Dividing the portfolio of assets you and your spouse built over the life of your marriage requires expert guidance.
- Which assets are part of the marriage and which are separate?
- How much are the assets worth?
- Should you challenge your spouse’s assets valuations or designations?
- Is your spouse disclosing all of his or her assets, and if not, what do you do?
- Which assets are really important for you, so much so that you will fight for them in court?
Your Robinson & Henry attorney can help you answer these questions. Our experienced team will guide you through the financial disclosure process and ensure that your martial portfolio is divide
d equitably. Contact us at 303
We will help you make sure all of the appropriate assets are included in the portfolio, including:
- Real property
- Personal property
- Employment income
- Income bonuses
- Outside income
How Colorado Courts value marital property in a divorce
One of the court’s main objectives during a divorce is to equitably divide the party’s marital assets and debts. To do this, the court must have a clear picture of which assets the parties consider marital property* and their value.
After determining what constitutes the parties’ marital property, called the marital estate, the court will look to the parties to provide the information required to determine the fair market value for which the court will base its decisions on dividing the property. The property will be valued as of the date the court signs the divorce decree, or the date of the property disposition hearing if the decree is signed beyond the hearing date.
The court’s determination of an asset’s fair market value need only be reasonable in light of the evidence presented to avoid appellate review. The court can base its valuation on limited evidence, such as the parties’ testimony and financial affidavits if no other information is presented.
Both parties are responsible for providing the court the information relating to the value of marital property, and each party has the option to provide its value of any marital asset. However, even if both parties present evidence on the value of marital assets, the court may disregard one or both values and determine the value on its own as long as the court’s value is reasonable and supported by evidence.
In a number of instances, the parties stipulate to all or some assets’ fair market value to avoid the cost and time required to litigate. The stipulated value must be current to meet the court’s duty to value the assets as of the date of decree or disposition hearing.
Parties can stipulate to the value of an asset without agreeing on its disposition, its designation as separate or marital, and how much each party contributed to its acquisition, preservation, or appreciation in value.
Property presented as separate property must be valued as part of the court’s determination of the equitable division. The asset’s value prior to the marriage and its current value are required to determine the increase, if any, of the asset’s value during the marriage. While the asset itself may be the separate property of one party, the increase in value during the marriage may be included in the marital estate.
Assets allegedly dissipated, or wasted, by either party must also be valued to determine if all or some of the asset’s value should be included in the estate.
No single valuation method will cover every type of property. There are a number of accepted valuation methods Colorado courts use to value marital property. Their use is mainly dependent on the type of asset and the available information.
Comparable sales. Also referred to as a market comparison approach. Frequently used for real estate valuation. It compares the asset to prior recent sales of the same or similar assets. Drawbacks include the timeliness of recent sales and what the evaluator defines as comparable sales. For real property, real-estate agents are frequently used to determine the property’s value. Do not rely on tax appraisals or outdated valuations. If the real property is claimed as separate property, a historical valuation will be needed to determine its value prior to the marriage.
Assessed value. Colorado statutes define how and when the government values real property — such as homes, undeveloped land, and some personal property — for tax purposes. This value is known as the property’s assessed value, which is infrequently used in dissolution cases because they can be based on outdated information and it tends to ignore actual market conditions.
Liquidation. Typically, most applicable to business interests. It assumes that the business will be dissolved due to the divorce proceeding, and that the businesses assets will not be sold together as an on-going operation. Liquidation frequently results in a lower total value because many items with higher value in an ongoing business would be difficult to sell for more than scrap or salvage value.
Capitalization of earnings. Another business-interest valuation method, which assumes the business will be sold as a whole and may be continued after the sale. The business’s market value is determined by multiplying its average net earnings by a capitalization factor, which reflects a reasonable rate of return after taking into account current interest rates and the risk associated with the business’s market. The liquidation method almost always requires expert testimony.
Book value. Another business-interest valuation method. The owner’s net equity is determined by subtracting the business’s liabilities from the value of its assets. Use of this method has a number of drawbacks in a divorce.
- Business record inaccuracies can easily result in erroneous asset valuations or liability amounts.
- The value of tangible assets is generally determined by subtracting an asset’s tax depreciation deduction from its purchase price. However, the depreciation deduction rarely corresponds to an asset’s actual decline in value.
- It frequently excludes substantial intangible assets, such as goodwill.
Book value is most commonly used by a party to minimize a business’s value.
The valuation of assets in a divorce is not unlike determining their value in other settings, such as selling homes or businesses. There aren’t any legal formulas or algorithms like you see in child support and spousal maintenance instances. The courts are looking for reliable methods and accurate and current values.
* The terms asset and property are used interchangeably, unless property is referred to as real property, which indicates real estate such as houses and land.