Some people are so eager to break free of the bonds of marriage that they put a little forethought into strategically timing their divorces. While it may be understandable to hasten the process, it could also wind up costing you big bucks when it's time to split up the property.
Why does a valuation date matter?
For some assets, the valuation date matters very little, if at all. But for others, it can matter a great deal. Colorado uses a valuation date that is a close to the divorce trial date as possible. In cases where the matter is settled or mediated, that day may be selected.
If you are wondering how the valuation date of your assets could impact your divorce, consider the following hypothetical situation.
You and your spouse decide to divorce during the summer months, at which time your area is in the midst of a seller's real estate market. But by the time the actual divorce occurs, the market has flipped and your property may command a price that is significantly less than its value just a few months prior.
If you were hoping to leverage your share of the house for a larger piece of your spouse's pension pie, for instance, this will not be welcome news.
Active versus passive assets
Assets can be considered active or passive. Active assets have values that can go up, down or remain static dependent upon its owners' actions. Occupied properties and businesses typically are classified as active assets. As you can imagine, the spouse in control of the asset could do (or neglect to do) certain things that could lower an asset's value.
For instance, if the spouse you are divorcing is a dentist, he or she could dramatically reduce his patient workload during the pendency of the divorce to make the business appear to be much less profitable than it actually is.
Another example would be if one spouse is living in the family home and lets it deteriorate by neglecting to keep up with routine maintenance tasks.
All assets' values can change based on a variety of factors, some of which are completely beyond the control of either spouses. Those types of assets are usually considered to be passive and might include investment portfolios or tracts of vacant land.
The role of the court in asset valuation
A court could conceivably rule that a dip in the value of a business was not due to any actions by the spouse tasked with its management. Instead, the court could determine that the lessened value was related to a downturn in the economy.
However, the judge is not the one who will ultimately assess your marital assets' value. For that, you will need to hire an independent evaluator who can accurately pinpoint its worth. By working closely with your family law attorney, you can petition the court for your fair share of your property's value.
Tags: Divorce, Family Law
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