Finding the value of marital property
Soon after the divorce case has been filed, the court will set a date or dates that the parties must use to value each asset. The valuation date or dates may be any time after the beginning of the divorce action up until the trial, if there is one. Sometimes, New York courts will choose the valuation date depending on whether the increase in value is due to active or passive factors.
An active increase in value comes from some direct contribution of a spouse. For instance, one spouse increases the value of a business by working in its day-to-day activities. Other examples of an active increase in value include situations where one spouse manages a stock portfolio that increases in value, or does renovations or improvements to property that increases the value. Generally, assets whose value increases by active contribution of a spouse are valued as of the date when the divorce action began.
A passive increase in value is where an asset’s value rises and falls based on market conditions or the work of someone other than one of the spouses. A court may be more flexible in choosing a valuation date for these assets, and may choose a date that is practical so that neither spouse receives more than they should, or a “windfall.” Examples of passive increase in value include retirement accounts managed by an investment advisor, artwork, and collectibles.
Once the valuation date is determined, some assets are easy to value. Bank accounts, stock portfolios, and other financial instruments will have a certain value on the valuation date which is set forth on their monthly statements. For other marital assets, like cars, furniture and household items, it may be more difficult to establish a fair market value. Market value is a price that a willing buyer and seller would agree to on the open market. This value is generally much lower than replacement value. The parties may each hire appraisers for this purpose, or the parties can agree on a neutral, expert appraiser.
Still other marital assets can be extremely more difficult to value and their worth may be disputed. Assets such as businesses, professional practices, advanced degrees, real estate and collectibles may require expert witness testimony and appraisals. In some cases, the parties can agree to hire one neutral appraiser and agree to that person’s valuation of the property.
Neither party can do anything to waste, destroy or reduce the value of marital property while the divorce action is ongoing. Should this occur, the court may reduce that spouse’s share of the equitable distribution of the marital property to compensate for the loss that spouse created.
Legal Editor: Jody N. Gerber, January 2015 (updated February 2016)
Changes may occur in this area of law. The information provided is brought to you as a public service with the help and assistance of volunteer legal editors, and is intended to help you better understand the law in general. It is not intended to be legal advice regarding your particular problem or to substitute for the advice of a lawyer.