Identifying community property is only one part of California property division. When the court must award particular assets to one spouse or otherwise divide the community estate, those assets may also need to be valued. The date used for valuation can significantly affect the result, particularly when a business, investment, home, or other asset changes substantially in value while the divorce is pending.

Community Assets Are Generally Valued Near the Time of Trial

California’s general rule is that community assets and liabilities that must be valued for division are valued as near as practicable to the time of trial.

This rule matters because divorce cases can remain pending for a considerable period. A house worth one amount at separation may appreciate or decline before trial. The value of investments can change. A business may grow or lose value. Using a current valuation helps the court divide the community estate based on what the property is actually worth when the division occurs.

For a marketable asset, value generally refers to its fair market value: the price that would be agreed upon between a willing seller who is not under pressure to sell and a willing buyer who is ready and able to purchase without being under pressure to do so.

Not every asset requires a formal valuation. If an asset can simply be divided equally in kind, there may be no need to assign a dollar value to it. For example, certain securities may be divided by giving each spouse an equal number of shares.

Valuation becomes particularly important when one spouse will receive the entire asset and the other spouse must receive other property or an equalizing payment.

The Court Can Use an Earlier Valuation Date When Appropriate

Although valuation near trial is the general rule, California family courts can use an alternate valuation date when the required showing is made.

The alternate date must be after separation and before trial, and there must be good cause for departing from the normal rule. The purpose is to achieve an equitable division of the community estate.

A business operated primarily through one spouse’s personal efforts can be an important example. If most of the business’s increase in value after separation resulted from that spouse’s individual skill, labor, or reputation, using the trial date without considering those circumstances could improperly include post-separation separate efforts in the community property value.

An alternate valuation date is not automatic simply because one spouse requests it. The party seeking the earlier date must follow the required procedure, identify the proposed valuation date and assets involved, and explain why that date would produce a more equitable result.

The date of separation is frequently proposed when an alternate valuation date is appropriate, but it is not automatically required for every asset.

Different Assets May Require Different Valuation Methods

The type of asset can determine how value is established.

Real property may require an appraisal based on comparable sales, income, or other accepted valuation methods. Closely held businesses can require substantially more analysis because their value may include assets, liabilities, income streams, and potentially goodwill.

Business goodwill represents the expectation that customers or clients will continue patronizing the business. In a California divorce, goodwill can have value when it is part of a community business, even though it cannot be seen on a bank statement or physically divided between the spouses.

Forensic accountants and appraisers may therefore become important when a significant asset cannot be reliably valued using ordinary records.

When an asset cannot accurately be valued at trial, the family court may reserve jurisdiction rather than force an unsupported valuation. Retirement assets require particular caution because delaying division without properly protecting the spouses’ respective interests can create additional complications.

Valuation Determines More Than the Price of an Asset

Asset valuation affects whether California’s community property estate can be divided equally and fairly. Although assets are generally valued near trial, the court may select a different post-separation date when good cause makes that approach more equitable. Because real estate, businesses, retirement benefits, investments, and other property can require different valuation methods, understanding both the appropriate date and the appropriate method is an important part of California property division.