Active and Passive Appreciation on Marital Property


In North Carolina, the law which governs the dividing of assets and debts is North Carolina General Statute § 50-20. Your property can be classified as either marital, separate, or divisible during this process. Marital property is defined as real and personal property acquired by either spouse or both spouses during the course of the marriage, before the date of separation of the parties. Separate property is defined as real and personal property acquired by a spouse before marriage or acquired by a spouse by devise, descent, or gift during the course of the marriage. Divisible property is another category recognized by North Carolina law which is subject to Equitable Distribution as part of the marital estate. The North Carolina legislature has enacted a public policy that mandates that marital property should be divided equally.

The party requesting that property be classified as “marital” has the burden of proving the following:

            (1): the property was acquired by either spouse or both spouses;

            (2): the property was acquired during the course of the marriage;

            (3): the property was acquired before the date of the separation of the parties; and

            (4): the property is presently owned.

At trial, if sufficient evidence is not shown supporting the above four classifications, not enough evidence is presented to show that an equal division would be inequitable or unfair, thus the court is instructed under North Carolina law to divide marital property equally.

As is seen in all cases, the value of an asset can change over time, but what happens when the worth of marital property changes after the date of separation? Active appreciation means that someone is actively doing something to increase the value. An example of active appreciation is a spouse using their own labor to make improvements and/or renovations to a home, after the parties have separated, to the extent such efforts may increase the value of the property. Passive appreciation means that a spouse is not actively creating an increase in the value of the asset. An example of passive appreciation is a retirement account growing based on stock market activity, through market gains and/or interest. The appreciation of a marital asset after the date of separation is not marital property, however, it would be considered divisible property.  

The increase in the value of marital assets between the date of separation and the date of a trial should be considered by the court as a factor in determining what defines an equitable distribution of you and your spouse’s estate. The factors that a court can consider are laid out in North Carolina General Statute § 50-20(c). Instead of distributing the appreciation, the court must determine whose benefit the increase in value will accrue and then consider that benefit when determining whether an equal or unequal distribution of the marital estate would be equitable.

If you are in need of legal advice or representation in a divorce regarding the distribution of assets, please contact one of our lawyers at Jetton & Meredith.  Our attorneys are equipped with knowledge and experience to help you maneuver through these difficult times.