What are “hard-to-value assets”? And why should I care?

What are “hard-to-value assets”? Do you have any? Does this affect your divorce?

Let’s discuss.

“Hard-to-value assets” are things that are, well, tough to simply hang a price-tag on, as you would with, say, a car. I’m talking about things like a business. Or a pension. Or real estate. Or artwork. It gets real tricky, real quick.

If your marriage involves any of these kinds of assets, read on. As a divorce financial expert—specifically, I’m a CPA, a CERTIFIED FINANCIAL PLANNER^® professional, and a Certified Divorce Financial Analyst^® professional—let me help you.

Fortunately for you (and for me), hard-to-value assets are typically an automatic trigger for attorneys handling divorce. They represent a “let’s call in the experts” red flag—and so they do. I’m the one who specializes in pensions, but I also contribute to businesses and real estate, too, in ways I’ll describe shortly.

The experts in these cases are people such as real estate appraisers. Jewelry appraisers. And people known as business-valuation experts, who do what their title implies.

These people, generally, are great at what they do. And I do not step on their toes.

But are you familiar with a computer acronym called “GIGO”? It stands for “garbage in, garbage out.” In other words, these experts are only as good as the input they’re given.

Case in point: I worked on a case recently in which the affluent wife was the one-third owner of a $30 million business. So the business valuation or BV expert quickly arrived at “$10 million” for the wife’s share; this would be the number used in the divorce negotiations.

Wait! Not so fast! I was the one who had to step in and point out that the input was wrong. One-third is clearly “minority” ownership. Meaning, she couldn’t out-vote her partners. She couldn’t compel them to buy out her share, or sell the business, or anything major like that. Once the BV expert knew this, he discounted the wife’s amount by 38 percent. Almost half! That’s a huge difference—and benefit—for that woman client.

Here’s another example of divorce financial strategies: I worked on a case where the husband owned a big business, but—honestly—was cash-poor. So we worked out a way to for him to make affordable (for him) payments… for 15 years. That was the trade-off he’d have to make in order to retain the business.

And as I’d noted above, I’m an expert when it comes to dividing those tricky-to-value pensions—especially when you’re going to do what’s called a “lump sum buyout.” In that case, you’d get a lot of cash up front, vs. smaller amounts over many months. But how much cash? This is where you need to create what’s called an actuarial age chart to run the math and get the right answer.

Correction: You don’t create that! I do.

Let me help your attorney to better help you in your divorce. Contact me and let’s get started.