Passive Appreciation in Divorce A Quantitative Measure
74 Pages Posted: 27 Aug 2020
Date Written: May 27, 2020
Breaking up is hard to do. High net worth marital estates often contain family businesses started or inherited by one or both spouses. The growth in the value of such business interests occurring during the marriage can consist of two components. It may be attributable to environmental factors (passive) or marital efforts and resources (active). Quantifying the passive contribution of economic environment changes during the marriage is a complex task. A substantial body of case law dealing with establishing causation and attributing impact has developed in the torts and class action practice areas. This paper presents this statistically sound, empirically tested, and peer reviewed methodology for estimating the passive (caused by/resulting from external forces) portion of appreciation for a business. This methodology can assist the forensic accountants in identifying pertinent causal factors and quantifying their impact (passive appreciation) on the value of a business during a marriage.
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