This is the last of three columns dealing with community property and equitable division at divorce.
If the court chooses to divide a pension plan based on present day value, there must be an economic evaluation of the plan by an actuary or certified public accountant who is an expert in the area of statistics and financial evaluations. After reviewing the plan and the amount of money in the employed spouse’s account, the expert can determine the present day value of the portion of the pension plan that is to be divided. This complex calculation must include an estimate of the long-range interest rates that will be in effect over the same period of time.
If this method of division is used, the employed spouse will keep the pension plan at the determined value while other community or marital assets of that value will be placed on the non-employed spouse’s side of the ledger in order to allow either the equal division of community property or the equitable division of marital assets.
If a family business or a professional practice has been acquired during the marriage, this asset must be valued and considered when making a division of assets. Like dividing a pension, to the extent that the business or practice has been developed during the marriage, there is a property interest that must be dealt with when the marriage dissolves.
There are a number of ways in which to value the business or practice which, again, must be accomplished by an economist or certified public accountant who has access to and reviews the books and records of the entity. While some assets such as accounts receivable, inventory, and work in process can be valued comparatively easily, an integral part of arriving at the value of a business or professional practice is determining the worth of an intangible asset known as “goodwill". Goodwill is an estimate of future business based upon either the name or the reputation of the business.
Even if the business or practice could not be sold on the open market, and even though one of the spouses operates the entity, goodwill still exists -- despite the protestations of the business spouse or professional who says that there is no goodwill if that person stops working. In practice, however, the courts generally will presume that the business will continue to operate at least as it has in the past. Otherwise, the spouse would not receive an appropriate value and therefore division of the asset.
When it comes to a spouse earning a college degree or securing a professional license during the marriage, different courts take different views of how, if at all, to value and divide this asset. Some courts say that by securing a decree or professional license the employed spouse was able to produce more money and, therefore, the marital estate was larger and there was more money for support available.
Other states have adopted rules that the marital or community estate is entitled to reimbursement of the cost of securing the degree or license -- such as tuition, fees and books and nothing else. Still other states award the non-employed spouse a right to a percentage of the difference between what the licensed or degreed spouse earns now as opposed to what that spouse would have earned had he/she not acquired the degree or license.
Then there is the marital residence. If there are minor children at home, it is not uncommon for the custodial parent to live in the residence with the children for a specified period of time after the divorce. In this event, the custodial parent may be required to pay the monthly mortgage payment, taxes, and insurance; however, since the residence is one of the largest assets, some courts will not tie up the non-custodial parent’s share of the equity for too long a period of time.
And last, but not least, the way in which property is titled is irrelevant when it comes to dividing the assets. Should there be a corporation, partnership, or other entity which hold assets that should be divided, then those separate legal entities may be joined as parties to the divorce suit to prevent multiplicity of suits and to assure that as many issues as possible are determined in the divorce suit.
Because of the complexities involved, always check with a matrimonial lawyer where you live to find out the latest developments in your state before you act.
For more free information, visit www.flyingsolo.com.
Jan Collins is an award-winning writer and editor. Jan Warner is a matrimonial, elder law, and tax attorney. Both are based in Columbia, South Carolina. Flying Solo is distributed nationally by Knight Ridder Tribune News Service.
Please send your questions by email to janwarner@flyingsolo.com or by mail to P.O.Box 11704, Columbia, S.C. 29211.
