Tax Brake with Robert G. Nath, Esq.
"How to Value Assets in a Divorce"
- Week of 8/05/02 -
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| When couples divorce, valuing assets for division purposes is both easy and hard. Easy, because cash and other near-cash assets are normally quickly valued; hard, because there can be incredibly difficult issues on other assets.
The easy items: Cash, publicly traded stocks, bonds, CDs, and similar items. But even there, it's possible to introduce ambiguity. What is a stock option worth? In olden days, couples fought over this; the option was going skyward, and everyone wanted to have the right to buy a dot com cheaply. Now, many are worth nothing. There are specialists who do nothing BUT value these options, and of course, they can be all over the place on value depending on whom you ask. Even “real” stocks can be a problem sometimes, say when they are in a trust, or in a family partnership where other members have legal interests. So if you own a 15% interest in a family partnership that owns nothing but T-bills, your share is NOT 15% of the value of the T-bill. There can be discounts for minority ownership, and in some cases, lack of marketability (if the securities are not publicly traded). The marital home is usually easy to value. Even if the couple can't agree, they can hire an appraiser. If they can't agree on an appraiser, often they can agree they will each hire their own appraiser, and average the difference between the two appraisals. The vacation home, and jewelry and other art objects, can be valued by the same process, absent agreement by the couple to the contrary. Small business stock is difficult, as there is no market. This is especially true where the owner is the husband or wife and the “value” of the business truly depends on their efforts alone or in large part. Sometimes A will say to B : “I'm going on strike; NOW see how much that stock is worth!” But even here, values can be assigned based on hard assets, going concern, or other bases. This is both and art and a science; again there are qualified appraisers who do nothing but this for a living. In general, it's wise to make a total, complete list of assets, even if you don't know what they are worth. If you can say “This is worth SOMETHING, I just don't know what,” then list it and you can thereafter systematically solve the “valuation” problem. |
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