Financial Valuation, 5th Edition

CHAPTER 19Valuation in the Divorce Setting

Divorce valuations are state-specific and dependent on the unique facts and circumstances of each case. This chapter presents important concepts applicable to valuations in the context of divorce and references certain state-specific cases where a significant issue was addressed. For additional information regarding the types of businesses that are frequently the subject of valuations in divorce, see Chapters 20 and 21.

STANDARDS OF VALUE

It is incumbent on the analyst to know what standard of value is appropriate in the valuation of a business or business interest in a divorce. Since this may vary from state to state and from jurisdiction to jurisdiction, the analyst should be aware of the terminology used in the jurisdiction and how that terminology is defined within that jurisdiction. Most often, case law within the jurisdiction is the appropriate source for defining the standard of value. The definitions of the standard of value for divorce may differ from the traditional definitions for other areas of valuation, which are discussed in Chapters 1 and 2.

Value or Fair Value

Some state marital dissolution statutes prescribe “value” or “fair value.” Fair value is a statutorily or judicially defined standard of value. Historically, fair value has been used primarily in litigation matters involving a marital dissolution or with dissenting or oppressed minority interest shareholders. When valuing a business using the standard of fair ...