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Equitable Distribution of the Appreciation in Value of Separately Owned Residences

By Marcy L. Wachtel and Lori K. Meyer

In the period of time since an article we authored with Pamela Sullivan, Esq. appeared in the February 2006 issue of this newsletter, courts continue to differ widely on the issue of the equitable distribution of the appreciation in value of a residence that is the separate property of one party. It is widely believed that a residence's appreciation in value is primarily “passive” in nature resulting from market forces outside of either party's control as opposed to the “active” efforts of either spouse. Yet despite the classification of this appreciation in value as mostly passive in nature, courts still frequently have awarded non-titled spouses a share of the appreciation in a separate property residence due to direct or indirect, financial or nonfinancial, contributions to the economic partnership of the marriage ' often without any demonstrated nexus between such contributions and the increase in value of the residence.

Unfortunately, financial and nonfinancial contributions are generally not spelled out in the judicial decisions, particularly when only the appellate, and not the trial, decision is published. However, it seems clear that courts distribute the appreciation in separately owned residences based upon fact-sensitive, case-by-case inquiries as well as assessments of the parties' meeting their respective burdens of proof and the credibility of each party's evidence. The overarching goal of the courts appears to be reaching an equitable result considering each party's role in, and contributions toward, the marital relationship and the acquisition of marital property.

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