Divorce Valuation: How to Value Assets in a Divorce | 7 Steps

Amidst the emotional turmoil of divorce is the very practical and methodical division of assets. You are, after all, dissolving a contract. 

The Rembrandt on the wall, the family home, and even your business are all fair game. 

To keep this division of assets actually fair, courts and lawyers will recommend divorce valuation—a process where all marital assets are valued and divided equitably, if not equally. 

We understand the weight of this moment in your life and are here to guide you with clarity and compassion through the process of valuing your shared assets.

     Key takeaways:

  • In the case of a divorce, spouses need to divide their assets fairly between the two. Before they can be divided, however, the spouses need to come to an agreement on how much they’re worth.
  • If a couple is not able to reach a settlement agreement on their own, states apply “equitable distribution” or “community property” distribution methods.
  • Equitable distribution states divide assets fairly, but not always equally.  Community property states divide assets equally (50/50).
  • Debt, retirement funds, and pensions can also influence the division of assets.
  • If you or your spouse own a business, it can be included in the division of assets. And the valuation process will be slightly different than a normal business valuation. 
  • You don’t always need a third-party valuation, but it’s advised and in complex situations can be court ordered.

Divorce Valuation Glossary: Terms You Need to Know

Before we dive in, it’s important to understand the key terms used in divorce valuations. 

Here’s a breakdown of some you’ll come across:

What is “Marital Property” vs. “Separate Property”?

In a divorce, property is divided into two types: marital and separate. 

Marital property is everything you and your spouse own together. Think of the house you bought after getting married or the car you share.

Separate property is what you owned before the marriage or received as a gift or inheritance just for you. 

For example, if you inherited a painting from your grandparent, that’s yours alone.

Some jurisdictions will also divide assets owned before marriage. So it’s best to look at your State’s laws.

What is a valuation date in divorce?

A valuation date is a specific day chosen to decide how much your marital property is worth.

This date can be the day you separate, file for divorce, or another date the court picks. 

It’s important because the value of things can change over time, like how stocks go up and down.

Appraisal vs. fair market value in divorce

Appraisal and fair market value are terms used to figure out what your property is worth in a divorce. 

An appraisal is a detailed report by an expert on the value of an item, like your house, a piece of art, or even your business. 

Fair market value is how much something would sell for on the open market. It’s like the difference between getting a professional to tell you what your car is worth (appraisal) versus what similar cars are selling for on websites (fair market value).

What are “Equitable Distribution” and “Community Property” states?

Equitable distribution and community property are two systems states use to divide assets during a divorce. 

Equitable distribution means assets are divided fairly, but not always equally. Factors like income, length of marriage, and future needs can influence who gets what. 

New York and Florida are examples of equitable distribution states.

Community property states split marital assets 50/50, assuming everything acquired during the marriage is owned equally by both spouses. 

As of 2024, there are nine community property states:

  • Arizona
  • California
  • Idaho
  • Louisiana
  • Nevada
  • New Mexico
  • Texas
  • Washington
  • Wisconsin

Some states in this list may apply equitable distribution principles under certain circumstances. 

All the other states not included in this list typically follow the equitable distribution method. But some states, like Alaska, South Dakota, and Tennessee, allow married couples to opt into community property rules.

Now that we’ve covered the basics, let’s go into how asset divisions and valuations work in practice.

How Does Asset Division & Valuation Work During Divorces

That which has been one must now become two. Two lives, two sets of assets. 

You can’t cut a house, business, or other piece of property in half. So to divide assets fairly, they have to be valued. 

Valuation during divorce is about fairness, legality, and preparing for the future. 

  • Fair Distribution: To ensure assets are divided fairly, their current value must be determined.
  • Accurate Financial Picture: Provides a clear view of the couple’s finances for equitable division.
  • Legal Requirements: Courts require an accurate valuation of assets for divorce proceedings.

You can’t go off of what you feel something is worth. Especially, when you and your soon-to-be former spouse disagree about what the value of different assets are. 

That’s why there are third-party valuators available. They apply specific methodologies across different asset types to reach fair valuations. 

