Posted by Nydia Streets of Streets Law in Florida Divorce
What is active appreciation, and how does it affect equitable distribution in a Florida divorce case? Active appreciation is an increase in value of an asset due to the efforts of a spouse. An example of this would be a stock account - while the stock account may be non-marital, if a spouse actively trades on the account or makes more than ministerial effort to increase the value of the account, the increase in value of the account might be considered active appreciation which is subject to distribution between divorcing spouses. This was an issue in the case Naranjo v. Ochoa, 4D21-3084 (Fla. 4th DCA July 5, 2023).
The former wife’s mother gifted her an advanced inheritance of over $600,000. She transferred these funds to a brokerage account in her name alone. She used these funds to invest in mutual funds. Additional advance inheritance was sent to the former wife which she also transferred to the brokerage account and invested in a mutual fund. By the time a petition for divorce was filed, over $800,000 in appreciation had accrued on the investments. The former husband claimed this was due to marital effort. He testified that he researched and chose the mutual funds, and that the strategy employed was a “buy and hold” method. The wife, in contrast, testified that she was the one who chose the mutual funds, but she argued that it did not matter which spouse chose the funds, because this was not enough to show marital effort. The trial court found the increase in the account’s value was due to marital effort and ordered it to be distributed between the spouses. The former wife appealed.
The appellate court noted its standard of review: “Our standard of review is mixed. See Gromet v. Jensen, 201 So. 3d 132, 135 (Fla. 3d DCA 2015) (‘A trial court’s determination that an asset is marital or nonmarital involves mixed questions of law and fact. Although [an appellate court] defer[s] to the trial court’s factual findings if [those findings] are supported by competent, substantial evidence, [an appellate court] review[s] the trial court’s legal conclusions de novo.’) (citations omitted).” The court concluded “former husband did not meet his burden to prove that either party’s “efforts” resulted in enhancing the value and appreciation of the wife’s $830,000 advanced inheritance. See Palmer v. Palmer, 316 So. 3d 411, 416 (Fla. 5th DCA 2021) (‘The spouse asserting a claim that the appreciation in value of the other spouse’s separate, nonmarital property is a marital asset bears the initial burden of proving that marital labor or funds were used to improve [the] assets.’) (citation and internal quotation marks omitted). While the circuit court found the research and selection of the mutual funds were done as a ‘joint marital venture’ which had ‘contributed’ to the $892,687.94 enhancement to the invested funds, we conclude such ‘contribution’ was not sufficient to be deemed as ‘efforts of either party’ under the prior interpretations and applications of section 61.075(6)(a)1.b.”
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