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Active Appreciation vs. Passive Appreciation of Assets in Georgia Divorce

Tuesday, October 6th, 2015

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In a previous post included in our Celebrity Divorce Chronicles series, we discussed the divorce of Oklahoma oil tycoon Harold Hamm from his wife of 26 years, Sue Ann Arnall (formally Sue Ann Hamm). Ultimately, an Oklahoma court ruled that Harold Hamm, founder of Continental Resources, must pay Sue Ann Arnall a settlement of roughly $1 billion dollars. The court concluded that the $1 billion settlement represented an equitable division of the couple’s marital estate, which had been valued at around $18 billion.

Both parties appealed the trial court’s decision. Mr. Hamm contends that the marital settlement is too much. On the other hand, Ms. Arnall contends that although $1 billion is a significant amount of money, the $1 billion payment is not a fair or equitable division of the couple’s marital assets. The legal and financial concept at the heart of the couple’s dispute is active appreciation vs. passive appreciation.

Active Appreciation of Assets
Active appreciation is the increase in the value of certain assets that can be attributed, at least in part, to the contributions or efforts of either spouse. Put another way, if a person owns a company, and that company grows and succeeds because of the ideas, leadership and business acumen of the owner, that increase in value is due to active appreciation.

Passive Appreciation of Assets
Passive appreciation is the increase in the value of certain assets due to outside market forces such as supply and demand and inflation. For example, let’s say Person A bought a parcel of land 20 years ago. Upon purchase the parcel was worth $10,000. Over the alast 20 years, Person A made no improvements to the land, but the area around that parcel was successfully developed over the past 20 years. Today, due to no efforts on the part of Person A, the parcel is now worth $100,000. This is passive appreciation.

Georgia and Oklahoma are both equitable division states, meaning that marital assets are divided equitably or fairly upon divorce. Additionally, both Georgia and Oklahoma employ the concept of passive vs. active appreciation of assets similarly in the context of dividing assets upon divorce. Thus, using the Hamm’s Oklahoma divorce as an example may be particularly helpful in understanding active vs. passive appreciation in Georgia divorce.

Under Oklahoma law, the amount attributed to the active appreciation of separate, premarital assets over the term of the marriage is subject to division in divorce; the amount that passively appreciated is not. Harold started continental Resources before he married Sue Ann. Thus, although it may seem counterintuitive, it is in his best interest to argue that the tremendous success of Continental Resources was largely due to the whims of a fickle commodities market, or just good luck, not due to his active participation and decision making. Maintaining this position allows Harold to argue the success of his company was due to passive appreciation. Thus, any increase in value should be deemed separate property not subject to equitable division upon divorce.

Alternatively, it is in the best interest of Sue Ann to argue that the success of Continental was largely the result of Harold’s skills and his successful active management of the company. Because she also worked for the company, it is also in Sue Ann’s best interest to argue that the company’s success is also the result of her hard work and successful management. Sue Ann is best served by taking this position, because any increase in the value of the company attributed to active work of one or both spouses is deemed active appreciation, subject to equitable division upon divorce.

Active vs. passive appreciation is a very complicated concept in Georgia divorce law. Thus, the examples discussed above should not be relied upon to determine whether you or your spouse is entitled to the benefit of a certain asset upon divorce. If you are considering divorce, and have question regarding how the concept of active vs. passive appreciation may apply to your specific case, contact one of our knowledgeable and experienced Atlanta divorce attorneys today.

Is Imputing Income to Non-Custodial Parents Fair?

Saturday, September 26th, 2015

In Georgia, child support is calculated using Georgia’s Child Support Worksheet. This child support worksheet relies on the monthly income of each parent, along with other information regarding the income and expenses of each parent, to determine the appropriate child support obligation for the non-custodial spouse. However, in the event the non-custodial parent is unemployed or underemployed, an income may be imputed to that spouse for the purposes of calculating child support. For example, if a non-custodial parent is unemployed and has no significant work experience, a court may impute an income of minimum wage on that parent. Alternatively, if the earning potential of an unemployed or underemployed parent can be proven by examining that parent’s work history and prior salary, a higher income may be imputed on that parent.

The rationale behind the imputation of income on non-custodial parents is to ensure that child support is calculated fairly and uniformly, and to deter non-custodial parents from quitting their jobs or seeking lower paying jobs to avoid child support obligations. Although the ultimate aim of this policy is to serve the best interests of the child involved, many child support reform advocates argue that calculating child support based on imputed income instead of actual income is unfair to non-custodial parents because jobs are hard to find. Due to the instability of the current job market, child support reform advocates believe that imputing income to unemployed non-custodial parents traps these parents in a cycles where they are obligated to make child support payments that it is impossible for them to pay.

