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Asset division and the active appreciation of separate assets

When young New Yorkers decide to get married, it is not uncommon for the future marital partners to have few assets to their names and only a modest amount of money in the bank. As individuals age, though, their overall wealth generally increases through work, savings and investments. When individuals choose to marry later in life they can bring a lot more money and a lot more property to the relationship.

Often when a person owns property on their own prior to their marriage that property is considered separate from the shared marital assets the couple owns together. The comingling of assets can convert separate property into marital property, but this post will not address this complication any further. Rather, the remainder of this post will address a unique wrinkle that can convert the value of appreciation on separate property into marital property, and thus subject to property division if the owner of the property and their spouse divorce.

Imagine that a single person owns an investment portfolio prior to their marriage. At the time of the person's marriage the portfolio has an overall value of $1 million. Over the next decade of marriage the owner of the portfolio is careful to avoid comingling marital assets into it, but does actively manage the portfolio to improve its chances of growth. After 10 years the portfolio is worth $2 million, but the individual and their spouse have decided to end their marriage.

In some cases, the $1 million increase in value of the portfolio may be considered marital property, because the owner of it actively supported its growth and through the support of their spouse the non-owning spouse also contributed to the portfolio's improvement in value. The initial $1 million that the portfolio contained when the marriage occurred likely would remain the separate property of the original owner, but the appreciation of the asset may be subject to New York's marital asset division laws.

When separate property appreciates during a marriage through passive means it is less likely that its increase in value will be considered martial property. It is important that readers of this post understand that its contents are offered as information only. It is not intended to provide legal or financial advice.

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