In every divorce case, no matter the situation of the parties, there will be a division of assets. Many people think this is a simple “split the baby” determination. However, that is not always the case. For bank accounts and joint debts, you may be able to do that. However, when it comes to retirement accounts, real property, and business payouts, the formula is not that simple. Each of these areas has its own unique set of problems, and you will definitely need an attorney to help you piece this together.
Retirement Accounts and Pensions
In cases where divorcing parties have retirement accounts or pensions, those assets are subject to division as part of the divorce as they are considered marital property. However, retirement accounts and pensions are considered and divided differently, and there are ways to ensure that you are receiving present day, actualized value for your awarded portion. Determining what the “marital portion” of those accounts can often be the first problem. Where the entirety of the value in the accounts has been earned entirely during the marriage, the problem is simple. Where the asset existed prior to the marriage, but money was placed into or earned by the account during the marriage, determining what constitutes the “marital portion” can become very complex. An attorney will help to make the best arguments about what constitutes “marital assets” in the account, and will also know the appropriate experts to consult and review the accounts to help make that determination. In many cases, having an expert conduct an account valuation to determine exactly what amount of money is marital, can ensure that you receive the maximum amount.
First, you need to know the difference between what are called “defined contribution plans,” commonly called 401ks, IRAs, CMAs, 457b, and 403b plans, and “defined benefit plans” which are pensions. With defined contributions, the present value of the account is the “actualized” value. The problem that arises is determining the amount of that value that accrued during the marriage, if the account was in existence prior to the time of the marriage, and if the account existed prior to the marriage, is it marital property at all, or does it meet the requirements for being considered “separate property.” Again, if you have that circumstance, you should talk to an attorney about these issues.
With defined contribution plans, an expert can determine the value of the marital and non-marital portions and offer an opinion on the marital portion’s value that is subject to division. With defined benefit plans, or pensions, things can become much more complicated. In many divorces, the primary payee of the pension has not retired, and will not retire for some time. As a result, you cannot simply determine the present value of the plan. An expert is required to determine the actualized value of the account at the time the primary payee will receive the benefit, and how much of that value will be awarded to the alternate payee. Any increase in the value of the defined benefit plan after the date the divorce judgment can be segregated and not included in the future contributions to the plan. This is usually done by entry of a Qualified Domestic Relations Order, commonly called a QDRO or EDRO.
In either event, you will want to hire an attorney who can advise you, and who can put you in touch with the appropriate professionals to properly conduct such valuations. Expert opinions are looked upon very favorably by most Courts in the family law arena, particularly when it comes to account and property valuations. The expenditure of funds to make these determinations is often worth the expense, for a number of reasons, not the least of which is to ensure that, if your opposing spouse hires an expert, and if they are the party with more assets they likely will, you aren’t the party on the outside looking in.
Real Property Valuations
Another area where people often make mistakes are with the sale of real property. Whether you only have your marital residence, or you own multiple homes or commercial properties, there are too many people who simply take what they paid for the property, minus any liabilities on the property, and decide to use that as the current value of the property. That mistake can cost you a substantial amount of money. Most good divorce attorneys will tell you that you should not make a decision about the value of any real property that is part of the marital estate without taking certain steps. One of those would be to obtain an appraisal of the property. Good family law attorneys will know several appraisers and their predilections about property valuations. Depending on whether or not you want to the property to be valued high, or low, you will want to discuss the appraisal of the property with an attorney before making a decision.
You may find that the value of the home from ten years ago when it was purchased has substantially increased. If your opposing spouse wants to keep the house, knowing about that substantial increase can net you a substantial increase in your equity buyout. If the house is to be sold, an increase in the value will result in your obtaining a larger share upon sale. In some circumstances, divorcing parties own multiple homes. In those case, knowing the present values of the houses can help make better decisions about selling or keeping some or all of those properties as part of the settlement. In those cases, appraisals and appraisal reports documenting the basis of that appraised value can be significant.
The same can be true, and sometimes more so, if the parties own a commercial building, or a rental property. Often times, commercial property valuations result in substantial valuations. In some cases, commercial properties can be worth large sums more than residential property. In a case we litigated recently, the one-sixth valuation of marital interest in a commercial property was worth more than the one-half value received from the sale of the marital home. Having a commercial appraisal done on the property is important, and your attorney can counsel you on how to have one done and on who your best option to use for that service might be, given your individual facts and circumstances. Commercial appraisal reports are typically lengthy, detailing the basis for the appraisers determined value. In the event of litigation, having that report along with the expert’s testimony can provide a solid basis upon which the Court may rely in making a determination on value. In both circumstances, it is important to have an attorney who can help you determine the best plan for protecting your interests and maximizing the value you can receive as a result of your property split.
Many divorce litigants do not know that the other partner’s business is actually, in many cases, a marital asset, to which they are entitled to receive one half of the value. Whether it is a restaurant, medical practice, law firm, or accounting group, in many cases, the business may be a marital asset that is subject to division. While the parties could simply agree on a value to place on the business, doing so usually results in a substantial loss to one of the parties in the property split. In these circumstances in particular, you will need the assistance of an attorney, who can help find an expert to properly review the business, its assets, its debts, profit and loss statements, tax return filings, expenses and properly reach a conclusion about the value of the business.
Having an expert and an attorney to do the necessary work to find a proper value on the business is of the utmost importance. In many cases, the business itself can be the most substantial asset in a divorce matter, and often parties don’t even consider the company as a marital asset. Don’t make that mistake. If either party has a business, whether it is you or the other spouse, you are most in need of an attorney to give you proper guidance, to try and ensure that you are not cheated out of your share of marital assets. We have handled cases for clients where the difference between having the business valuation and not changed the value of the estate in our client’s favor by hundreds of thousands of dollars. Our experience and connections to the right experts can help to ensure that you get the property settlement you deserve.
If you are planning to file for divorce, or are already engaged in divorce litigation, give us a call. We can help put a plan in place that will ensure you the best possible outcome as part of your case. At our firm we have handled small and large asset divorces, and our approach guarantees that, whatever the size of your marital estate, we can maximize your outcome.