How to Calculate the Marital Portion of Passive Appreciation of Non-Marital Property During Marriage Under Florida Law

By: Jonathan Schiller

Jonathan Z. SchillerIn general, an asset acquired prior to marriage is a non-marital asset that is not subject to equitable distribution under Florida law.  However, Section 61.075(6)(a) 1(b), Fla. Stat., states, in pertinent part, that a marital asset includes “the enhancement in value and appreciation of non-marital assets resulting either from the efforts of either party during the marriage or from the contribution to or expenditure thereon of marital funds or other forms of marital assets, or both.”  As such, if marital funds have been used to paydown the principal balance of a mortgage during the marriage, then there may be a portion of the passive appreciation in the non-marital property which shall be deemed a marital asset.

In Kaaa v. Kaaa, 58 So. 3d 867 (Fla. 2010), the Florida Supreme Court held that, contingent upon certain findings of fact by the trial court, “passive appreciation of the marital home that accrues during the marriage is subject to equitable distribution even though the home itself is a non-marital asset.”  The Court explained that the trial court should employ the following method when determining whether a non-owner spouse is entitled to a share of the passive appreciation of the non-marital property:

    1. The trial court must determine the overall current fair market value of the property;
    2. The trial court must determine whether there has been a passive appreciation in the property’s value;
    3. The trial court must determine whether the passive appreciation is a marital asset, a step which includes making findings of fact as to whether marital funds were used to pay the mortgage, whether the non-owner spouse made contributions to the property, and the extent to which the contributions of the non-owner spouse affected the appreciation of the property; 61.075(5)(a)(2);
    4. The trial court must determine the value of the passive appreciation that accrued during the marriage and is subject to equitable distribution; and
    5. After the court determines the value of the passive appreciation to be equitably distributed, the court’s next step is to determine how the value is allocated. Id. at 872.

In so holding, the Court accepted the methodology used in Stevens v. Stevens, 651 So.2d 1306, 1307–08 (Fla. 1st DCA 1995), which is as follows:  “In general, in the absence of improvements, the portion of the appreciated value of a separate asset which should be treated as a marital asset will be the same as the fraction calculated by dividing the indebtedness with which the asset was encumbered at the time of the marriage by the value of the asset at the time of the marriage.”

Facts in Kaaa v. Kaaa

    • Parties were married in 1980.
    • Approximately six months before the parties married, Husband purchased a residence in Riverview, for $36,500 with a $2,000 down payment from non-marital funds.
    • Husband financed the balance of the purchase price with a mortgage on the property
    • Property titled in Husband’s name alone.
    • House became the parties’ marital home where they lived for the next 27 years.
    • Although the parties refinanced the property several times, Husband never transferred any interest in the home to Wife during the marriage.
    • Throughout the marriage, the parties paid all of the mortgage payments, insurance premiums, taxes, and maintenance expenses of the property from marital funds, and also used marital funds to improve the residence, installing or constructing a carport.
    • During the 28-year marriage, the $34,500 mortgage was paid down by $22,279, and the property passively appreciated in the amount of $174,100.
    • As a result of the carport renovation, the trial court found that the property actively appreciated by $14,400.
    • At the final hearing, the property had a fair market value of $225,000 ($36,500 purchase price, $174,100 in passive appreciation plus $14,400 in active appreciation) and was subject to a mortgage balance of $12,871.46.

kaaa v kaaa marital passive appreciation calculation

Therefore, in Kaaa, the Wife is entitled to 50% of the total marital portion of the passive appreciation of $164,524.50, or $82,262.50.

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By |2017-03-13T13:31:08-04:00May 15th, 2015|Blog, Divorce, Marital & Family Law|