Equipment Appraisal Blog | Understanding Machinery Appraisals

Equitable division of assets and divorce appraisal of equipment

Posted by Equipment Appraisal Services on Fri, Feb 22, 2019 @ 08:00 AM

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For business owners, creating an equitable division of assets during a divorce means taking the value of existing equipment into account. Since divorces can be contentious matters, there are a few considerations to keep in mind when planning to get equipment appraised before a divorce. 

What to Expect in a Divorce Appraisal

During a divorce, couples must split all marital assets. Just as the couple will need to divide the house and the cars, a divorcing couple with a business must divide the company's assets.

Circumstances vary, but a general rule of thumb is that anything owned by one party before the marriage does not count as a marital asset, thus is exempt from being split. Any property, personal or business, acquired after the marriage counts as a marital asset and must be shared. So if one person owned a van before getting married, they maintain ownership of the van, but if the van was acquired as a company car after the wedding, its value must be split. 

In order to divide assets fairly, the couple must agree on their worth. While it's relatively easy to get a valuation of a van using Kelly Blue Book or the equivalent, it's not so easy to get the valuation of business assets. That's where an appraiser comes in: A qualified appraiser can examine the company's equipment and calculate value, so the couple can move on with the division of marital assets. 

After all of the equipment has been valued, lawyers can determine how to split all of the couple's assets equitably. In some cases, one party may want to buy the other party out of their share of business assets. Other times, the business owner may decide to sell off certain assets, then give the proceeds to their ex. A third option is to retain business assets and give the ex a greater share of personal assets. 

Divorce Appraisal Concerns 

Maintaining fairness can be difficult in a divorce, as emotions run high on both sides. Sometimes, one party can be tempted to hide assets as a way to punish their soon-to-be ex. Even when both sides are playing fair, the lower-earning spouse can worry about whether they are really receiving everything they're entitled to by law. For this reason an appraisal list, which lists all company equipment to be valued, can guide the process. Once both sides have agreed to the list, the appraisal can move ahead. It's key to select an appraiser who is experienced with divorce appraisals and taking equipment valuations. If things aren't valued correctly, then both sides are harmed.  

Once an appraiser has been chosen, they will value all equipment. An appraiser might take a market approach to equipment valuation, which examines recent sales prices of similar items. This approach is best for common items, since data is available.

The cost approach works well in the absence of recent sales data. In this valuation method, the appraiser determines how much it would cost to replace the equipment new, and then subtracts value lost due to depreciation or obsolescence. To accurately assess how much value the existing equipment has lost, the appraiser may need maintenance records, purchase receipts, and other data. 

Business owners or their spouses who are undergoing a divorce should identify an experienced appraiser early on, so there's a lead time in which the appraiser can get valuation. Our equipment appraisers can work with one spouse, both parties, and their attorneys to develop a divorce appraisal that is objective, so marital assets may be split equitably. 

Tags: Equipment Valuation in a Divorce Proceeding