Methods of Valuing Assets
Courts must determine the value of marital assets that are to be equitably distributed between the parties. Although the cost of property may seem as straightforward as checking the price tag of an item in a store, the value of certain assets can change, depending on the method used to appraise its value. As a result, the value of a marital asset can be contested in a divorce case, as depending on the valuation method
The following assets can be valued by different appraisal methods:
- Real property: The value of land, houses, and commercial real estate may be derived from the price a buyer is willing to pay on the market. This is known as “fair market value” (FMV).
- Personal property: Tangible property that does not qualify as real estate—such as cars and furniture—may be valued according to its FMV or the cost of replacing the item (“replacement value.”)
- Businesses: A business’s value may also be evidenced by its FMV. However, businesses that are not subject to listing on the market—such as closely held companies subject to a contract giving a co-owner the first option to buy-out another owner’s ownership interests—can be valued based on the total worth of the company’s physical assets if it were sold at the time. This is known as “liquidation value.”
- Stock options: A stock option is a kind of employment incentive given to employees where they may buy company stock at a discount. If the company’s value grows due to an employee’s contribution of labor and efforts, they can buy the stock at a lower price. Typically employees can only exercise stock options at a future date—such as 5 or 10 years after starting work at the company (“vesting date”). A stock option’s value can only be ascertained when the employee’s right to exercise them vests.
- Paid time off: The present value of accrued, unused paid sick leave or vacation days is typically used for purposes of equitable distribution.
- Retirement benefits: Retirement benefits are typically valued based on the present value of vested interests, excluding amounts attributed to post-divorce contributions.
The Date of Valuation
Typically, courts will only accept the present value of an asset on the date that a divorce was filed, or dates to which the parties agreed in a settlement or marital agreement for valuing assets. However, Florida law affords broad discretion to courts when deciding on which date to value assets. Florida courts may determine the value of assets and liabilities based on a date that would be just and equitable in light of relevant circumstances.
For example, retirement benefits and stock options that do not vest until after the parties get divorced may be valued on the date they vest. However, a spouse’s contributions to a retirement account made after the divorce and before their right to retirement benefits vests will be deducted from the value attributable to marital property that is subject to equitable distribution upon divorce. This is known as “deferred distribution,” because the equitable distribution of the asset does not occur upon divorce, but at a future date when the right to the asset vests.
For Quality Legal Representation, Turn to The Virga Law Firm
If you need legal advice and advocacy regarding an issue regarding Florida family law—such as matters concerning high net-worth divorces—you should retain the services of a professional attorney at The Virga Law Firm for legal representation.