Property division in a divorce can involve intense litigation, especially when the parties disagree about the proper value of their assets. As part of our blog series on special property division issues in divorce cases, this blog examines the problems that arise in disputes about the correct value of marital property.
The Importance of Valuing Property
When property is divided in a divorce case, a Texas court must decide what is a just and fair division of all property that constitutes community property. Both spouses have an interest in the equitable ownership of community property, but tangible property cannot be physically divided without destroying it or harming its value. As a result, courts typically add up the value of all community property and assets and then distribute items, accounts, and more between the spouses. Therefore, assessing the accurate value on the parties’ assets is a vital preliminary step in the divorce process.
The importance of determining how much property is worth is evident from the effort and resources people spend on property division issues in divorce cases. Many divorcees end up hiring experts to appraise their assets—experts whose services don’t come cheap.
Despite the substantial investment, the difference between using an expert and not using one can amount to thousands of dollars. For example, if both spouses have an ownership interest in the growth of a business that is nominally owned by only one of them, the court will likely resolve the dispute by letting the named owner buy-out their spouse's interest or by awarding the non-owner spouse with a larger share of other community assets. Therefore, the non-owner spouse will want to argue for a higher valuation, while the owner spouse would want to argue for a lower valuation.
Evidentiary Issues in Property Valuation
Determining the value of something can be challenging, and the value of any given thing can change depending on whom you ask. One common method of valuing an asset is by basing it on how much someone is willing to pay to purchase it—also known as fair market value. Another way of valuing assets involves looking at how much it cost the spouse to acquire it—sometimes called book value.
No matter what method someone uses to value property, that person must offer evidence to support his or her claim. If a party does not provide that, they forfeit the right to later claim that they lacked sufficient evidence to determine its value.
For example, if a spouse provides evidence that the family vacation home is worth $250,000, but the other spouse offers no evidence of alternative values, they cannot complain to the Court of Appeals that the trial court erred by basing its ruling on the $250,000 valuation. Although the Court has discretion to determine valuation issues, it may not fabricate a different valuation that is inconsistent with the evidence presented.
When Property Is Not Divided in a Just and Right Manner
Sometimes a party may discover a valuation error after the court issues its Final Decree of Divorce. Such a valuation error sometimes results from arithmetic errors or typographical mistakes. Valuation often involves sophisticated mathematical calculations performed by trained professionals, such as Certified Public Accountants.
Despite their training, a valuation error might originate from an expert’s miscalculations, only to be discovered later by another expert. However, the Court ultimately has fairly wide discretion when conducting a just and right division of property, and it is hardly an abuse of discretion if they relied in good faith on an expert’s erroneous calculation.
The issue of valuing specific property will not be reconsidered on appeal unless the error caused the court to award a manifestly unjust division of community property. Many cases will look at the degree to which the results vary between the correct calculation and the one based on the alleged error.
If an erroneous calculation only deviated from the correct amount slightly, Texas courts have held that no manifestly unjust division of assets occurred. However, if the error resulted in a substantial margin of difference—such as a 70-30 split in favor of the husband, instead of a 60-40 division in favor of the wife—the Court of Appeals can reverse the ruling to undo the resulting injustice.
The valuation of property in divorce cases can be tricky. Some might consider it more of an art than a science. Nevertheless, the importance of valuing property cannot be understated. If you do not contest your former spouse’s valuation, you might get stuck with an unfavorable—maybe erroneous—division of community property. Unless an erroneous valuation led to an unjust division of community property, a court won’t reopen the issue. If the community estate is worth millions of dollars, a mere one or two percent miscalculation can cost you tens of thousands of dollars.
Get in Touch Coker, Robb & Cannon, Family Lawyers
Property division issues in a divorce can be challenging and intense. Given the complexity of the issues and the stakes involved, divorces involving high-value assets require highly competent legal representation. At Coker, Robb & Cannon, Family Lawyers, you will benefit from a legal team with a demonstrated mastery of complex divorce issues, including property valuation and division.
Call us at (940) 293-2313 or complete our online request form to set up an initial consultation with a member of our legal team about the merits of your case today.