In Georgia, an equitable distribution state, property division during divorce aims to ensure fairness rather than equality. One of the more complex aspects involves how the appreciation of separate property during a marriage is handled.
Understanding this distinction is essential for anyone navigating property division in the state.
What is separate property?
Separate property includes assets owned by one spouse before the marriage or those received as gifts or inheritances during the marriage. In Georgia, separate property typically remains with the original owner after divorce. However, complications arise when the value of separate property increases during the marriage.
Active versus passive appreciation
Georgia law distinguishes between active and passive appreciation. Active appreciation refers to increases in value resulting from efforts by either spouse, such as managing a business or making significant improvements to real estate. This type of appreciation is often considered marital property and subject to division.
Passive appreciation, on the other hand, results from market forces or general economic conditions. In most cases, passive appreciation remains separate property.
Commingling and tracing
If separate property is commingled with marital assets, it may lose its separate status. For example, depositing an inheritance into a joint account could result in it becoming marital property. Tracing, a method used to identify the origins of funds, is critical to prove that an asset or its appreciation remains separate. Proper documentation and records are essential in these cases.
Ensuring fairness in property division
Georgia courts consider multiple factors when determining how to divide marital assets, including the appreciation of separate property. By distinguishing between active and passive appreciation and understanding how commingling affects property classification, spouses can better prepare for equitable property division. Taking a clear and organized approach ensures that the division process reflects fairness and supports a stable financial future for both parties.
