Q. My wife and I separated two years ago and we have decided to divorce.
We don't agree on the date we should use to value some of our property,
like the home where she's been living in with the kids. She wants
it to be now while prices are down, but when I left our deal was that
she got that value. I don't think this is fair. What is a judge going to do?
It is always my hope that spouses can agree on as many issues as possible,
without court intervention. One never knows for sure what a Court will
do, and my experience is that people are far better off working through
their disagreements by way of
Mediation. One reason why is to ensure you are in charge of your life, not a stranger.
It is possible to mediate parts of your divorce, like this issue.
Still, valuing real property is not difficult.
Family Code section 2552(a) directs the court to "value assets and liabilities as near as practicable
to the time of trial." Time of trial is also the equivalent of the
time of settlement - in order words, if you cannot settle your divorce
and you take it to a judge, that will be the time of trial so the same
rule for the date of valuation should apply to your settlement negotiations.
Family Code section 2552(b), however, gives the court discretion to pick
another date before trial for the valuation of property "for good
cause" in order to "accomplish an equal division of the community
estate ... in an equitable manner." This concept is called an "alternate
valuation date." It is often applied in cases of business valuations,
which is a complex topic I will separately address, but the basic reasons
for the potential different treatment includes the fact that business
values can be intentionally depressed by the spouse who controls the assets
(and so it may not be fair to apply a lower value) or because the "in-spouse"
has contributed substantial value to the company since separation and
it is not necessarily fair that the other spouse share those benefits.
This is a major issue in dividing businesses or professional practices,
where you are many months down the road from your separation. All post
date of separation time, skill and efforts belong to each spouse and not
to them jointly - as was the case before separation. All that blood, sweat,
and tears after separating may have dramatically increased the value of
the business; or the spouse in control may have trashed the business intentionally
to avoid a higher buy-out.
Here you might argue that you and your spouse reached a verbal agreement
to divide all your assets two years ago if that is in fact what you did,
in order to hold to those values. But verbal agreements are difficult
to prove if they are not admitted by the other party, absent witnesses
and she will continue have various defenses where she was not independently
advised before reaching agreement.
Most courts are going to value passive assets like houses or investments
or pensions at the time of trial. That does not mean that post-separation
increases in value, like increased equity by paying down principal on
a mortgage, or contributions to a pension after the date of separation,
will not be reimbursed to one or the other of you to compensate the separate
property (post-separation) contributions.
If you do seek an alternate valuation date, you need to file a Notice
of Motion to Bifurcate the issue
(FL-315), along with the accompanying declaration establishing why this is more
fair and appropriate than the basic rule. A bifurcation is essentially
a request of the court to carve off one or more issues in the divorce
for separate trial or adjudication. It is often used where a call needs
to be made on one issue that, once decided, will assist in resolving other
aspects of the case.
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Thurman W. Arnold III