How Does Coronavirus Affect Divorce Property Valuation?

0072396001647268828.jpgIn most cases, economic activity slowed to a standstill during the spring 2020 coronavirus lockdowns. The slowdown was especially bad for entertainment venues, most retailers, and other nonessential businesses. Normally, the law distinguishes between active and passive assets. But these are not normal times. The extraordinary circumstances rule, first articulated in 1991’s Goldman v. Goldman, sometimes comes into play.

Assume Husband and Wife opened a restaurant shortly after they got married. For several years, the restaurant was profitable and the couple was happy. Then, coronavirus turned everything upside down. The restaurant took out loans to stay afloat as revenue plummeted to almost zero. The strain was too much for Husband and Wife, so they divorced.

The restaurant is clearly marital property subject to equitable division. But it is now a debt instead of an asset. How should the judge divide this portion of the marital estate?

So, in these abnormal times, diligent representation from a Somerset County family law attorney is more important than ever. Without such advocacy, there may be no one to stand up for your legal and financial rights.

Goldman and Business Valuation

In Goldman, Husband owned a car dealership. The 1987 stock market crash torpedoed the business’ value. He argued that the asset had become a liability, and it must be treated as such in the property settlement.

The court disagreed. Essentially, divorce business valuation is not a snapshot. Unexpected events do not remake failing businesses into successes or successful businesses into failures.

A year after the fact, the 1987 stock market crash was already a historical footnote. The economy was not much of an issue in the 1988 Presidential election. Coronavirus is different. Most observers expect that the economy will never fully recover. So, comparing a market downturn to COVID-19 is not exactly comparing apples to apples. Nevertheless, the same principle applies.

These principles include examining long-term business performance, in addition to the market environment, when assessing that business’ value. These long-term measurement tools vary significantly depending on the type of business. For example, asset assessment often works well with restaurants. The physical components of a restaurant, such as its kitchen and location, determine much of its value. Asset assessment is a terrible way to evaluate a freelance writing business. The sole asset might be a laptop computer.

Property Division Factors

Coronavirus disruptions do not materially affect economic value calculations, and they do not materially affect property division factors. Coronavirus might be more impactful in areas subject to future modification, such as spousal support. But for the most part, property divisions are permanent. So, it’s important to stay close to the listed factors.

There are a number of factors, and the most important one may be any agreements between the parties. Most New Jersey family law judges uphold most premarital and post-marital property agreements, as long as these agreements are not blatantly one-sided and each spouse had an equal voice in the process.

Count on an Experienced Attorney

Coronavirus might affect divorce property settlements, but this pandemic is not a game-changer. For a confidential consultation with an experienced Somerville equitable distribution lawyer, contact Katherine K. Wagner, Attorney at Law. We routinely handle matters in Somerset County and nearby jurisdictions.

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