In re: Marriage of Honer – Valuation of Marital Assets

After two people decide they no longer wish to be married, one of the key points of contention often becomes division of assets. Indiana, as in most states, seeks equitable distribution, or a distribution that is fair given the circumstances.

But this is often a more complex process than it seems. Some assets can’t be simply cut down the middle, 50-50. In order for the distribution to be fair, marital assets must first be identified and then valuated.

For some elements, this can be straightforward. For example, the amount of money in a bank account can be clearly valuated. A retirement account or real property might be a bit more complicated, but will still generally come out to a fairly easily calculable figure. A business, however, is different. In order to properly evaluate a business, one must often analyze the history of the business, the company’s tangible assets, the earning capacity, the fair market value, good will and any other intangible value.

Typically, because of the complex nature of these CASES, Indiana divorce attorneys will recommend retaining the services of an accountant.

The recent California appellate court case of In re: Marriage of Honer was one such case in which an intense valuation was needed.

According to court records, at issue was the dissolution of a 27-year marriage that involved division of property and spousal support.

During the course of the couple’s long marriage, they bought and built up several grocery stores with an upscale, organic niche. Two of those remained primary marital assets at the time they split. The businesses were held by an S corporation, of which husband was CEO and wife was vice president. The husband managed the stores while the wife designed the logo and handled administrative tasks.

Husband took a salary of $260,000 annually, plus he earned $20,000 as a bank director. Wife did not take a salary, but was paid $6,500 monthly as director following the separation.

Husband was healthy and expected to run the stores for another six years or so before retiring and passing them on to his daughter and her husband. Wife, meanwhile, was not well. She’d been less involved with the store since the late 1990s, and was diagnosed with multiple sclerosis shortly before the separation. Her condition is expected to worsen over time.

They owned a 50-acrew ranch, a 3,100 square-foot home, with property valued at $1.85 million. They were also involved in real estate and were equal co-owners of that corporation.

After they were separated, husband stayed at the ranch while wife moved to Texas to care for her sick mother. She paid $3,800 monthly to rent a downtown apartment.

Divorce court tallied the couple’s total net worth at $6.6 million, and ultimately awarded husband $4.9 million after credits and charges and $1.75 million to wife, which included minor assets and distributions. Additionally, husband was ordered to pay wife an equalizing payment of $1.6 million, which meant in the end, husband would receive $3.3 million and wife would receive $3.3 million.

Wife sought to re-open the case for new evidence of certain companies, arguing the valuation hadn’t taken into account important information. Her forensic accountant argued she was due an additional $430,000.

However, the court denied her motion to reopen. She was, however, awarded attorneys’ fees, offset by a $40,000 sanction she was ordered to pay her ex for “conduct increasing the costs of litigation.”

Wife appealed, but the California appellate court affirmed, finding the valuation prior to the court’s distribution of assets was proper and no new trial was warranted.

Indiana Family Law Attorney Burton A. Padove handles divorce and child custody matters throughout northern Indiana, including Gary and Hammond. Call Toll Free 877-446-5294.

Additional Resources:
In re: Marriage of Honer, May 6, 2015, California Court of Appeals, First Appellate District, Division Four
More Blog Entries:

Ryder v. Ryder – Divorce Agreements Must be Carefully Drafted, May 10, 2015, Indiana Divorce Lawyer Blog

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