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Manner of asset enhancement fueling billionaire's alimony payment

Massachusetts residents may be aware of the many financial issues surrounding a divorce. Stakes are even higher in high-asset divorce cases. Many Massachusetts residents surely have read or heard about the on-going tussle between billionaire Harold Hamm and his former spouse. Billions of dollars are at stake in this prominent divorce case. Readers may be aware that Hamm has already paid $1 billion in alimony to his former wife. However, now both spouses have made appeals for revision of the alimony order.

Hamm's former wife, Sue, contends she contributed substantially to the growth of Hamm's oil company while they were married. Hamm states that the net worth used to award the billion-dollar alimony payment has declined appreciably due to the crash in crude oil prices, so the award should decline. An important point used for this case's net worth calculation is active versus passive appreciation. Active appreciation is the growth of a company due to management's direct efforts. Active appreciation means a company's prosperity and growth can be attributed in fair measure to a spouse's business acumen.

Passive appreciation, on the other hand, is an increase in a company's value due to inflation and other market forces. For instance, a person owns a parcel of land for 20 years and makes no effort to improve it, but its value increases anyway due to real estate development of the land surrounding it. Identification of the cause of marital financial gain and worth is important when considering division of assets for a divorce. Hamm's standpoint is that the tremendous growth of his company was luck and not his ability, so it's not a marital asset.

The truth regarding the asset accumulation for this divorce case is probably somewhere in the middle. To say that the oil company's growth had nothing to do with Hamm's abilities would probably be stretching the truth. But, it would also probably be wrong to say that oil market forces played no role in the accumulation of the company's worth and Hamm's wealth.

Source: Forbes.com, "Active And Passive Appreciation In The Continuing Story Of Hamm v. Hamm," Jeff Landers, Jan. 22, 2015

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