Non-marital assets may no longer be protected

I am keeping an eye on the aftermath of the ruling in  Kaa v. Kaa, 9 So.3d 756 (Fla. 2d DCA 2009), to see how the Courts will continue to address the issue of passive appreciation of non-marital assets.  There has been a distinct conflict in our district Courts of Appeal with the Second District Court of Appeal firmly holding that passive appreciation of  a non-marital asset is non-marital.  That may be changing.

The distinction has been that a non-marital asset, which has been enhanced either through marital funds or efforts (“active appreciation”) has been deemed marital while increases in value which were due to market forces (“passive appreciation”) has been deemed non-marital.  As least until recently, the market forces that I have seen in Naples, Florida made it easy to argue  that any increase in property was due to passive appreciation and that, regarless of any marital contribution, the property increase in value had nothing to do with marital labors.  That position is changing, not only because the market has plummetted in recent years but because of the holding in the Kaa case.

Kaa is a case where, 6 months before the parties’ marriage, the Husband purchased property in his name (his “non-marital” property).  The property was never retitled jointly and, after more than 25 years of marriage and 4 children, the parties decided to divorce.  The Husband claimed that the property was non-marital and that the entire value of the property should be his.  The Wife argued that, after more than 25 years of paying mortgage payments and maintaining the property with joint funds, half of this property should be hers.

The Court found, based on the prior rulings from the Second District Court of Appeals, that the Wife was entitled to only the increase in value of the property due to the use of marital funds to pay down the principal balance of the mortgage and increase the size of the house.  The Court certified conflict with the First District Court of Appeal’s decision in Stevens v. Stevens, 651 so.2d 1306 (Fla. 1st DCA 1995).  The decision, in Stevens, provide that an equitable distribution should take into consideration not only the marital contributions to the property but also the appreciated value of the property due to the expenditure of marital funds and contribution.  This is a huge distinction.

The decision, in Kaa, may have been different if there had not been what appeared to be an truly inequitable result.  Kaa was a long-term marriage, with real estate which had, for all intents and purposes, been utilized as marital to raise their four children.  Providing the Wife with merely the marital portion of the non-marital asset, without giving her any of the appreciation, probably seemed patently unfair to the Appellate court.  Still, based on the previous holdings in the Second District, the Court affirmed the opinion below and certified the conflict with the First District.

This is an evolving area of the law that I believe we will see significant change in the near future.