Strategies for the best resolution possible in complex divorce situations


Why does the valuation date for marital assets matter in divorce?

On Behalf of | Oct 26, 2016 | Divorce

When you are going through a divorce and have accrued valuable assets during the marriage, it is vital that the parties accurately valuate all the marital assets to assure they are fairly and equitably divided. In order to ensure this is done, the valuation date must be set.

Who determines this date, and when it is set?

Here in New York City, and all over the Empire State, the courts make that determination, and normally use the date the divorce petition was filed and recorded by the Clerk of Court. If, for some reason, that date is not chosen, it will be assigned to a date just after the filing. This date can have both positive and negative repercussions for the spouses involved, so it is important to understand how this can affect your divorce settlement.

Many couples undergo trial separations before filing their divorce petitions. Perhaps they have hopes of reconciling, are undergoing marital counseling or may be living apart but not formally divorcing for other reasons – religious prohibitions, social concerns or familial obligations. But since the date of separation can be months (or even years) from the date of filing the divorce petition, and even farther from the signing of the final decree of divorce, savvy divorcing spouses can use the filing date to their advantage.

But what difference does it make?

It can make a great deal of difference, actually. For young married couples who have accrued few marital assets during their short marriages, the asset valuation date may not matter that much. For those couples, the main concerns may be focused more on custodial and visitation arrangements than asset division.

But for long married couples with affluent lifestyles and significant marital assets, the focus shifts markedly. Many of these couples are empty-nesters who don’t have to worry about the aforementioned child custody decisions. Instead, making sure that they are fairly compensated in the asset division phase of the divorce process becomes primary.

Assets are viewed two ways by the courts – active and passive. Active assets are subject to value changes initiated or affected by the owners of the assets. One example is the family home. If one spouse in a particularly acrimonious divorce reminiscent of the film “The War of the Roses” decides to punish the other spouse by driving down the market value of the home, he or she can neglect to make repairs on the residence or vacation home or otherwise devalue it, e.g., repaint rooms in garish colors or remove expensive features like marble countertops that are then replaced with cheap imitations.

On the other hand, passive assets are affected by market fluctuations that are not within the owners’ control. Consider, for instance, how the recession of the last decade decimated stock portfolios and bottomed-out the housing market. Couples who were in the midst of divorce during that financial upheaval really felt the pinch.

By working closely with your family law attorney, you can protect significant assets by choosing the most advantageous date to file your petition for divorce in the New York courts.

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