March 25, 2022

Valuation of assets in family law cases

By Andrew Sauer, Senior Associate


When couples separate and have property and financial issues to resolve, the first step in obtaining a settlement is to identify and value the assets.


Many assets are uncontentious and easy to value. For instance, a statement can be easily generated online for bank accounts, shares in listed companies and most superannuation accounts, detailing the current value.


For some other assets, the value of the asset is subjective and so may be contentious. Assets falling in this category include real properties (real estate), cars, equipment, household goods, artworks, businesses and Intellectual Property. For these items, a couple can agree a value, based on their own knowledge or on publicly accessible information, such as sold prices for similar assets. If a couple cannot agree on a value, an expert can be appointed to value the asset.


The date of valuation of an asset is generally the date of agreement about a property settlement, or of final hearing before the Court if necessary, or as close to that date as possible. Other valuation dates may be relevant, but generally only for the purposes of assessing each person’s contributions.


Valuations of businesses


A business may be operated by an individual, or through an entity/entities, such as a company, trust or partnership, or a combination.


A business valuer may need to be appointed. Business valuations can be expensive, but some valuers now offer cost effective high-level review valuations. A valuer will usually ask for standard information, including ASIC searches, taxation returns, financial statements, trust deeds, partnership agreements and constitutions. A valuer appointed to do an audit or forensic report will delve deeper, and may require documents such as bank statements and invoices.


Much of the complexity in the valuation of business is in the subjective assessment of goodwill. To ensure that goodwill is properly assessed, it is important to appoint an experienced valuer, ideally with experience in valuing other businesses in the same industry. Goodwill is generally calculated by multiplying earnings by a subjective multiple.


When valuing goodwill, the valuer will generally deduct a notional manager’s salary. It is important to note that the business operator’s income for the purposes of negotiations and Court proceedings should then be fixed at that notional salary. There is a risk of “double counting” if a higher figure is taken, because any income received by the operator above the notional salary has already been capitalised in the value of the business.


Valuations of real properties


If a real property is to be sold as part of a property settlement, then there is generally no need to get a valuation.


If the property is not to be sold, many people start by trying to reach an agreed value, using appraisals from real estate agents.


If a couple cannot agree on a value for a property, the next step is to obtain a formal valuation, usually on a joint basis. If one person is unhappy with the joint valuation, they may be able to challenge it by obtaining their own valuation from another valuer. This second valuation is referred to as a “shadow valuation”. If the matter is in court, there are limitations about obtaining and relying on shadow valuations, so it is important to be guided by a lawyer about this. 


Valuation of superannuation accounts


Some superannuation accounts, such as defined benefit accounts, should always be valued by a specialist valuer. It is also important to obtain advice about the possible effects of any proposed superannuation splitting order on defined benefit accounts.


Conclusion


Valuation disputes can be a barrier to reaching agreement about a property settlement. Our experience and expertise means we are able to resolve both simple and complex valuation disputes in the most straightforward way so that the assets can then be divided between the separated couple.    

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