Key Factors in Determining the Value of Undivided Community Property in a Divorce Action

Assessing a value to marital assets is difficult enough, but this process can become even more complicated when those assets include undivided community property. While most divorcing couples like to assume the marital assets will be divided evenly during the divorce steps this does not always happen and may be for any number of reasons including the existence of items that may not be completely tangible and easy to assess. 

One example of a situation that may include undivided community property is when a husband and wife are involved in a business that is not only owned jointly by the couple contemplating a divorce but also by shareholders and investors thus creating a situation whereby assets cannot be easily divided. When investors (shareholders) own some of the assets of a business entity it is not as simple as selling the business and dividing the assets between the two parties in the divorce. It may actually be better to assess the value of each spouse’s share in the business’s equity and allow the business to remain operating in the same manner as it did prior to the divorce. The divorce lawyer is the best person to determine whether this is the best solution for the couple as well as for the profitability of the business entity.

The valuation of undivided property is one of the divorce steps necessary in order to assign a value to each party’s net worth in the divorce proceedings. This information is necessary in order to properly assign a value to the assets of each party in the divorce. While it may not have an effect in community property states since each party is believed to own equal shares, in other states the party with more assets may receive a lower percentage of the total value of all marital assets in the divorce settlement. When the divorce lawyer conducts an assessment of all undivided property he or she will be able to determine how much of initial investment in the business entity belongs to each party in the divorce, an essential element when the couple acquired the business after their marriage took place. When people other than the couple hold a share of the business whether as shareholders or joint owners, the purchase agreement is the essential documentation necessary to determine the portion of the business entity that belongs to each of the parties in the divorce.

One problem that may also arise during the valuation of undivided property is it may be assessed at a discounted rate rather than the true value of the asset. This will then show a lower net worth for each person and although this type of valuation may be beneficial for tax purposes, it can still have a domino effect since the person with the lesser share may receive more of the total marital assets when all of the divorce assets are divided—advantageous for the person with the lower share but detrimental to the person with the higher undivided property assessment.

It is necessary to allow your divorce lawyer to work with you and your spouse’s lawyer in order to implement a settlement that is fair, equitable and representative of the true value of all marital assets instead of just assessing an arbitrary split that appears to represent shares that much more easily identifiable and structured.