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How Courts Handle Equitable Distribution
The equitable distribution of the appreciation in value of the separately owned or separate property marital residence raises some unique issues. Real estate is generally considered to be a “passive” asset that increases in value mainly as a result of passive market forces rather than due to the “active” efforts of either spouse. Accordingly, the passive appreciation of such an asset would likewise remain the titled spouse's separate property, not subject to equitable distribution. Nevertheless, courts often distribute a portion of the appreciation to the non-titled spouse who resided in the separately owned marital residence. Perhaps courts have done so because, were it not for the titled spouse's residence, the parties would have presumably purchased a joint residence — often one of the most valuable assets in the marital estate — and would have shared in the appreciation that accumulated during the years of their economic partnership. Thus, courts have often awarded the non-titled spouse a share of the appreciation in a separately owned marital residence even when the non-titled spouse is unable to show that any efforts on his/her part contributed directly to the increase in value. These courts also seem to recognize that the marital “home” is something to which both parties to a marriage contribute simply by virtue of their economic partnership and that the value of certain contributions are difficult if not impossible to quantify.
For these reasons, courts have grappled, often on a case-by-case basis, with the appropriate method to utilize in distributing the appreciation of a separately owned marital residence. There is often much confusion surrounding the issue, even as it relates to which party bears the burden of proving or disproving a claim for distribution of the appreciation. Consequently, courts often impose their own judgment as to what is equitable by distributing the appreciation based on contributions to the marriage in general and not specific contributions that add value to the marital residence. However, as we will discuss, some courts, when presented with real evidence in the form of financial data and expert testimony on passive market forces, have made a concerted effort to parse out and quantify that portion of the increase in value of the separately owned marital residence that was due to efforts of one party or both parties as opposed to passive market factors. This article contains an overview of the cases in which courts have endeavored to distribute the appreciation on a separate property marital residence in an equitable fashion.
Appreciation in Separate Property, Generally
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