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Friday, May 28, 2010

Valuation of Assets

A frequent question that comes up in divorce cases, is what date do we use to value assets. The short answer is the court will want to use the date of trial, however for settlement purposes, we will use the date of the settlement. There are always exceptions to the rule however.

For a house, the court will usually use the date of trial fair market value, and also the date of trial balance on the mortgage to calculate the equity. Frequently the person living in the house will have been paying down the mortgage during this time. The court usually assumes that that is offset by living in the home "rent free" during that time.

A more difficult issue can be 401(k)'s or IRA's. The asset at separation is community property. Earnings after separation are separate property. Therefore, contributions after separation (either by the employee or employer) are separate property. The difficult issue to determine, is if the value goes up, what portion of the increase is due to increase in market value (which would be community) versus increase due to contribution (which would be separate). If we have all of the data, we can calculate this, but sometimes it can be difficult or time consuming to do it (especially if there have been changes in investments).

If bank account have not been touched, they would be valued at trial. Typically however, someone has had the use of the checking account, and have made deposits and written checks for bills. In that case, we typically use the date of separation value.

Automobiles are typically valued at trial. An exception would be if you get in an accident or have mechanical problems after separation. Then we would use the value at separation before the problem (as that is the individuals responsibility, not the community's).

Valuing assets can be a difficult challenge, not only in determining the value, but in deciding the timing to do so. A good family law attorney can help you navigate through this process.

The Renton law firm of Mogren, Glessner & Roti, represents clients in a variety of family law cases. Please visit our web page at Bellevue Divorce Lawyer for more information.

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