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How Are Assets Valued for the Purpose of Division During a Divorce?

Divorce is often about more than the breakdown of the personal relationship between the parties. It also commonly involves a fight over property. Texas is a community property state. Essentially, this means that any property acquired by either spouse during the marriage–that is not otherwise considered separate property–must be divided in a “just and right” manner upon divorce. Strictly speaking, the court does not have to divide community property 50/50, but in most cases it tries to stay within that range.

Of course, before you can divide property, the court needs to know how much it is worth. Valuation of property in a Texas divorce case can be tricky. Liquid assets like bank accounts are obviously not difficult to value. But what about your house? For that matter, what about the furniture inside the house? And what if the couple owns a business? How do you properly value that? It’s helpful to connect with a division of property attorney for help with answering these questions.

Inventory and Appraisement

Texas Family Code 6.502 provides that when a divorce suit is pending, the judge can order either or both parties to file a “sworn inventory and appraisement” with the court. This is a document signed under oath–i.e., under penalty of perjury–listing all of the couple’s real property, personal property, debts, and liabilities. The list should clearly distinguish community property from separate property owned individually by each spouse. Each item also requires a valuation.

As a general rule, the value of any community property should be determined as of the date the divorce suit was filed, as opposed to when the property was acquired. For example, say a married couple purchased a home in June 2015. The wife subsequently filed for divorce in April 2024. In valuing the house, the court would want to know the estimated value in April 2024 as opposed to June 2015.

Now, this does not mean that a party should blindly guess or simply make up a valuation. The test applied by Texas courts is the “fair market value” of the property. This is basically how much a willing buyer would pay for the asset, assuming that neither party was forced to make the transaction.

Do You Need an Expert?

When it comes to more complex assets, it may be necessary for the parties to hire expert witnesses to assist the court in making a proper valuation. For instance, if the parties own rare or valuable artwork or other collectible assets, an expert appraiser can serve as an expert witness. Similarly, if the parties cannot agree as to the valuation of their home or other real property, a real estate agent or licensed real estate appraiser may be brought in to prepare a valuation.

If there is a business classified as marital property, an expert valuation is almost always necessary. One reason for this is that if the spouses were co-owners, it is likely they will not wish to continue working together after the divorce becomes final. This usually means one spouse needs to “buy out” the other spouse’s ownership interest, which means ensuring as accurate a valuation as possible.

Unlike public companies, a closely held business controlled by spouses lacks any sort of readily accessible external valuation. An outside business valuation expert will therefore need to examine the company’s financial and operational records carefully when making a valuation. Ideally, the spouses would agree on a single expert. But if they cannot agree, each will hire their own, and it will be left to a judge or jury to decide which expert valuation is more credible.

Leaving It Up to a Jury

Unlike many states, Texas does allow for jury trials in divorce cases. The parties can ask a jury to make decisions regarding the valuation and division of community property. As previously noted, the legal standard for valuation is an asset’s “fair market value.” In cases where an asset has no fair market value, the jury may consider other evidence presented at trial to make a valuation, including the testimony of the parties.

Please note that unlike criminal trials, a jury in a Texas divorce trial does not have to reach a unanimous verdict with respect to property division. The law only requires 10 out of 12 jurors to agree.

Contact a San Antonio Property Division Lawyer Today

The division of community property is often a major issue in a Texas divorce case. If you need legal advice or representation from an experienced San Antonio division of property attorney, call The Law Office of David J. Rodriguez, PLLC, today at (210) 716-0726 or contact us online.