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.
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