Common Asset Valuation Mistakes / by Cassandra Hearn

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Divorce has enormous financial implications for any couple.  When a divorce occurs, there needs to be a division of the parties’ assets.  California is a community property state.  This means that each spouse gets half of the value of the parties’ marital property.  It is, therefore, essential that there is an accurate and fair value placed on each of the parties’ assets in order to make sure that both spouses get their fair share.  There are some common mistakes made in valuing assets that divorcing spouses should be aware of and should be careful to avoid.

One common mistake is taking your spouse’s word for how much an asset is worth.  Your spouse may tell you that his or her retirement account only contains $5,000, but you should make sure that paperwork is exchanged anyway.  Your spouse may be undercutting the value, either intentionally or by mistake, and it is important to examine the paperwork independently to make sure that the value is accurate. 

Another mistake is not hiring an expert to place a value on large assets, such as getting a professional appraisal of your marital home.  Family businesses often typically merit hiring a professional.  Businesses may have equipment, accounts receivable, hardware, real estate, goodwill, and a myriad of other assets that must be accounted for when placing a value on the business.  An expert is much better suited to provide an opinion on this issue than the parties.  Another type of asset that may require an expert is a pension plan.  Unlike a 401(k), a pension plan is controlled and funded by the spouse’s employer.  Even though the employee is not at liberty to withdraw money from the pension plan as he could from a 401(k), the pension still has value and the parties should not overlook it.

A vital mistake can be in selecting the wrong valuation date.  The valuation date is the date at which the value of the asset is determined.  California family code 2552(a) provides that the value of an asset will be determined as close as practical to the final hearing or settlement.  This means that even if the parties have been living apart for a year, the value of any marital assets will still be set close to the trial, not to the separation.  There is an exception provided for this, called an “alternative valuation date,” which would allow a court to select a different valuation date if this is necessary to make an equitable division of the assets.  This will often be used in cases of division of a family business where one spouse has intentionally reduced the value of the business. 

If you have questions about the division of marital assets, call us today at 619-800-0384 for a consultation. We can talk with you about your case and how your assets may be divided in the event of a divorce.