Divorce: Valuing Marital Property

As mentioned in a previous blog, Divorce: Marital vs. Separate Property, when a court divides parties’ property, it first must determine whether the property is classified as marital or separate property.  The term “property,” here is not limited to only a house, or real property, but includes personal property as well.  Personal property is anything that is movable.  Property can include the furniture, vehicles, retirement plans, airline mileage, life insurance, jewelry, clothing, a house, bank accounts, debts and loans, cemetery plots, etc.

After the court categorizes the property as marital or separate, it must then divide the marital property equitably.  Equitably means “fairly,” not equally.  However, it is often that marital property is divided equally, the court is just not bound to divide it this way and can use its own discretion.

For the court to equitably divide the marital property, it must put a value to the property.  Most property tends to be valued by the parties.  This is particularly true for vehicles, where the parties consult the Kelly Blue Book, bank accounts and credit card debt, where the parties look to their current bank or credit card statements, some retirement plans, and general household items and personal effects.

However, it is of no surprise that things tend to get trickier when dealing with the parties’ large assets – the house, a business, or even some retirement or pension plans.

When there is a dispute to the value of property, the court uses reliable sources to come to a value.  This may include parties using professional evaluators and appraisers, testimony, reports, and documentation showing what the property is selling for elsewhere.

Real Estate –  There are instances where it may not be necessary to value the home.  For example, if neither you nor your spouse are going to keep the house and plan to sell it.  In this case, so long as both parties can decide on a sales price, a valuation may not be necessary.  If the parties cannot settle on a sales price, one option may be to place the house on the market at the higher value and agree to slowly decrease the sales price.  Another option would be to rely on the recommendations of a hired realtor.

But, if one of the parties is looking to keep the house, it is often worth the cost of an appraisal to ensure the parties are treated fairly.

Despite our new reliance on internet valuation sites such as Zillow, these sites are only to be used by the parties or attorneys as a guide or starting point.  They will likely not be admissible in court, and if they are, will hold little to no value.  For this reason, the parties look to either professional appraisers or real estate professionals to provide a more legitimate value.

When valuing real estate, we typically start with one of the licensed realtors we have a relationship with to get a comparative analysis of the value of the home. We then compare the value we receive with the value the other party is agreeing to.  If we are close, then we are finished, if not, we share the information we received from the realtor and see if the other side will agree to the value.  If they do not, then the client must decide whether to pay for an appraisal.  Depending on the property, this averages around $600.  If there is potentially a lot to gain from the appraisal, we do order one.

Business – Unfortunately, valuing a business can cost thousands of dollars depending on the type of evaluation and business.  Because of this cost, valuations are not common and are typically only performed on large companies and businesses when the price tag for the valuation is peanuts to the business’s annual revenue.  It is common for the parties to reach a value on their own for the smaller, sole proprietorships.

Pension – The value of a pension often confuses people because pension statements generally have an account balance and/or a projected monthly payment upon retirement.  However, assets are valued as of the date of divorce and the figures on your pension statement do not represent the present value of the account. Valuations of pensions usually required an actuarial calculation done by an actuary or a qualified forensic accountant.  If the spouse receiving the pension is close to retirement and has worked for their employer for many years, the value of the pension could be far greater than the martial home.

Depending on the circumstances of your case, hiring a professional to value an asset may lead to a major negotiating advantage that could outweigh the expense.  An experienced attorney at Skulborstad Legal Group, LLC can help you decide whether a formal valuation is necessary and worth the investment and can assist in finding someone qualified.  Contact us for a consultation!

By | 2018-08-03T18:16:12+00:00 July 10th, 2018|Uncategorized|0 Comments

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