In most divorces, the equitable distribution of assets between spouses is a relatively simple proposition.  The attorneys generate a list of assets they believe the couple holds, as well as a list of debts, and each presents a reasonable scenario for sharing and dividing them. A divorce agreement includes both the value of assets as they appear at present and the future projection of any joint holdings that may change in value until actual division and distribution. In a high stakes divorce, when the parties control large assets or debts, or their holdings are expected to show sharp valuation changes over time, the process can become complicated and beyond the ken of most family law practitioners.

Determining the value of holdings

If one partner has an interest in a closely held business, the value of that partner’s share needs to be evaluated. This can be tricky, especially if the company is young and growth is anticipated down the line. To determine the value of the holdings, financial experts often use a method called normalization. This means that the reported valuation of the company is adjusted to account for items that might have been added or left out, such as personal expenses or taxes. Both the company’s value and cash flow are subject to normalization. At that point, the financial experts can attempt to assess projected worth, both in terms of income and value, and how that might change in the future.

Valuation also involves paying attention to some customary practices, like ascertaining the appropriate multiplier, or capitalization rate, but ignoring others, like taking minority discounts or imputed taxes or commissions upon sale – when no such sale is pending.  Sometimes the easiest approach is to look for recent evidence of shareholder buy-outs, when the transaction involved “arms length” negotiations rather than insider deals.

Dividing up large assets and debts

In the course of due diligence, the financial expert should determine:

• The current growth rate of the company,
• The current value of the company,
• The expected income of the company, and
• A realistic picture for the projected future performance of the company.

This is not a simple process, and if the stakes are high enough, these figures could mean a serious difference in equitable distribution money for the non-titled spouse.  When dealing with large sums or holdings in a company with large growth potential, it is essential to hire a CPA or other expert financial consultant to assure data accuracy and ultimate fairness to both parties.  That is why it is so important to select divorce counsel with lengthy experience in the Family Law field and in the community, someone who knows and can work effectively with the top financial experts.

Conclusion

If you have a crisis or concern about a high value marital estate, you should retain a divorce lawyer who will protect your rights. Call Hanan M. Isaacs, P. C., at 609-683-7400 or contact us  online to schedule a near-term and reduced fee initial consultation at our Central Jersey law offices in Kingston.  We will listen to your facts, explain the relevant law, and advise you of the best pathways to civil and economic justice.  Call today.  You will be glad you did.