In California, the overall timeline for a divorce can last several months to several years depending on various factors. Asset valuation, particularly when it comes to divorcing couples with high net worth, is one of the most important of those factors. The timing of asset valuation can impact the divorce proceedings as well, as the value of certain assets like real estate, investments, and stock options can fluctuate over time.
Date of Asset Valuation in California Divorces
California courts understand that asset value changes over time, and the date of separation of a divorcing couple may predate the actual divorce date by a large margin. For example, imagine one spouse starts a business during the course of a marriage. Over time, that spouse invests in the business and it grows in value leading up to the date of separation. All property acquired during a marriage is community property, so the value of the business for the purposes of divorce hinges on the date of the divorce trial. Upon divorcing, each spouse would have a right to half of the value of the business because it qualifies as community property.
California Family Code Section 2552 stipulates that property division and valuation takes place as close to the date of the divorce trial as practicable. As a general principle, the court will value the assets in the divorce at the time of trial. However, some assets may qualify for valuation prior to this date to achieve a more equitable division of those assets. For example, if an asset’s property value increases due to the property owner’s personal services and work rather than financial investment, then the court may value the asset on the date of separation and not the trial date. If the value of the asset changes due to external values, like market fluctuations, then the valuation will likely take place on the trial date.
There are several reasons for these stipulations. First, it would be unfair to one spouse who put more effort into increasing the value of an asset to have to split the fruits of his or her labor after separation. Second, these stipulations help prevent one spouse from purposely diminishing the value of a particular asset out of spite. Third, setting a valuation date as close as possible to the trial date for the divorce gives the court more flexibility in determining an equitable division of community property.
How Can a Divorce Attorney Help?
Anyone anticipating divorce likely has concerns over the value of his or her property involved in the divorce. Property that one spouse owned prior to entering into the marriage typically remains the property of that spouse, but several factors like the investments and personal services offered by the other spouse toward increasing the value of such an asset can influence the property division process. A divorce attorney can help a divorcing spouse determine his or her individual property rights and ensure an equitable distribution of community property in the marriage.
The goal of a divorce is a clean break and fair distribution of community property. Different assets and property types may fall under “active” or “passive” designations, which in turn influence when and how the value of those assets comes into play. A divorce attorney will help his or her client determine the valuation dates of assets involved in the divorce and help encourage mutually beneficial negotiations with the other spouse and his or her attorney.
Ultimately, it is important to hire a divorce attorney as soon as possible once one spouse has filed for divorce to protect individual property rights and ensure an equitable distribution of community property.