Not all assets in a divorce case are easy to value, especially if an asset was owned by a party prior to the marriage. For example, assume the Husband has a 40% ownership in a business at the time of a divorce, and he had owned that interest prior to marriage. How do we deal with this asset in a divorce case?
Our law on equitable distribution states that all assets accumulated during the marriage, whether in joint names or individual names, are subject to equitable distribution. Generally, pre-marital assets are not subject to equitable distribution. However, there are exceptions to every rule.
If a pre-marital asset increases in value due to the active efforts of one of the parties, then the increase in value of that asset during the marriage may be subject to equitable distribution. The first step we have to take is to hire a forensic accountant who can value the business on the date of the marriage, as well as on the date of the Divorce Complaint. These evaluations are complex in that they must take into consideration the actual profits of the business, the realities of the economy and market, good will, accounts receivable and possibly minority and marketability discounts.
Business evaluations are not an exact science, and if both parties in a divorce case have their own experts, it often becomes a battle of the experts. Any valuation depends on the judgment and experience of the appraiser and the completeness of the information reviewed.
Once we know what the value of the Husband’s interest is in the business, then the Wife’s equitable distribution interest must be determined.