Do you always need valuation when dividing assets?

No. There are instances where couples can agree to asset division without the need for valuation.

However, where there are disagreements or complexities, the court may order formal valuations from third-parties.

Common complexities in asset division

Business Ownership: Valuing a business requires expert analysis to determine its worth accurately.

Retirement Accounts: Splitting these accounts can have tax implications and might need a court order.

Real Estate: Deciding who keeps the home or whether to sell it can be complex, often requiring appraisals.

High-Value or Unique Assets: Art, antiques, or collectibles need specialized appraisals to determine their value.

Factors that influence divorce valuations

Divorce valuations can be influenced by a range of factors, each contributing to the overall assessment of assets and determining how they are divided. 

Here are some key factors that play a crucial role:

Type of Asset

  • Liquidity: Liquid assets (cash, stocks) are valued differently than illiquid assets (real estate, business interests).
  • Unique Assets: Art, antiques, and collectibles require specialized appraisals and can be subject to subjective valuation based on market demand.

Tax Implications

  • Capital Gains: The potential tax impact of selling assets can affect their net value. For example, selling a property or stock may incur capital gains tax, reducing the asset’s overall value.

Debts and Liabilities

  • Shared Debt: The division of shared debts (mortgages, loans) must be considered in the valuation, as it affects the net value of the marital estate.

Economic Trends

  • Inflation: Inflation can affect the value of financial assets and liabilities, impacting their real worth over time.

Emotional Value

  • Non-Monetary Considerations: Sometimes, the emotional attachment to certain assets (like a family home) can influence negotiations and valuations, although this is more subjective and less financially quantifiable.

Future Earnings Potential

  • Businesses and Careers: The future earning potential of businesses and career advancements can be considered, especially in the valuation of professional practices or business interests.

How to Value Assets in a Divorce – 7 Steps

Here are seven steps that can guide you through valuing your assets during a divorce:

Step 1. List and categorize all assets: 

Start by listing every asset, then categorize them. You also need to determine which assets are considered marital property and which are considered separate property.

Here are some common asset categories:

  • Household Items: Everyday items like furniture, electronics, and appliances. These are usually valued at their current market value, considering depreciation.
  • Pensions: Long-term savings for retirement. Valuing pensions can be complex and often requires a financial expert.
  • Real Estate Property: Includes your home, rental properties, or any land. Real estate is appraised for its current market value.
  • Jewelry: High-value items may need an appraisal from a certified gemologist.
  • Vehicles: Cars, boats, and other vehicles are valued based on their make, model, year, and condition, often using industry guides.
  • Businesses: Require a detailed valuation considering assets, debts, and future earnings potential. This often involves hiring a business appraiser.
  • Stock Options and Stocks and Shares: Financial assets are valued based on the current market prices, but options may need a specialist to value potential future worth.

Step 2. Gather documentation:

Collect all relevant documents for each asset category, such as titles, purchase receipts, and recent statements, to support valuations.

Step 3. Determine the Date of Valuation:

The value of assets like stocks and bonds can fluctuate over time, so it’s important to determine a specific date for valuation.

This could be the date of separation, the date of filing for divorce, or another date mandated by the court or agreed upon by both parties.

Some state courts dictate when this valuation must be, such as the date of the trial, while others leave it for the divorcing couple and their lawyers to decide. 

Ask your lawyer what the requirements are in your state.

Step 4. Appraise High-Value Assets: 

For high-value or complex assets like real estate, businesses, or valuable personal property, professional appraisals may be necessary. You should hire qualified appraisers to obtain the most accurate and current value of these assets.

Below we’ve outlined the process for appraising common high-value assets, including:

  • Real estate
  • Businesses
  • Household items
  • Jewelry

How to value real estate in a divorce

  • Hire a Certified Real Estate Appraiser: Choose an appraiser with experience in divorce valuations.
  • Review Comparative Market Analysis (CMA): The appraiser will compare your property to similar properties recently sold in the area.
  • Inspect the Property: The appraiser will examine the condition, size, location, and any improvements to determine the value.
  • Receive the Appraisal Report: This document provides a detailed analysis of the property’s value.

