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Asset appreciation within complex property division

| Oct 3, 2014 | Military Divorce

Just as no two marriages are exactly alike, there are no two divorce cases that share all of the same components. This is especially true among high-asset couples in Texas, in which a diverse mix of assets have been accumulated over the course of a marriage. When it comes time to divide that wealth, however, a complex property division process can be expected.

One issue facing couples who own a business involves the appreciation of assets held within that entity. In many cases, one spouse came into the marriage with a business already up and running. The other spouse may have contributed to the growth of that entity, but it can be difficult to place a figure on the value of his or her input. The process of determining that value involves looking at both active and passive appreciation.

Passive appreciation occurs when forces outside of one’s control lead to an increase in value. An example might be improved market conditions. Another would be inflation, or an increase in the value of real estate holdings due to market improvement. These are factors that neither spouse created or improved.

Active appreciation, on the other hand, occurs as a direct result of the effort one or both spouses put into the business. Examples could be a marketing strategy implemented by one spouse, or a rebranding effort spearheaded by the other. Active appreciation leads to increases in value that can be directly attributed to the work of one or both spouses.

In determining what share of value a spouse is entitled to, the courts will look at the value of a business when it was brought into the marriage, compared to the value at the time of divorce. Active and passive appreciation will be evaluated, and the result will guide the complex property division process. In the end, each Texas spouse will be given a fair share of the value of all assets, even if getting there is a complex process.

Source: Forbes, “A Multi-Billion Dollar Divorce: What All Divorcing Women Can Learn From Sue Ann Hamm“, Jeff Landers, Sept. 22, 2014