What happens when passive investments depreciate in value after a Florida divorce filing
Sometimes it takes a while to get divorced. While the legal proceeding is open and pending, economic and financial problems in the markets beyond the control of either party can have negative impact on the value of marital assets subject to division between the divorcing spouses. A passive depreciation – meaning that neither party had any control over or effect on market forces – in the value of an asset such as stock or real estate could make a division of marital property unfair if based on the value before the depreciation.
Some Floridians with open divorce proceedings may be concerned about this issue because of COVID-19’s negative impact on the markets and overall economy, which could cause loss in value of marital assets.
Date of valuation
In the case of a big swing in value of an asset after the divorce was filed but before it has concluded, a spouse may be concerned that they will have to absorb a financial loss (or that the other spouse may unfairly benefit from a gain), so the date at which the asset is valued may have a huge impact on the fairness of the final property division, which under Florida law is supposed to be based on equity – meaning fairness under the circumstances.
Florida statute says that the judge in the divorce has the discretion to choose the valuation date of marital assets (and debts) that they determine is “just and equitable under the circumstances.” The court may set different valuation dates for different assets if the circumstances would make that fairer and more equitable. For example, one asset may drop unexpectedly while other assets hold their value in an otherwise unstable market.
The court might consider the appropriateness of using valuation as of the date of separation, the divorce filing date, the date of final hearing or some other date. In the case of passive drop in value, Florida courts have usually found the use of a later valuation date to be fairer and more accurate for use in asset division between the parties.
Courts decide valuation dates on a case-by-case basis according to the unique circumstances of each pending divorce. Florida courts tend to use their wide discretion in picking the date to prevent a windfall to either party and to make the division as fair as possible. It is likely that our courts will equitably take into consideration unexpected negative impact of the new coronavirus on marital asset valuation.