VALUATION OF MARITAL ASSETS

What is "Fair Market Value"?

Accurately determining what is the Fair Market Value (FMV) of any and all items of the parties' personal, real, tangible or intangible property is essential to representing a client is a complex divorce action.

FMV can be simply defined as "the price an item would sell for on the open market."  This often means what an item could sell for at an auction or yard sale.  It does not mean its purchase price or replacement cost.

Valuation of Real Property

In simple cases, the parties may be able to agree on the value of major assets, such as the house.  For instance, if the house was appraised in the past year or so for a refinancing, the parties may well agree to use that value for the residence.

However, professional appraisal of real estate (residence, farm, rental property, commercial property, vacant land, etc.) is commonly required in divorce actions.

Sometimes it is necessary to ascertain what was the value of a piece of real estate at the time of marriage (particularly if it was owned by one party prior to the marriage) and to measure that against its value today.  Occasionally, one party will have invested a significant amount of "sweat equity" into real estate which had been owned by the other party prior to marriage.  The increase in the property's value will be a key issue in the division of this asset.

Personal Property

The IRS defines "personal property" as "property of any kind except real property. It may be tangible, having physical existence, or intangible, having no physical existence, such as copyrights, patents, or securities."

Other assets which may require appraisal would include furniture, tools, jewelry, household furnishings, appliances, linens, books, collectibles, automobiles, boats, trailers, sporting equipment, motorcycles, computers, etc.  In that case, a personal property appraiser would be engaged by one or both parties to inventory and value every item found in either of the parties' homes.  This process is somewhat expensive but is often required in cases where the parties are unable to agree on how to divide these items equitably.

We encourage clients to try to inventory their own homes and to cooperate with each other to determine who gets what.  This can save the parties a lot of money, avoiding the need for appraisal or even auctioning off their possessions.  It also sets the stage for future cooperation in negotiating a settlement and even the parties' post-divorce relationship (especially important when children are involved).

Business Interests

Business interests, professional practices (doctors, lawyers, accountants, etc.), stock, stock options, investment real estate, copyrights, inventions, etc. are important examples of other types of property which may require appraisal or valuation by an expert.  Valuation of the goodwill of a business asset is another critical component of this process.

Medical practices are an extremely complex area for business valuation but we rely on qualified financial experts to assist us in protecting our clients' interests.

Business appraisals are not inexpensive, by any means, but this expense may make a world of difference in the settlement you are able to obtain.