Court do-over to figure passive appreciation for divorce

BVWireIssue #246-4
March 22, 2023

marital dissolution/divorce
divorce, disclosure, fair market value (FMV), marital asset, marital dissolution, real estate, equitable distribution, appreciation, separate property, marital property, trial court

In an Ohio divorce case, the trial court made an award to the wife based on the full fair market value of the husband’s business. But the business was started prior to the marriage, and, in Ohio, only the active appreciation of a business during the marriage is marital property. Any passive appreciation goes to the business owner. The husband appealed, and the appellate court remanded the case back to the trial court. The experts for each side will have to value the business as of the date of marriage and also as of the date of divorce. The increase in value then must be broken down into active and passive components, recognizing the contribution of each to the business.

The case is Fordeley v. Fordeley, 2023-Ohio-261; 2023 Ohio App. LEXIS 240; 2023 WL 1097726, and a case analysis and full court opinion are on the BVLaw platform.

Passive calculator: Dr. Ashok Abbott (West Virginia University) has developed an online application that produces a passive appreciation factor on a national level for businesses in the retail sector. Just choose the type of retail business and enter the beginning and end dates for the valuation. The application is live and available for testing purposes if you click here. The application embodies Dr. Abbott’s methodology from his peer-reviewed paper (click here). Feedback is welcome!

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