Determining the Worth of Depreciating Marital Assets
All assets have their own value profile. While real estate often increases in value as the supply-and-demand changes, there are some assets that depreciate – such as vehicles or appliances. As an asset depreciates, it can be harder to determine its value, let alone what portion is to be divided for community property. In a divorce, marital assets are divided based on their value. For those assets that have depreciated, it is imperative that couples estimate the depreciated value – rather than the original purchase price – to ensure a fair division.
Fair Market Value
Property division in California is based on fair market value of that asset. However, the asset’s depreciation will continue throughout the divorce process, making it hard to determine how much it is worth at the time of division.
The Valuation Date is Key
The date for when assets are valued is determined by the “active-passive approach.” This is a test that helps estimate the value of each asset. For active assets – those that increase or decrease over time due to a spouse’s direct involvement – the valuation is based on the date the matrimonial action was taken. Therefore, an active asset’s value at the time a divorce petition was filed would be the value that is split amongst the couple, regardless of whether or not it has changed in value by the time the divorce is finalized.
Passive assets – assets that increase or decrease due to market conditions – are valued at the date of the divorce trial. So, if the asset depreciates dramatically by the time the couple’s case is in front of the judge, they will have to base their division on the decreased value.
Determining the Value of Depreciating Assets
A family law attorney will call on the services of a forensic accountant to valuate assets and calculate any applicable depreciation. This professional can then calculate the fair division of that asset based on where the value is heading. For example, a vehicle purchased for $20,000 will depreciate at a specific rate over time. Therefore, the forensic accountant will project the depreciation up until the matrimonial action, and then come up with an estimated value for the court hearing date to determine the actual value of the asset for division.
It is imperative that you hire a family law attorney for depreciating assets. Not having the depreciation of your assets adequately calculate could result in an asset being split based on the original purchase price or market value – without depreciation being taken into account. Therefore, the split may not be as accurate or fair as the courts assume. Also, your family law attorney may advise you to sell quickly-depreciating assets to preserve their value for distribution.
Do You Have Questions About Depreciating Assets? Contact Sarieh Law Offices Today
Asset division in a divorce is one of the most complex legal processes. The divorce attorneys at Sarieh Law Offices can help you explore your options, estimate depreciating value, and advise you as to how you should handle depreciating assets so that you can preserve your equitable share as much as possible. Call us today for a free, 30-minute consultation at 714-542-6200 or fill out an online contact form.