Property Division in Divorce: Valuation of Marital Property

In divorce cases, courts usually must divide the parties’ marital property between them. Marital property usually includes both marital assets and marital debts, and generally consists of all property acquired by both or either of the spouses during the marriage, other than property acquired by inheritance or gift from a third party. State divorce laws handle marital property differently depending on whether the state follows equitable distribution, straight community property, “all property,” or dual property rules.

Valuation usually is simple for liquid marital assets, such as bank accounts or liquid securities. For other assets, the spouses may agree on a value, or an independent appraisal may be used if the spouses cannot agree on a value. Hiring an expert can be expensive, and spouses should incur such expenses only on advice of counsel and if it is reasonable to do so.

Separate property can become marital property through commingling, by the spouses’ agreement, or by a spouse’s gift to the marital estate. The spouse claiming a separate interest in commingled property may trace it to recover its separate character. Marital property can include property receivable as passive income from marital property, such as rents and dividends. Pension rights, salable stock option rights, or retirement or other employment benefits accrued during marriage usually are considered marital property. Marital property also can include recovery from personal injury actions, worker compensation claims, social security disability suits, and similar actions to recover wages lost during the marriage; reimbursement for medical bills incurred and paid with marital property; and damage to marital property. A spouse’s degree or professional license cannot be divided, but a spouse’s professional practice may be valued for division.

Parties to divorce proceedings often begin with an inventory of their separate property claims, and then treat the remainder as marital property and/or divisible property. Finally, marital debts are tabulated for division. Generally, valuation is done close to the date the property division order is issued. If the spouses mutually agree to a division of assets, then the divorce decree can reflect their division agreement. Otherwise, the divorce court or a mediator usually determines the property division.

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