Active vs. passive appreciation – A deceptively complex issue in divorce cases

Description

Abstract: In divorce cases, it’s common for an interest in a closely held business or professional practice to be the marital estate’s most valuable asset. In many states, when the owner-spouse brings this asset to the marriage, a valuator may be called upon to distinguish between active appreciation in the business’s value (which is subject to division) and passive appreciation (which isn’t). This article explains how, after determining passive vs. active appreciation, the valuator might then decide how much an owner-spouse is responsible for the latter.