How might COVID affect the valuation of certain assets in a divorce?
In a divorce action, assets are generally classified as “marital” if they were acquired during the marriage (i.e., after the date of marriage and before the date of filing for divorce). The valuation date used for these marital assets can vary depending on the asset. The value can be measured before filing, as of the date of filing, or sometime after filing, as equity requires.
Examples of Different Assets
- Businesses: Prior to COVID, businesses were typically valued at the time of filing because any appreciation after that was usually due to non-marital efforts. However, because of COVID, it may make more sense to value businesses closer to the date of the agreement or trial (as applicable) because market conditions are likely playing a much larger role than usual. In other words, non-marital efforts may be having less of an effect on the value right now, and market conditions could be significantly decreasing the value.
- A few businesses are actually flourishing right now, in whole or in part because of COVID’s effects on the market. For those businesses it may be necessary to measure how much of the appreciation is due to COVID/the market and how much is due to potential post-filing non-marital efforts.
- Other relevant inquiries might involve whether or not the business in question will recover (if it’s suffering) and how long it will take to recover.
- House: An asset like a house, whose change in value is most likely driven by market forces/ passive appreciation or depreciation, should be valued closer to the date of agreement or trial as applicable. On the other hand, the mortgage might be valued as of the date of filing if only one party is paying with their non-marital funds, and they are getting the house.
- Stocks: Likewise, stocks passively appreciate and depreciate, so these should typically be valued closer to trial.
How to Proceed
In these uncertain times, couples may need to be creative about their settlement options. Some couples may want to include flexibility in their settlement agreements to allow for adjustments depending on future developments.
Picking the correct valuation date can involve many subtleties and nuances. The attorneys at The Heskin Martinez Law Group can assist you with the valuation issue of assets in a divorce and are staying up-to-date on COVID’s effects on valuation issues.
If you need assistance regarding valuations during divorce or any other family law issue, please reach out with the form below!