What is “valuation” and why is valuation so important in a Louisville divorce case? The issue of valuation is associated with marital property division and how the debts and assets of the parties are characterized and ultimately divided.
We’ve covered the concepts of “marital property” and “separate property” extensively on this site, so this discussion is going to focus on the concept of establishing the actual value of an asset (or debt) before the Court and what makes valuation so important in a Louisville divorce.
Ultimately, marital property is to be divided equitably between the parties. In order to do so, the parties and/or the Court must clearly establish the genuine value of each unique asset. If there is a financial account with a cash balance, the value is obvious. However, the bottom line value of complex assets such as a business or professional practice, investment account, stock options, vested or unvested stock, or even a collection of some sort can be very challenging to accurately appraise.
For example, an account with $10,000 in it is literally worth $10,000. However, an investment account with $10,000 worth of stock is a completely different asset. Selling investment assets such as stocks or making withdrawals from a 401(k) account before the age of 59 years and six months can have substantial tax consequences. If we use the $10,000 in stock example, the stock was purchased at a specific price and on a specific date. The amount it was originally acquired for helps to establish the “basis” and ultimately determines the amount of tax which will be owed after the asset is sold. The date it was acquired will impact the difference in taxation between short-term and long-term capital gains (a substantial difference in tax rates). When one is considering the division of marital property a financial account with $10,000 in it and an investment account with $10,000 in stock are not equal in “valuation.” To establish the actual value of the stock one must subtract the taxes associated with the sale from the perceived face value of the account.
Another example of what makes valuation so important in a Louisville divorce is the ownership of a business or professional practice. The principle question associated with the business will be “what is the valuation of the marital property interest in the business asset?” In order to answer that question one must establish the characterization of the business asset (separate or marital) as well as the actual value of the asset regardless of its characterization. If the owner of the business wishes to keep the company after the divorce they must offset their former spouse’s half of the marital interest in the business. The same is true for a collection, whether it involves cars, art, real estate, guns or statuettes.
Finally, the interests of the parties are naturally opposed in the process of valuation if an asset is to be kept. The owner of the asset who wishes to keep it wants to establish the lowest possible valuation of the asset in order to reduce the amount they will have to “offset” in order to keep it. The non-owner of the asset has a natural interest in establishing the highest valuation possible in order to receive the maximum financial benefit during marital property division.
Louisville divorce cases involving substantial assets such as wealth, investments, real property, a business or professional practice, stock (vested or unvested) or other complex assets require an attorney with genuine legal skill and experience.
We invite you to review the strong recommendations of our former clients and contact us or call 502-584-1108 to schedule an appointment with one of our experienced divorce and family law attorneys.
