How Assets Are Divided in Divorce

The most common questions asked—and answered—so you can better understand which assets will be best for your financial security

Jeffrey A. Landers, CDFA™ • Divorce Financial Strategist™ and founder of Bedrock Divorce Advisors, LLC
  • The length of the marriage
  • The income or property brought into the marriage by each spouse
  • The standard of living established during the marriage
  • The age and physical/emotional health of each spouse
  • The income and earning potential of each spouse
  • The financial situation of each spouse when the divorce is finalized
  • The contribution of a spouse to the education, training or earning power of the other
  • The needs of the custodial parent to maintain the lifestyle for the children

What do I need to know about active appreciation and passive appreciation when it comes to assets?

Active appreciation is appreciation that is due, in part, to the direct or indirect contributions or efforts of the other spouse. For example, if your husband helped you grow your business by giving you ideas and advice or he took care of the kids so you could work late or travel, he could claim that any appreciation in the value of your business that occurred during your marriage is partially due to his direct and/or indirect efforts and therefore that increased value (or the entire value if you started the business during your marriage) is actually marital property.

Passive appreciation, on the other hand, is appreciation that is due to outside forces, such as supply and demand and inflation. Consider this: If a parcel of vacant land you own increases in value even though you and your husband made no improvements to it and it required no management skills, then that increase in value would be considered passive appreciation.  However, if you used marital income and/or assets to pay the mortgage and/or taxes on this parcel of land, you might have a very good argument that this property, or at least the increase in value during your marriage, should now be considered marital property because of the use of marital funds to pay the expenses associated with it. As you can see, this can get quite complicated and convoluted, so be sure to talk to a divorce financial expert so you can carefully analyze the specifics of your individual case. 

Will I have to go to court to divide my assets?

Most divorcing couples want to stay out of court. Why? Because a judge can consider any factors that he or she feels might be relevant, making it very difficult, if not impossible, to predict the outcome of who will get what. Interestingly, research shows that more than 95 percent of all divorces are ultimately settled out of court.

I know the process of dividing assets can seem confusing, time-consuming and stressful. But understanding the terminology and having a skilled divorce team on your side can help you make the best decisions to ensure your long-term financial security. By Thinking Financially, Not Emotionally®, you’ll be better positioned to achieve a divorce settlement agreement that includes your fair share of those assets you’ve worked so hard to accumulate.

Photo courtesy VIPDesignUSA/ Shutterstock

 

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First Published March 20, 2012

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