Section 15.7 Title and Evolution of the Source of Funds Rule

• Library: Family Law Deskbook and 2014 Supp

1. (§15.7) Title and Evolution of the Source of Funds Rule

The manner of classifying “marital” and “separate” property has evolved dramatically since 1984. The most significant change from the prior law came with the adoption of the pure “source of funds” rule by the Supreme Court of Missouri in Hoffmann v. Hoffmann, 676 S.W.2d 817 (Mo. banc 1984). Under the Hoffmann source of funds rule, the character of property was determined solely by the source of funds financing its purchase. Id. at 824. The property was considered to be acquired as it was paid for so that a portion of the property’s ultimate value could be both marital and separate property. The source of funds approach embodied a theory of marital partnership. Id.

The source of funds rule allowed compensation for marital efforts and property contributed to the acquisition or enhancement of the value of the asset. These contributions would not otherwise be reflected in the title ownership of the property. The equitable theory of the rule also gave the marital estate a proportionate share of the total appreciated value of the property, even if only because of general economic conditions and not attributable to any further marital effort or contribution. “Thus, the spouse who contributed nonmarital funds, and the marital unit that contributed marital funds each receive[d] a proportionate and fair return on their investment.” Neal v. Neal, 776 S.W.2d 861 (Mo. App. S.D. 1989) (quoting Harper v. Harper, 448 A.2d 916, 929 (Md. 1982)).

The acquisition of an interest in the appreciated value of separate property, by...