How a Forensic CPA Calculates Marital vs. Non-Marital Appreciation of Investment and Retirement Accounts in a Florida Divorce

Quick answer: When one spouse owned an investment or retirement account before the marriage — or received it by gift or inheritance — the account itself stays non-marital, but the growth during the marriage may be split. Under Florida law, the increase is marital only to the extent it resulted from a spouse’s work/effort or from marital money added to the account; pure market growth (passive appreciation) remains non-marital. The hard part is not the rule — it is the math. A forensic CPA isolates the passive portion from the active portion using one or more recognized methods (a market-benchmark calculation, a buy-and-hold counterfactual, or direct transactional tracing), and typically presents a defensible range rather than a single number.

The question this article answers

A spouse walks into a divorce owning a brokerage account or IRA that was funded before the wedding. Over a ten-year marriage it grows substantially. Is that growth his or hers alone, or does the other spouse share in it?

Family-law attorneys handle the legal standard. What I focus on as a forensic CPA is the part that actually decides the dollars: how much of the appreciation is “active” (and therefore marital) versus “passive” (and therefore non-marital)? That calculation is where cases are won or lost, and it is surprisingly under-explained. This guide walks through how the analysis is actually performed.

The legal foundation (the short version)

Florida’s equitable-distribution statute, §61.075(6)(a)1.b, treats the enhancement in value and appreciation of a non-marital asset as marital to the extent it results from:

  • the efforts of either spouse during the marriage (active/labor), or
  • the contribution of marital funds to the asset.

Market-driven growth that happens on its own — passive appreciation — stays non-marital. Two points matter for the calculation:

  1. The burden is on the owner to show that the appreciation was passive.
  2. What counts as “effort” is a real threshold, not a formality. In Naranjo v. Ochoa (Fla. 4th DCA 2023), the appreciation on inherited mutual funds that were simply bought and held was held non-marital, because selecting and holding the funds did not amount to the “efforts of either party.” By contrast, in Chapman v. Chapman, 866 So. 2d 118 (Fla. 4th DCA 2004), a spouse’s hands-on management of premarital securities over many years did create marital appreciation — and the court approved subtracting the portion the assets would have earned passively, treating only the excess as marital.

That last idea — measuring what the account would have done on its own and treating the rest as the product of effort — is the engine behind the most common calculation method.

Active vs. passive appreciation — the distinction that drives the number

  • Passive appreciation is growth from market forces: the index went up, interest accrued, a stock you simply held rose. Non-marital.
  • Active appreciation is growth attributable to a spouse’s labor during the marriage — frequent trading, active portfolio management, a concentrated bet that was researched and managed, or the reinvestment of marital income. Potentially marital.

Illustrative example (hypothetical): Suppose a premarital account is worth $200,000 at the date of marriage and $320,000 at the filing date, with no new deposits. The $120,000 of growth is not automatically split 50/50. The question is: how much of that $120,000 would the account have earned sitting passively in the market, and how much came from the owner’s active management? The three methods below answer that question in different ways.

Method 1 — The reasonable-rate-of-return (market-benchmark) calculation

This is usually my primary method, and it is the approach Florida courts have accepted in cases like Chapman. The logic:

  1. Take the account’s value at the date of marriage (the non-marital starting point).
  2. Grow it forward to the valuation date at a sourced, defensible market rate of return — for example, the total return of a broad market index over the same window.
  3. That grown figure is the passive result. Active (marital) appreciation = actual ending value − passive result.

Illustrative example (hypothetical): The $200,000 account would have grown to $272,000 if it had simply tracked a broad index returning 36% over the marriage. The account is actually worth $320,000. The $48,000 difference is the active appreciation attributable to the owner’s management — the marital portion under this method.

The strength of this method is that it directly isolates the owner’s “alpha” — the value they added beyond what the market handed them. The sensitive judgment call is which benchmark to use: a broad-market index versus a sector-heavy index can move the result substantially, especially for a tech-concentrated or otherwise non-diversified account. That is exactly why the benchmark must be sourced from a reputable system and disclosed, never assumed — and why I present the result across a reasonable range of benchmarks rather than a single point. See the dedicated spoke on the benchmark method.

Method 2 — The buy-and-hold counterfactual

Here, instead of using an index, I ask: what would the account be worth today if the owner had simply held the exact positions they owned at the date of marriage and done nothing?

  • Passive = the date-of-marriage holdings, valued forward at later prices.
  • Active = actual ending value − that buy-and-hold value.

This method uses only the account’s own data, with no external index assumption — which can make it more concrete in front of a judge. Its complications are the corporate actions along the way (stock splits, reverse splits, mergers, spin-offs), each of which must be tracked precisely. It is also revealing in an instructive way: if a spouse sold winners during the marriage and the buy-and-hold value is higher than what they actually have, the calculation simultaneously proves the management was active and shows it destroyed value — a result that cuts against the very spouse whose effort is being measured. I most often use this method as a cross-check on Method 1 and as evidence that management was, in fact, active.

