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Appreciation in Separately Owned Home Values
It is apparent from our review of the cases in the last two issues that in the area of appreciated value of separately owned homes, a hard-and-fast “rule of law” does not currently exist. The murkiness inherent in the classification of the appreciation in separately owned marital residences as passive or active, and the spouses' respective direct and indirect contributions results in an ever-shifting, unpredictable landscape, and difficulty both in preparing a case for trial and in formulating and negotiating a settlement.
A Formulaic Approach
With the dual objective of creating certainty and enhancing the possibilities for settlement, we set forth herein a formulaic approach to the division and distribution of the appreciation in value of a separately owned residence (SOR). This approach addresses the competing concerns of preserving a separate property interest while recognizing the marital contributions. It essentially adopts the concept of proportionally distributing the appreciation between marital and separate property contributions (as in SM v. MM) and then adjusts that distribution with a factor corresponding to the length of the marriage. Our proposal is that this methodology provide the presumptive distribution of appreciation. However, in those cases where an unjust or inappropriate result is obtained (e.g., a long marriage with children where the marital residence is one spouse's separate property and no marital funds were applied thereto), the court would continue to determine the distribution based upon the merits of each such case.
The formula would unfold as shown in the Box below. The Nine-Step Formula is offered in the hope that certainty and clarity will remove some of the guesswork and speculation in this area as courts continue to grapple with the myriad concerns in an effort to do equity.
[IMGCAP(1)]
Marcy L. Wachtel, a member of this newsletter's Board of Editors, is a partner in the firm of Katsky, Korins, LLP. Lori K. Meyer is an attorney with the firm.
It is apparent from our review of the cases in the last two issues that in the area of appreciated value of separately owned homes, a hard-and-fast “rule of law” does not currently exist. The murkiness inherent in the classification of the appreciation in separately owned marital residences as passive or active, and the spouses' respective direct and indirect contributions results in an ever-shifting, unpredictable landscape, and difficulty both in preparing a case for trial and in formulating and negotiating a settlement.
A Formulaic Approach
With the dual objective of creating certainty and enhancing the possibilities for settlement, we set forth herein a formulaic approach to the division and distribution of the appreciation in value of a separately owned residence (SOR). This approach addresses the competing concerns of preserving a separate property interest while recognizing the marital contributions. It essentially adopts the concept of proportionally distributing the appreciation between marital and separate property contributions (as in SM v. MM) and then adjusts that distribution with a factor corresponding to the length of the marriage. Our proposal is that this methodology provide the presumptive distribution of appreciation. However, in those cases where an unjust or inappropriate result is obtained (e.g., a long marriage with children where the marital residence is one spouse's separate property and no marital funds were applied thereto), the court would continue to determine the distribution based upon the merits of each such case.
The formula would unfold as shown in the Box below. The Nine-Step Formula is offered in the hope that certainty and clarity will remove some of the guesswork and speculation in this area as courts continue to grapple with the myriad concerns in an effort to do equity.
[IMGCAP(1)]
Marcy L. Wachtel, a member of this newsletter's Board of Editors, is a partner in the firm of Katsky, Korins, LLP. Lori K. Meyer is an attorney with the firm.
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