Property Division in General
When a couple gets divorced, one of the most critical issues they need to resolves is how to split marital assets and liabilities. State law governs the division of marital property upon divorce, with some states adopting the “equitable distribution method” and other states following the “community property” system of asset division.
Missouri is an equitable distribution state. Under Missouri law, courts presiding over a divorce case will divide marital property equitably between the parties, considering various factors. An “equitable” division of marital property does not necessarily imply that property is equally distributed between the parties. Instead, the court will consider the specific facts of the case to determine whether to order an unequal division of marital property, such as:
- “The economic circumstances of each spouse at the time the division of property is to become effective, including the desirability of awarding the family home or the right to live therein for reasonable periods to the spouse having custody of any children;
- The contribution of each spouse to the acquisition of the marital property, including the contribution of a spouse as homemaker;
- The value of the nonmarital property set apart to each spouse;
- The conduct of the parties during the marriage; and
- Custodial arrangements for minor children.”
Under Missouri’s statutes § 452.330, “marital property” means “all property acquired by either spouse after the marriage…” Simply put, assets that you and your spouse own since getting married qualify as marital property. In contrast, “nonmarital property” is not divisible upon divorce, including property acquired before marriage or after separation, as well as property acquired through gift, bequest, devise, or descent.
The central issue when determining the marital or nonmarital character of an asset involves figuring out the date of an asset’s acquisition. If an asset was acquired after the time of the couple’s separation, it might not qualify as marital property but rather as nonmarital property. Thus, asset valuations also depend on the date of acquisition.
When marital property is distributed in a divorce case, the court might award full ownership of an asset to one spouse who will buy-out the other spouse’s ownership interest in that asset. As a result, the value of such an asset becomes an issue.
If the spouses offer competing valuations for one asset, the court will determine which valuation to use when rendering property division orders. The value of an asset can derive from its fair market value—the price that the asset would sell for in the appropriate market. The fair market value of an asset can be evidenced by listings of similar items on the market and supporting expert testimony.
However, not all assets are considered marketable, such as small businesses that are subject to restrictions regarding the transfer of ownership. For example, an agreement between owners of a business might prohibit a partner from selling their ownership interest to a third party, requiring them to sell their interest to the other partners. How would such a business be valued absent evidence of how much it would sell for on the market? Some courts have recognized the net asset value of property to determine an asset’s value—the money spent to acquire the asset. Determining the investment value may require experts, such as accountants, to go through the business’s books.
Business valuations depend on the form of ownership involved. The ownership of publically traded corporations derives from the company’s stock, which is usually organized into different tranches. Depending on the features of the stock involved, evidence of its fair market value or investment value may be used.
The value of a business can also be calculated from a balance of its assets and liabilities. Capital assets, accounts receivable, loans, and tax obligations are accounted for to determine the business’s value. Even intangible assets, such as intellectual property and goodwill, can contribute to the value of a business.
Certain assets can be distinctly classified as marital property or nonmarital property, such as business goodwill. Missouri courts held that “[g]oodwill has no separate existence; it has value only as an incident of a continuing business.” Courts have held that the capitalization of earnings valuation method is appropriate for appraising the goodwill of a professional practice. The capitalization of earnings method assigns the value of a business based on the earnings of the business or another expected economic benefit.
Furthermore, the growth that a company experiences during the marriage may also be subject to characterization as a marital asset if such growth is attributable to spending marital funds.
Valuing Employment Benefits
Generally, wages and earnings that either spouse receives qualify as marital wages and earnings that are divisible upon divorce. Courts have extended this principle to other employment benefits, especially if such benefits served as compensation for completed work.
For example, some state courts have held that paid time off—such as accrued vacation days—is a divisible marital asset if it is readily converted into cash value, supported by evidence of the employer’s methods or policies for such a conversion.
Consult The Roberts Law Firm, P.C. if You Are Looking for Legal Advice
Property division is a complicated issue in divorce cases. As a result, you should seek the professional services of a licensed attorney from The Roberts Law Firm, P.C. for legal representation. Attorney Greg L. Roberts is an experienced family law attorney who will you through sophisticated legal issues and advocate for your interests.
Call The Roberts Law Firm, P.C. at (636) 590-4864 or contact our office online today to schedule a consultation.