Child support reform advocates are correct that ordering an unemployed parent to make child support payments, regardless of their ability to pay, is not practical. However, child support is not calculated in a vacuum, without regard to the special circumstances each parent faces. In determining a non-custodial parent’s child support obligation, Georgia courts may consider all of the facts and circumstances or each case, and may apply certain deviations and adjustments to the presumptive child support amount generated by the child support worksheet. Thus, the answer to the above question is yes, imputing income to non-custodial parents can be fair so long as family courts use their discretion to consider all the facts of each individual case.

How to Avoid Common Divorce Mistakes

Tuesday, September 8th, 2015

Divorce is a complex legal issue consisting of four core elements: division of marital assets, child custody, child support and alimony. Because of the complexity of divorce, and the fact that divorce touches on almost every facet of one’s life, making a mistake during the divorce process could be potentially costly in various ways. With that being said, it is important to identify and plan ways to avoid making one or more of these costly mistakes. Listed below are several common divorce mistakes along with some tips on how to avoid them.

Mistake #1: Bad-mouthing your ex in front of the kids.

Regardless of how tempting it is, resist the urge to bad mouth your ex-spouse, especially in the presence of your children. Exhibiting such behavior can cause your children to begin viewing the other parent in a bad light, which may ultimately impact their relationship with that other parent. As any parenting coach of child therapist will tell you, it is imperative for children to have healthy relationships with both parents if at all possible, so don’t let your anger or bitterness impede your child’s relationship with your ex-spouse.

Mistake #2: Taking legal advice from just anyone.  

Yes, hiring a divorce attorney may be costly, but divorce attorney exist for a reason. The role of an attorney is to provide legal guidance and advice during your divorce process, and this is the only source of information you should rely upon during your divorce. Although your friends and relatives may mean well when they offer divorce advice, you should remember that all advice is not created equal.

Mistake #3: Failing to plan for life after the divorce. 

Should you keep or sell the martial home? Do you have life insurance independent of your ex-spouse?  How will you support yourself post-divorce? These are all questions that are essential your financial wellbeing post-divorce. However, more often than not many going through the divorce process fail to address these questions until after the divorce is over. Yes, divorce is stressful and emotionally taxing, but failing to address these important financial issues could have potentially devastating consequences. Thus, it is important to work with a financial advisor to create a post-divorce financial plan to ensure you have an affordable and sustainable post-divorce budget in place.

Mistake #4: Keeping the kids out of the loop.

Should your children be made aware of every single detail of your divorce? Absolutely not. However, it is important that you discuss your divorce with your children in an age appropriate way. Failing to adequately discuss your divorce with your children may cause them to harbor unhealthy feelings and beliefs surrounding your divorce. For example, your children may feel that the divorce was the result of their behavior, or that they will no longer be able to have a relationship with both parents. If you are unsure how to appropriately address the issue of divorce with your children, seek the advice of a parenting coach or a therapist who specializes in family and child counseling.

Mistake #5: Failing to anticipate how long the divorce process will last.

The divorce process can last as little as 31 days, and as long as 3 years (possibly longer). Although divorce attorneys are skilled at assessing the divorce process, there is no way your attorney can accurately predict how long your divorce process will take, and neither can you. For this reason, it is a mistake to assume your divorce will be amicable and short lived, no matter how friendly the relationship between you and your estranged spouse is currently. Failing to plan accordingly can result in unexpected and unneeded stress and expense. With this in mind, it is important to have a candid discussion with your divorce attorney about your expectations early on in the divorce process.



Divorce and Teen Health

Friday, September 4th, 2015

As discussed in a previous blog, divorce can have a huge impact on the children involved, and can even put their health at risk. Often, these health risks are a result of the increased stress the children of divorce have to deal with as they navigate their new post-divorce lives. A recent study published in the Journal of Epidemiology & Community Health found that teen children of divorced parents have an increased risk of psychosomatic symptoms (defined in the article as physical problems caused by mental distress). Divorce May Increase Psychosomatic Symptoms in Teens: Study , by Robert Preidt,, April 28, 2015.

The results were fairly straightforward – teens who lived primarily with one parent due to divorce/separation showed the most psychosomatic symptoms. Conversely, teens who lived in an intact household with both parents had the fewest symptoms. Those children of divorced parents who shared joint custody were somewhere in the middle. According to the researchers, psychosomatic symptoms are related to stress, which can be caused by going back and forth between two different homes. The researchers hypothesized that the “stress may be reduced by maintaining close contact with both parents.”

