Splitting up the marital estate is one of the hardest parts of divorce. It’s not just emotionally challenging; it’s often a complicated balancing act of numerous variables. But those aren’t cold, impersonal variables. They all have a real, immediate effect on your life.
Who gets the home? How can you protect your retirement account? What happens to the business or your stock portfolio? California says the marital estate is community property and should be split 50/50. But almost no one sells everything and splits the cash. Instead, you and your attorney will start into the process, driven by your priorities, and then negotiate the options, accounting for such issues as tax penalties. So, what happens when the values of your marital assets suddenly spike or plummet during the process?
California asset valuation during divorce
According to California law, the court values your community assets as close as possible to the time of trial. However, life has a way of altering our plans. Perhaps, you hire someone to provide a valuation of your marital estate, only for the other party to file actions that delay your trial date. If the economic realities change wildly in the intervening months or years, should you still use the earlier valuation? Can you change it?
It’s possible the court might refuse an updated valuation. For example, take the case of one California woman who appealed her property division. She argued the value of two marital businesses had increased substantially between the time she had valuated them and the time the court entered its judgment. She had tried to enter new evidence to that effect, but the trial court denied her because it had already closed evidence seven months earlier. The woman claimed this was an error. But the appeals court upheld the trial court’s ruling because:
- The trial court had already considered the businesses’ profits
- The businesses and their business models had remained effectively the same
- The woman hadn’t submitted evidence that reflected a material change worth reopening the case
- The businesses’ increased values after the couple’s separation might have counted as separate property
- The woman failed to show the increased value owed to anything other than the normal course of business
In other words, the appeals court said the woman and her attorney should have known better. They should have anticipated business growth. They should have provided a better business valuation. They could have raised their concerns during the trial.
Conversely, the appeals court’s opinion suggests the trial court may have considered new evidence if:
- It reflected a core change to the businesses or their business models
- It reflected a significant, material change
- It showed how the woman’s ongoing efforts had contributed to the increased values
The trick is that asset valuation is essentially a snapshot of their values at a given time. But many assets aren’t static. The values of businesses, stock portfolios, retirement accounts and real estate can all fluctuate over time. Accordingly, splitting the marital estate fairly may depend on more than your priorities, understanding of tax consequences and valuation methodologies. It may also depend on the timing of your valuation.
Your award can shape your future
Property division can be daunting and often stressful, but it’s also an important step in shaping the sort of future you’ll enjoy after your divorce. That makes it important to dive into the complexities, rather than avoid them, and to work with a team who can handle all the different legal and economic concerns.
