Quick answer: Before any calculation method matters, Florida law asks a threshold question: did a spouse’s effort actually cause the appreciation? Simply selecting investments and holding them is not “the efforts of either party” — in Naranjo v. Ochoa (Fla. 4th DCA 2023), the appreciation on inherited mutual funds that were bought and held was held non-marital. What does cross the line is genuine, ongoing labor during the marriage: frequent trading, active reallocation, professional-style management, a researched and managed concentration, or the reinvestment of marital income. And the burden is on the owner to prove the appreciation was passive. If no active effort is established, the appreciation stays non-marital and the calculation methods never come into play.
This is a spoke of the hub on calculating marital vs. non-marital appreciation. It addresses the gateway question that comes before the math.
Why this question comes first
The three calculation methods — the reasonable-rate-of-return method, the buy-and-hold counterfactual, and direct transactional tracing — all assume the threshold is already crossed: that there was active management whose value we are measuring. If a court finds no qualifying effort, there is nothing marital to calculate, no matter how much the account grew. So in practice, my analysis does two things in sequence: first, document whether the activity in the account rose to the level of “effort”; second, if it did, quantify how much of the appreciation that effort produced.
What the statute and the case law require
Under §61.075(6)(a)1.b, appreciation of a non-marital asset becomes marital only to the extent it resulted from a spouse’s efforts during the marriage or from marital funds. Naranjo v. Ochoa sharpened the “efforts” prong: the court determined that the appreciation on inherited mutual funds was non-marital because the trial court had not identified efforts sufficient to convert it — the act of holding investments, even ones that were chosen, is not by itself the labor the statute contemplates. The practical takeaway: passive ownership is the default, and the spouse claiming a marital share must point to real, identifiable activity.
What generally does NOT count as active management
- Buying a fund or a stock and holding it. Selection plus holding is the paradigm of passive appreciation.
- Receiving and reinvesting dividends automatically through a standing election, with no other activity.
- Occasional, incidental adjustments that do not amount to ongoing management.
What generally DOES count
- Frequent trading — a pattern of buys and sells reflecting hands-on decision-making.
- Active reallocation — deliberately shifting the portfolio’s composition over time.
- Professional-style management — managing the account the way an investment professional would, including research-driven decisions.
- A researched and managed concentration — building and actively maintaining a concentrated position based on the spouse’s analysis (this is the contested middle ground, and it is fact-intensive).
- Reinvesting marital income — directing income that is marital in character back into the account (whether that income is marital is a legal call for counsel; the activity of directing it is part of the effort picture).
The contested middle: a managed concentration
The hardest cases sit between the two lists. A spouse who researched a position, built it deliberately, and actively held it through volatility will argue the appreciation reflects effort; the other side will argue it was passive buy-and-hold. There is no bright line, and the outcome turns on the specific facts. My role is to document the activity objectively — the trading frequency, the reallocations, the timing, the records that show hands-on involvement — so the court can decide the legal question on a complete factual record rather than on competing characterizations.
The burden of proof matters
Because the owner bears the burden of showing the appreciation was passive, the absence of a clear record cuts against the owner, not the other spouse. Illustrative example (hypothetical, no client data): an account grows by $150,000 during the marriage. If the owner cannot show the growth was passive — and the records reveal active trading throughout — the door is open to treating some or all of that growth as marital, with the calculation methods then determining how much. Conversely, where the records show a hands-off, buy-and-hold account, Naranjo supports keeping the appreciation non-marital.
Why I establish the threshold before I calculate
Presenting a polished active-vs-passive calculation without first establishing that the account was actively managed is a weakness an opposing expert will exploit. I build the analysis in the right order — effort first, then amount — so the calculation rests on an established factual foundation and holds up on cross-examination.
If you are an attorney handling a Florida divorce involving a premarital, gifted, or inherited investment account, Joey Friedman, CPA, P.A. documents the activity and calculates the marital appreciation statewide.
Related resources
- Hub: Calculating Marital vs. Non-Marital Appreciation of Investment & Retirement Accounts
- Premarital IRAs & Inherited Accounts: Effort, Not Contributions
- Equitable Distribution Analysis in a Florida Divorce
Frequently asked questions
Does picking good investments make the gains marital?
Generally no. In Naranjo v. Ochoa (Fla. 4th DCA 2023), selecting and holding inherited mutual funds was held not to be the “efforts of either party,” so the appreciation stayed non-marital. Effort means ongoing activity, not just selection.
What activities count as active management?
Frequent trading, active reallocation, professional-style management, a researched and actively maintained concentration, and the reinvestment of marital income.
Who has to prove the appreciation was passive?
The owner of the non-marital account bears the burden of showing the appreciation was passive; an incomplete record tends to cut against the owner.
Why does this matter before the calculation?
Because if no qualifying effort is established, there is no marital appreciation to calculate — the threshold question gates everything that follows.
By Joey N. Friedman, CPA, ABV, M.Acc, MIB — President, Joey Friedman, CPA, P.A.