Protect Your Financial Future: Valuing Property and Businesses in Divorce Proceedings
Protect Your Financial Future: Valuing Property and Businesses in Divorce Proceedings
Elizabeth Taylor

10 July 2024

One of the major concerns that most people have when faced with a divorce is about their long-term financial security.  You might have been the main ‘breadwinner’ from a successful career and be worried about how much of your savings or pensions will need to be shared with your ex-spouse or you and your spouse might have operated your finances completely separately from each other but relied on each other to fund half of your shared lifestyle.  Whatever your circumstances or hopes for your financial future, it is essential that you establish the value of the available assets and income before you start dividing them up.

Some assets such as bank accounts, have a fairly obvious value but others are more complicated and here we will focus on a few common problem areas:

Land and houses

The property market fluctuates regularly so valuations should be as up to date as possible.  It is also wise to ensure that an appropriate expert or agent is approached for a valuation; a local residential agent who knows the area and property type is usually the best option for a standard residential property whilst a specialist agent or surveyor will be able to assist with unusual property types or land designated for specific use such as agriculture.  It is always advisable to take the average of at least three different valuations in case one is a particular outlier.

If one person is concerned that the other may try to influence a valuation, they may wish to suggest that they supply a list of valuers from which the other person chooses the final three.  Perhaps suggest that both parties are absent from the property during the valuation visit and aim to agree the terms upon which the valuer is to be approached beforehand.  Questions to think about include whether the valuer is giving a starting point for the marketing and negotiations or a realistically achievable sales price and how any planning permissions or problems are to be taken into account.

Business assets

There are many different types of business and the approach to a valuation for each varies widely.  For example, a sole trader without any premises or staff may work through a company structure or simply as a self-employed individual.  The value of their business may be limited to the income that it generates or be more substantial.

Alternatively, one spouse may have an interest in a company or business as a director, equity partner, shareholder or owner.  It will be important to establish their rights to receive equity (capital), a salary, dividends or other benefits.  The business may have an intrinsic value of its own and this will depend upon its size, gross turnover, assets including customer goodwill, staff and other factors.

It is therefore advisable to obtain a valuation from an accountant for the specific business or company.  The company accountant may be a suitable source of information but it is often appropriate to approach an independent expert for a neutral valuation.  Bear in mind that different types of business are valued in different ways.

Pensions

You will probably consider your pension in the context of the amount of income that it will generate when you reach retirement age but it will have a ‘cash equivalent transfer value’ as well.  This is a figure indicating its ‘worth’ as at that particular date and helps to compare pension assets.  Pensions are a form of investment and therefore the values fluctuate based on market factors.  Ensuring that a valuation is as up to date as possible and no more than 12 months old is important.

Cash equivalent transfer values are not all calculated in the same way and benefits attached to pensions, especially where contributions are still being made, can be overlooked.  Furthermore, the transfer values do not necessarily give a comparable indication of the amount of income different schemes may generate during retirement.

It is strongly recommended that expert financial and pensions advice is obtained before using a valuation for, or dividing, a pension.

Your solicitor at Phillips will give you detailed advice about how to approach each asset relevant in your situation and signpost you to relevant experts and sources of more information.  Contact Elizabeth Taylor, Daniel Weintroub or Kelly Geter in our family law team for more information on 01256 460830 or email [email protected].

 

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