So, as a divorced, or divorcing, parent, what can you do to help your child deal with this stress? In many situations, joint physical custody (where the children spend nearly equal time with each parent) is not feasible due to where each parent lives, the kids’ school schedules, and the parents’ work schedules. However, it is important to come up with a visitation schedule wherein the children see both parents regularly. If regular physical visitation is not possible, the children should be given the opportunity to see the other parent via FaceTime or other similar technology. Fortunately, we live in a time where there is technology to facilitate visitation even if the parent and child are not physically together. In addition, parents should not make any negative comments about each other in the presence of the children. Rather, regardless of their feelings toward each other, both parents should do their best to foster the relationship between the children and the other parent. According to these studies, it could greatly benefit the health of the children both now and in the future.



Divorce and the potential negative impact on children

Thursday, September 3rd, 2015

Clearly divorce can have an impact on the health of the spouses going through it. (See previous blogs.) But did you know it could also have a detrimental effect on the health of the children involved? A family dealing with a divorce has to adjust to a “new normal.” This includes children being shuffled back and forth between parents, moving to a new house and/or school, and just a adjusting to a new routine that is different from what everyone is used to. Stress can often come along with new routines and the way children of divorce deal with this stress can have an impact on their physical and mental health.

One recent study published online in Childhood Obesity followed the eating habits of children whose parents were married, separated and divorced. Divorce May Mean Kids Down More Soft Drinks, by Robert Preidt,, March 10, 2015. The study found that those children whose parents were separated or divorced were more likely to drink soft drinks or sugary beverages. Too many sugary drinks can put a child at risk for obesity. The lead researcher of the study hypothesized that children drink more sugary beverages as an easy quick fix for the stress that comes a long with dealing with divorce and change in a child’s usual routine. In addition, it’s possible that the children have better accessibility to these drinks than they used to, as the parents are also dealing with stress and may not be paying as close attention to what the children are eating and drinking.

Since children are drinking these sugary drinks as a way to deal with the stress of the divorce, there are several things parents can do in an attempt to decrease this unhealthy habit. First, parents can keep their children’s routines as close as possible to what they were pre-divorce. If this is not at all possible, establish a new routine and stick to it so that the children can become used to the “new normal” more quickly. In addition, parents can take away the accessibility of these sugary beverages. Though the children may get them elsewhere, if they are not kept in the house it will certainly cut down on consumption. Thus, while this statistic may be concerning, it seems that there are some easy adjustments divorcing parents can make to keep their children from going down this particular path toward obesity.

Michigan Children Jailed for Refusing Lunch with their Father

Monday, August 31st, 2015

Most people are familiar with parents being punished for refusing to abide by the custody and visitation terms of a final divorce decree. Recently, a Michigan judge punished the children of divorced parents for refusing to see their father. Kids Jailed for Refusing Lunch With Dad Being Freed as Judge Caves, by Steven Nelson,, July 10, 2015. In that case, the three children (ages 14, 10 and 9) refused Judge Lisa Gorcyca’s order that they spend time with their estranged father. The children did not want to see their father because he had allegedly abused their mother. Judge Gorcyca “told the siblings they would be placed in ‘cells’ and forced to use toilets without privacy until they turn 18” for refusing to comply with her.

Despite several allegations of abuse, Judge Gorcyca told the children that their father “had never been convicted of anything” and that he was “a great man.” In fact, Judge Gorcyca had previously denied the mother’s request for a protective order from the father, alleging that he had hit her, assaulted her, and threatened to kill their children. It is unclear why this protective order was denied. In spite of these abuse allegations, however, the mother apparently still encouraged the children to comply with the order, but they refused. After two weeks and a media firestorm, Judge Gorcyca backed down and released the children, though she claimed she had their best interests at hear throughout the case.

A case like this seems almost unbelievable. It is hard to imagine that it is in the best interests of children to spend time with a parent of whom they are afraid. But to go one step further and put children in jail for refusing to see a parent of whom they are afraid is unconscionable. There has to be a middle ground. If a Judge does not believe the allegations of abuse and feels strongly that the children should see that parent, the Judge should put some safeguards in place to make that child feel more comfortable. Perhaps visitation in a public place or with another adult with whom the children feel comfortable. Or even just give the children some time to think about it and revisit the situation in a month. Punishing the children will not help the situation and will likely only make the children more resentful if and when they do spend time with the parent at issue.

Divorce and Back to School Time

Tuesday, August 25th, 2015


When you go through a divorce and work out custody and visitation arrangements with your spouse, you make an agreement based on the kids’ ages at that point. However, as anyone with kids knows, schedules change fairly regularly as kids get older and get more involved with school and extracurricular activities. A parenting plan made when children were 7 and 5 will likely not work when the children are 15 and 13. As such, it is prudent to revisit your parenting plan regularly to make sure it still meets the needs of your changing family. A good time to do that is around back to school time, since schedules for school age children tend to change with the beginning of the school year, rather than the beginning of the calendar year.