Method 3 — Direct transactional tracing

The most granular method works from the inside of the account:

  • Active = realized trading gains during the marriage plus reinvested marital income (a legal question for counsel, but quantifiable either way).
  • Passive = the unrealized market drift on positions that were simply held.

This method is intuitive and transparent, and it is the right tool when the records are complete and the trading history is the crux of the dispute. Its limitation is that, taken alone, it can treat the appreciation on a retained, never-sold position as purely passive even when the decision to acquire and concentrate into that position during the marriage was itself an active choice — which is why it is usually paired with one of the methods above.

The coverture fraction — when marital money went into a non-marital asset

A related but distinct calculation applies when marital funds were contributed to a non-marital asset (the classic example is a premarital home with a mortgage paid down using marital income). In Kaaa v. Kaaa, 58 So. 3d 867 (Fla. 2010), the Florida Supreme Court approved using a coverture fraction to determine the marital share of the passive appreciation that accrued while marital funds were being applied. The same framework can apply to an investment account when marital contributions are mixed in. The mechanics — and how the investment-account version differs from the real-property version — are covered in the coverture-fraction spoke.

What actually counts as “active management”?

This is the threshold question, and Naranjo drew the line clearly: selecting investments and holding them is not, by itself, “effort.” Buying a mutual fund and leaving it alone produces passive appreciation, full stop. What pushes appreciation toward “active” is genuine, ongoing labor during the marriage — frequent trading, active reallocation, professional-style management, a researched and managed concentration, or the steady reinvestment of marital earnings. Part of my analysis is documenting which of those, if any, actually occurred — because the math only matters once the activity is established.

Special cases: premarital IRAs and inherited accounts

  • Premarital IRAs usually have no external contributions (you generally cannot add marital wages to an IRA beyond annual limits, and often nothing was added at all). That removes the “marital funds” prong almost entirely, so the entire marital-appreciation question turns on the “efforts” prong — was the account actively managed? This makes the active/passive calculation, not a contribution-tracing exercise, the whole ballgame.
  • Inherited and beneficiary (“BDA”) accounts are independently non-marital as gifts/inheritance, and required distributions generally flow out of them rather than marital money flowing in. Naranjo is the leading recent example of how their appreciation is treated.

Why the honest answer is a range, not a single number

Because the benchmark choice (Method 1), the corporate-action handling (Method 2), and the treatment of reinvested income (Method 3) each move the result, a credible forensic analysis brackets the answer — for instance, “the marital active appreciation is between roughly $X and $Y depending on the benchmark and method,” with each end of the range fully sourced. A single point estimate presented as certainty is a red flag, not a strength. Judges and opposing experts respect a transparent range far more than false precision.

Why this takes a forensic CPA, not a spreadsheet

The market data, the corporate actions, the benchmark sourcing, the reinvested-income treatment, and the active-vs-passive threshold all require professional judgment that a generic calculator cannot supply. Done carelessly, the analysis is easy to attack on cross-examination; done rigorously and disclosed transparently, it holds up. As a CPA accredited in business valuation, I prepare these calculations to be defensible from the first draft — sourced, ranged, and tied to the controlling Florida authority.

If you are an attorney handling a Florida divorce involving a premarital, gifted, or inherited investment or retirement account, Joey Friedman, CPA, P.A. prepares active-vs-passive appreciation analyses statewide.

The full method series

This hub is the overview. Each spoke below works through one method or special case in depth:

Related resources

Frequently asked questions

Is the growth on a premarital investment account always split in a Florida divorce?
No. The account itself stays non-marital. Only the appreciation that resulted from a spouse’s active effort or from added marital funds is marital; passive market growth remains non-marital, and the owner bears the burden of showing it was passive.

What is the difference between active and passive appreciation?
Passive appreciation is growth from market forces on an asset that was simply held. Active appreciation is growth attributable to a spouse’s labor during the marriage — trading, active management, or reinvested marital income.

How does a forensic CPA calculate the marital portion?
Most often by growing the date-of-marriage value forward at a sourced market rate of return and treating the excess actual value as active (the reasonable-rate-of-return method from Chapman), cross-checked with a buy-and-hold counterfactual and/or direct transactional tracing.

Does picking and holding good investments make the gains marital?
Generally no. In Naranjo v. Ochoa (Fla. 4th DCA 2023), simply selecting and holding inherited mutual funds was held not to be the “efforts of either party,” so the appreciation stayed non-marital.

Why do experts give a range instead of one number?
Because the benchmark and method choices each move the result. A sourced range is more defensible — and more credible to a court — than a single figure presented as certain.

By Joey N. Friedman, CPA, ABV, M.Acc, MIB — President, Joey Friedman, CPA, P.A.