How should assets be valued for a divorce?

When a marriage breaks down, one of the most complex and contentious areas of divorce proceedings is the division of assets. Correct asset valuation is critical because it forms the basis for a fair and equitable financial settlement.

This article explores how assets should be valued during a divorce, including the types of assets typically considered, methods of valuation, common issues in value disputes, and the role of courts in resolving such matters.

What assets are considered in a divorce?

Family law broadly categorises matrimonial property into several types of assets. Each requires different methods of valuation and consideration. These include:

Matrimonial and non-matrimonial assets

• Matrimonial assetsare those acquired during the marriage and are generally shared equally. They typically include the family home, savings, pensions accumulated during the marriage, and jointly owned property.
• Non-matrimonial assetsare those brought into the marriage by one party, inherited, or gifted from a third party. These are not automatically subject to division unless the court deems it necessary to meet the needs of both parties.

Types of assets to Be valued

• Property (e.g., family home, rental properties)
• Bank accounts and savings
• Pensions
• Businesses or shares in companies
• Vehicles
• Valuables (e.g., jewellery, antiques, art)
• Debts and liabilities (subtracted from asset values)
• Overseas assets

How assets are valued: Methods and standards

Valuation should ideally reflect the current fair market value at the time of the divorce proceedings, usually when financial disclosure is made (Form E stage). Valuations may require professional input depending on the type of asset.

Property

• Market appraisal: Typically done by an estate agent; provides a general idea but lacks weight.
• RICS surveyor report: The court prefers valuation from a chartered surveyor under the Royal Institution of Chartered Surveyors. This provides a detailed market value.
• Mortgage statement: Used to offset any outstanding debt on the property.

Pensions

Pensions can be one of the most valuable assets. They are valued using:

• Cash Equivalent Transfer Value (CETV): Provided by pension administrators. This shows the amount the pension is worth if transferred to another scheme.
• Actuarial valuation: Required in complex or defined benefit schemes to get a realistic value. These valuations consider factors like retirement age, life expectancy, and future income.

Businesses

• Accountant’s report: For SMEs, the value may include tangible assets and goodwill.
• Discounts for minority shares: If one spouse owns a minority interest in a company, the value might be discounted.
• Future earnings projections: The Court often assesses future income from the business as part of the overall financial picture.

Savings and investments

• Bank statements: Provide up-to-date information about current cash assets.
• Share portfolios: Valued at current market rates. Fluctuations may require valuation near the final hearing.
• ISAs and bonds: Valued based on the fund’s trading day price.

Valuables

• Expert valuation: For jewellery, art, antiques—preferably done by a qualified valuer.
• Insurance estimates: Sometimes accepted but less reliable.

Who values the assets?

• Mutual agreement: Ideally, both parties agree on values or jointly instruct an expert.
• Single Joint Expert (SJE): Appointed by both parties and accepted by the court. Their valuation is usually binding unless significantly flawed.
• Separate experts: In high-conflict cases, each party may use their own experts, but this can increase costs and complexity.
• The court: If no agreement is reached, the court will consider evidence presented and determine a value.

Common disputes over valuation

Disagreements often arise because of:

Divergent expert opinions

• Two valuations of the same asset may differ, especially with subjective elements like property or business value.
• The court generally prefers a Single Joint Expert but will weigh all evidence.

Hidden or undisclosed assets

• Parties sometimes under report or hide assets. Forensic accountants can be employed to investigate.
• The court takes a dim view of non-disclosure and may penalise the offending party.

Fluctuating asset values

• Share portfolios and businesses can fluctuate, leading to disputes over the appropriate valuation date.
• The court may order revaluation close to the final hearing date.

Debts and offsetting

• Disputes also arise over which liabilities are “matrimonial” and whether they should reduce the net value of assets.

Does future value matter?

The “Snapshot” Rule

Generally, the court uses the value at the date of hearing or Form E financial disclosure. Future fluctuations are not usually accounted for unless foreseeable.

Earning capacity vs. capital value

Where one spouse has significant future earning potential (e.g., from a business), this can be factored in as part of a “needs” or “sharing” principle, even if the actual asset value is currently modest.

Pensions and long-term value

Actuarial projections help forecast long-term pension benefits. The court may order pension sharing orders or offsetting, where one party retains the pension and the other receives more liquid assets.

How does the court decide?

Under the Matrimonial Causes Act 1973, Section 25, the court must consider all the circumstances of the case, giving first consideration to the welfare of any children. The primary principles the court uses are:

• Needs: Ensuring both parties and any children have adequate housing and financial support.
• Sharing: Equitable sharing of assets built up during the marriage. Often interpreted as an equal split unless reasons suggest otherwise.
• Compensation: Rarely invoked, but possible where one party’s career or earnings suffered because of marriage (e.g., giving up a job to raise children).
• Fairness: A guiding principle. Valuation plays a key role in ensuring neither party is unfairly advantaged or disadvantaged.

What if one party disagrees with the valuation?

They may:

• Cross-examine the expert in court
• Submit an alternative valuation (subject to court permission)
• Challenge the credibility of evidence (e.g., bias, outdated figures)

Ultimately, the judge has the final say, guided by evidence and principles of fairness.

Asset valuation in divorce proceedings is not an exact science. While precise figures may be elusive, the objective is fairness and clarity. Proper valuation requires expert input, full financial disclosure, and—ideally—cooperation between parties. When disputes arise, the court plays a crucial role in weighing evidence and ensuring that both parties walk away with a settlement that reflects their contributions, needs, and future circumstances.

Whether through mutual agreement or litigation, understanding how assets are valued can help divorcing spouses navigate this complex process more effectively—and more fairly.