Towards the end of the summer (or even earlier for some very organized families), your children’s school schedules will firm up and you will learn about the dates for breaks in the school calendar, such as Thanksgiving, winter break, spring break, and any other school holidays. You and your ex can then (hopefully!) work together to adjust the visitation schedule so that it makes sense with the children’s new schedule. For example, maybe your daughter had dance on Tuesdays last year, but now has it on Wednesdays. If the non-custodial parent’s weekday visitation is dinner on Wednesday night, this new dance class may cut into it. As such, it may make sense to switch the weekday visitation to another day where there would not be a conflict with an extracurricular activity. In addition, perhaps one parent has a family reunion over Thanksgiving and wants to bring the children, but the other parent is supposed to have the children for Thanksgiving that year. Hopefully the parents will be able to work together to switch things around in that situation.

Technically, your parenting plan (however old it may be) is the custody and visitation order that must be followed by both parents. However, it does not make practical sense to go back to court to modify every time your child’s schedule changes. As such, try to work things out with your ex on your own. While exes who still greatly dislike each other may not be able to work well together in this way, it can save you both a lot of money as opposed to contacting attorneys each time you need to make a change. Just make sure you communicate via email so that any changes are confirmed in writing. That way, if your ex goes back on his or her agreement to modify visitation and tries to sue you for contempt of the order, you will have a paper trail.

Beware of Child Support Collection Scams

Saturday, August 22nd, 2015

Owed child support? If so, there are several ways to enforce your child support order, including filing a contempt action against the non-custodial parent, seeking an income deduction order or garnishment of the non-custodial parent’s earnings, or contacting your local office of the Georgia Department of Human Services, Child Support Enforcement Division. Additionally, there are some private agencies that offer to collect child support arrearages in exchange for a contingency fee or percentage of the amount collected.

Although divorce and family law attorney are prohibited from entering into contingency fee agreements with clients, when the collection of past due support is treated like a collections case, contingency arrangement may be acceptable. Seeking the services of such a private collections company is an option if you are seeking to collect child support arrearages, but it is not advisable, because such companies may take up to 40% of the child support you are entitled to as payment of their services.

Additionally, as evidenced by the fraud perpetrated by the private company formerly known as the Child Support Services of Georgia, seeking the services of a private company could be potentially dangerous. In that case, the owner of the company pleaded guilty in 2014 to federal charges including conspiracy to commit mail and wire fraud and money laundering after it was discovered that his company stole over $2 million dollars from Georgia parents seeking child support arrears by defrauding them. According to parents who fell victim to this fraud, the company would contact the non-custodial parent and enforce the child support order, but instead of forwarding the money collected on to the custodial parent, the company would instead pocket most of the money, using it to fund the expensive lifestyle of company owners.

Is my Inheritance Marital Property?

Wednesday, August 19th, 2015

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Although this is a common question, it is also a very complicated one to answer, because as with many issues concerning divorce, the answer to this question depends on the specific factual circumstances in each individual case. The general rule in Georgia is that an inheritance will be viewed as separate property not subject to division upon divorce, unless the funds or property are comingled.

Some examples may be helpful:

During her marriage, wife receives an inheritance from her grandfather after he passes away. Upon receiving the inheritance, wife places the funds in a separate account, and never mixed the funds with marital assets. Two years later, the couple decides to divorce, and husband threatens to take half of the inheritance. So long as wife never comingled the inheritance with marital assets (she always kept in in a separate account in her name only), it is highly unlikely the court will deem the inheritance marital property subject to division upon divorce.

Alternatively, let’s say wife deposited the inheritance into the joint marital account, or applied the funds to a jointly held investment account. In the event of divorce, husband’s threat to seek half of the inheritance is more concerning. By comingling the inheritance with marital funds, wife has transmuted the separate asset into a marital asset. Put another way, by mixing the inheritance with marital property, the inheritance becomes marital property subject to equitable division upon divorce.

Buying a House Post-Divorce? Seek Child Support and Alimony by Check

Sunday, August 9th, 2015

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Generally, recipients of alimony and child support would be more than glad to receive their payments by direct deposit or cash. However, if you are the recipient of child support or alimony, and you are thinking about buying a house in the near future, it may be more prudent to receive child support and alimony payments by check. Why? Because when considering an applicant’s mortgage worthiness, banks require proof of income. Without a paper trail establishing a track record on on-time payments made by the obligated spouse, a mortgage lender cannot count a recipient spouse’s support as income. Thus, former spouses who rely primarily on alimony or child support for income may not qualify for a mortgage absent sufficient proof of that income.

With the above in mind, if you currently receive child support or alimony from your former spouse, and you are considering purchasing a house in the near future, seek support payments by check and make sure you keep meticulous records of the support payments you receive each month.