How to value a business in a divorce

  • Hire a Business Appraisal Expert: Businesses are especially difficult to value without a valuation expert. Find someone with experience of valuing businesses in the context of divorce. 
  • Analyze Financial Statements: When you provide your financial statements, the appraiser will review profit and loss statements, balance sheets, and cash flow statements. This gives them a clear understanding of the health of the business.
  • Consider Future Earnings and Market Conditions: Project future income and assess the business’s market environment.
  • Select the Valuation Method: Common methods include the asset approach, the market approach, and the income approach. Your hired appraisal/valuation expert will lead on this and do all of the number crunching for you.
  • Determine the Business’s Fair Market Value: The appraiser will synthesize this information to estimate the business’s worth.

Need help with valuing your business during a divorce?

At Eton, we’ve valued thousands of businesses across industries to reach fair, accurate, and favorable valuations. Get in touch to see how we can help!

How to determine the value of household items for divorce

  • Estimate the Fair Market Value: Take your list of household items and determine what each household item might sell for in its current condition. Online marketplaces can be a good reference.
  • Consider Hiring a Professional for High-Value Items: For expensive or antique items, a professional appraisal might be needed.
  • Agree on Values: Spouses should try to agree on the value of household items to avoid disputes.

How to complete jewelry valuation in a divorce

  • Find a Qualified Gemologist: A certified professional can accurately assess the value of jewelry.
  • Assess the Piece: The gemologist will evaluate the jewelry’s condition, materials, gem quality, and craftsmanship.
  • Consider the Market: The gemologist will look at current market trends for similar items.
  • Obtain a Detailed Appraisal Report: This report will include descriptions, quality assessments, and the value of the jewelry.

How to value complex securities

You or your spouse may own complex business interests or assets, such as cryptocurrency, a carried interest in a venture fund, or a private equity fund.

In this case, the situation gets a little more complex. We recommend working with a reliable third-party valuation company who can make this easier for you.

For instance, at Eton, the valuation process is really simple and fast:

  • Day 1: Information collection
  • Day 2: Valuation modeling and analysis
  • Day 8: Draft report delivered. Client review and approval.
  • Day 10: Final report delivered

We also offer ongoing audit support if needed. Reach out to us for more information. 

Step 5. Evaluate Retirement Accounts and Pensions:

Valuing retirement accounts and pensions can be complex, especially when determining the marital portion of these assets. 

You might need to hire a financial expert or actuary to calculate the present value of these accounts or to understand the implications of dividing them.

Step 6. Determine Debts and Liabilities: 

Just as assets are divided, so too are debts and liabilities. Identify all marital debt, including mortgages, loans, credit card debts, and any other liabilities. 

This will help in understanding the net value of the marital estate.

Step 7. Negotiate the Division of Assets

With a clear understanding of the value of all marital assets and liabilities, negotiations can begin regarding the division of these assets. 

This can be done through direct negotiation, mediation, or, if necessary, litigation. 

The goal is to reach an agreement that is fair and equitable to both parties, taking into consideration the laws and guidelines of your jurisdiction.

Throughout this process, it may be beneficial to work with a team of professionals, including a divorce attorney, financial planner, accountant, and valuator to ensure that all assets are properly identified, valued, and divided. 

Each divorce case is unique, and the laws governing the division of assets vary by jurisdiction, so professional guidance is essential.

Our Divorce Valuation Services

Overwhelmed by the number of assets and different valuation processes involved in your divorce?

Want to ensure everything is divided fairly?

In these instances, it’s best to look for a third-party valuator who is experienced with asset appraisal and is emotionally separated from the divorce.

At Eton, we help clients through the divorce process by valuing assets such as their business.

Review our divorce valuation services and get in touch with me to find out how we can support you and guarantee a smooth and accurate divorce valuation.

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President & CEO

Chris co-founded Eton Venture Services in 2010 to provide mission-critical valuations to venture-based companies. He works closely with each client’s leadership team, board of directors, internal / external counsel, and independent auditor to develop detailed financial models and create accurate, audit-proof valuations.

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