Quick answer: Sometimes a premarital account grows passively — pure market drift, no active management — yet part of that growth is still marital. That happens when marital money was added to the account during the marriage. Florida law treats appreciation as marital to the extent it resulted from the contribution of marital funds, and the tool for splitting it is a coverture fraction: the share of the account’s invested base that came from marital contributions, applied to the passive appreciation. In Kaaa v. Kaaa, 58 So. 3d 867 (Fla. 2010), the Florida Supreme Court used a coverture fraction to apportion the passive appreciation of a non-marital home that marital funds had paid down. The same principle applies to a brokerage or retirement account — but, as explained below, the fraction itself has to be adapted, because an investment account has no mortgage.
This is a spoke of the hub on calculating marital vs. non-marital appreciation. It covers the one pathway by which passive growth becomes marital — distinct from the active-effort methods in the rate-of-return, buy-and-hold, and tracing spokes, which measure growth a spouse produced through management.
Two different ways appreciation becomes marital
Most of this cluster addresses appreciation caused by a spouse’s effort (active management). This spoke addresses the other statutory pathway entirely. Under §61.075(6)(a)1.b, appreciation of a non-marital asset is marital to the extent it resulted from either the efforts of a spouse or the contribution of marital funds. The coverture fraction is the answer to the second pathway: even with zero active management, if marital dollars went into the account, the growth those dollars earned is marital.
| Pathway | What drives it | The method |
|---|---|---|
| Active appreciation | A spouse’s management effort | Rate-of-return, buy-and-hold, tracing |
| Passive-but-marital | Marital funds added to the account | Coverture fraction (this spoke) |
The two can coexist in one account, which is why I keep them separate in the analysis and report them on distinct lines.
What Kaaa actually decided — and why I adapt it
It is important to be precise about the source. Kaaa was a real-property case. The husband owned a home before the marriage; during the marriage, marital funds paid down the mortgage, and the home appreciated passively with the market. The Florida Supreme Court held that the passive appreciation was partly marital and laid out a five-step method: determine the property’s current value; determine whether the appreciation was passive; determine whether that passive appreciation is marital (including findings on whether marital funds paid the mortgage); determine the value of the passive appreciation subject to distribution; and allocate it. To set the marital share, the Court applied a coverture fraction defined for that mortgage context as the mortgage balance at the date of marriage divided by the property’s value at the date of marriage.
An investment account has no mortgage, so that exact numerator does not exist. What does carry over is the statute the Kaaa fraction was implementing — appreciation is marital in proportion to the marital contribution. For an investment account, the marital contribution is not a mortgage paydown; it is the marital money deposited into the account. So I adapt the fraction to the asset:
Investment-account coverture fraction ≈ marital contributions ÷ total invested base (premarital value + marital contributions)
Applied to the account’s passive appreciation, that fraction yields the marital share. I am explicit in every report that this is an application of the Kaaa principle to a different asset class, not a mechanical copy of the home-mortgage fraction — because an opposing expert will (rightly) point out that Kaaa was about real property, and the analysis has to meet that head-on.
The calculation, step by step
- Establish the premarital (non-marital) value at the date of marriage.
- Identify and date every marital contribution into the account during the marriage — the deposits of marital money.
- Determine the total passive appreciation over the period (market drift, after confirming the growth was passive — see what counts as active management).
- Build the coverture fraction — marital contributions over the total invested base.
- Apply the fraction to the passive appreciation to derive the marital share; the marital contributions themselves remain marital, and the original premarital value stays non-marital.
Illustrative example (hypothetical, no client data): A spouse enters the marriage with a brokerage account worth $200,000. During the marriage, $50,000 of marital funds is deposited and nothing is withdrawn. The account is worth $400,000 at the valuation date, and the analysis confirms the $150,000 of growth was passive market appreciation, not the product of active trading. The invested base is $250,000 ($200,000 non-marital + $50,000 marital), so the marital coverture fraction is $50,000 ÷ $250,000 = 20%. The marital share of the passive appreciation is 20% × $150,000 = $30,000. Adding back the marital contributions, the marital portion of the account is $50,000 + $30,000 = $80,000, and the non-marital portion is $200,000 + $120,000 = $320,000 — which sum to the full $400,000.
The timing wrinkle that a basis ratio alone misses
A simple “marital dollars ÷ total dollars” fraction quietly assumes every contribution was in the account earning returns for the entire period. That is rarely true. A $50,000 deposit made two years before the valuation date did not earn the same return as the premarital principal that was invested the whole marriage. Treating them as equal overstates the marital share. Where the contributions were material and made at different times, I time-weight them — crediting each contribution only with the return it actually could have earned from its deposit date forward. The basis ratio is the starting point; the time-weighted apportionment is the defensible number. This is the kind of refinement that separates a calculation that survives cross-examination from one that does not.
Where this method fits with the others
The coverture fraction answers a question the active-effort methods do not even ask. The rate-of-return, buy-and-hold, and tracing methods all measure appreciation a spouse generated by managing the account. The coverture fraction measures appreciation that the market generated on marital money. A single account can require both analyses — for example, an account that received marital deposits and was actively traded. In that situation I separate the two effects so the court is not asked to count the same dollar twice, and so each component rests on its own footing.
If you are an attorney handling a Florida divorce involving a premarital, gifted, or inherited investment account that received marital contributions, Joey Friedman, CPA, P.A. prepares coverture-fraction and time-weighted apportionment calculations 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
Can appreciation be marital even if no one actively managed the account?
Yes. Under §61.075(6)(a)1.b, appreciation is marital to the extent it resulted from marital funds or a spouse’s efforts. If marital money was deposited into a premarital account, the passive growth on that money is marital even with no active management.
What is a coverture fraction?
It is the proportion of an asset attributable to marital contributions, applied to the appreciation to isolate the marital share. In Kaaa v. Kaaa (Fla. 2010) the Florida Supreme Court applied one, defined for a mortgaged home as the mortgage balance at the date of marriage divided by the home’s value at that date.
Does Kaaa apply directly to brokerage and retirement accounts?
Kaaa was a real-property case, so its exact mortgage-based fraction does not transfer mechanically. The statutory principle it applied — appreciation is marital in proportion to the marital contribution — does carry over, and the fraction is adapted to use marital deposits rather than a mortgage paydown.
Why does the timing of contributions matter?
Because a contribution made late in the marriage earned less return than principal invested the whole time. A plain dollar ratio treats them as equal and overstates the marital share, so material contributions should be time-weighted from their deposit dates.
By Joey N. Friedman, CPA, ABV, M.Acc, MIB — President, Joey Friedman, CPA, P.A.