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An Increase in Value in Separate Property Can Be Considered Marital Property

Let’s assume a person has a company that was clearly started before the marriage, maybe even with inherited funds or by gift. This company is not a marital asset. However, if the company increases in value during the marriage, that increase in value can be considered a marital asset.

The key inquiry is whether the spouse took effort during the marriage in increasing the value of the company. Factual situations can very significantly, but, generally, when a spouse actively participates in the company, that active participation is considered “marital effort” and the increase in the value of the company is “marital.”

One way to help us look at it is the difference between a spouse owning stock in Coca-Cola versus stock in a small family store. The increase in the Coca-Cola stock is not due to the efforts of the spouse, but to the “passive” forces of the market, and will not, therefore, be marital property. However, the spouse’s efforts in a small family-owned business which contribute to the increase in the value of the business will be marital and therefore divisible under equitable distribution.

Such situations require valuation of the business both at the time of the marriage and at the time of divorce, and perhaps expert testimony on the reasons for the increase in the value of the marriage. For a Mississippi case on the subject, see: A & L, Inc. v. Grantham, 747 So. 2d 832, 839 (Miss. 1999).