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The Divorce Encyclopedia
Valuation Date

Term Definition Valuation Date - the date an asset is appraised for divorce purposes.
Application in Divorce Because there is often a long delay between separation and divorce, both sides will jockey for the valuation date favorable to its position.

The DOS may automatically determine the valuation date of some assets.

Remember, in contested divorces, one leverage factor is, In whose interest is it to remain married longest? Thus, the valuation date is a bargaining chip that can be used. Once again, the parities can and do make trade-offs in determining the valuation date.

In general, for active assets, the date should be as close to the time that a date when the marriage ends in terms of accumulating marital and community assets. This could be when a couple decide to separate but do not move toward divorce. For passive assets, the date should be as close to the divorce trial date. Assets that appreciate both actively and passively at the same time -- such as a professional practice -- may be more problematic.

Depending upon the jurisdiction, the parties have latitude in the selection of different dates for valuing marital property. These include 1) the date of separation, which reduces the potential for inequity where a marital asset has increased through the efforts of one spouse; 2) the date when the assets existed, which may apply in cases involving dissipation; 3) the date of the commencement of action, which keeps the "titled spouse from purposefully decreasing an asset’s value..."); 4) date of trial or distribution, which gives the court more flexibility "to respond to the parties’ needs and circumstances at the time of distribution"; 5) date of divorce, which insures that the distribution includes all marital property; and 6) date of hearing on remand.

Some states have adopted a single valuation date, usually the date of separation. Others recognize that while a single date is preferred, particular cases may justify a different date.

In some jurisdictions, different assets may be valued on different dates to allow for the effects of active and passive appreciation, and some state identify specific dates for the valuation of specific assets. For example, California values professional practices as of the date of separation to avoid including postseparation income in the community estate.

Increases or decreases in the value of marital (or community) property during the separation but before the divorce may be grounds for changes in the date of valuation.

Depending upon the reason for the appreciation (active or passive), substantial increases in value may be grounds for an earlier or a later valuation date. In a New Jersey appeals case, the courts ruled that a seat on the New York Stock Exchange that nearly doubled in value between the time of the filing of the complaint and the divorce trial should be valued as of the trial date. The increase in value was entirely passive.

When a marital asset decreases in value through no fault of either spouse, a current valuation is most fair. Economic misconduct, such as dissipation, generally justifies an earlier date that predates the decrease in value. For example, a New Jersey court held that a auto dealership that had become worthless by the time of the trial should be valued as of the trial date "[because] it would be unfair to charge the husband with an asset having a value of $294,000 when the asset had no value at the time of the trial."

Care should be taken not to confuse the valuation date, which is the date the martial estate is appraised in conjunction with classification and distribution, and the cutoff date, which draws a line in the sand relative to property, income and particularly new debts. Relatively few states have a mandate valuation date; many have a set date for classification of property as marital or separate.

See also DOS; Active Assets, Passive Assets, Active Appreciation, Passive Appreciation.

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