Valuation and Division of Individual Assets in an Oregon Divorce

Wednesday, May 28, 2014

    As explained in other articles in this series, Oregon divorce courts are required to make an equitable division of assets when a couple is divorced.

    As also explained elsewhere, although this “equitable division” often means a relatively equal division, sometimes the courts determine that a division that is far from equal is, nonetheless, equitable.

    Leaving aside these issues, it can be important to understand how assets are valued in an Oregon divorce.

    Bank or credit union accounts are relatively simple to value.  They have the value of the contents of the account.

    Houses can be more complex.  In many cases, if a house is going to be sold as a result of the divorce, the expected net price of the house, after costs of preparing for sale, and after real estate commissions, is considered to be the value of the house.

    In other cases, if there is little expectation that the house will be listed or sold immediately, the house is valued without subtractions for real estate commissions or the like.

    There are also issues with determining in advance what a house is likely to actually sell for, of course.

    Similar issues arise for cars, for art work, and for a variety of other assets.

    If the house or other asset is going to be sold, and the sales price is speculative, sometimes the court will order that the house or other asset be sold, with the net proceeds divided between the parties, as a way of achieving equality of outcome, regardless of the price at which the house or other asset actually sells.

    If this is not done, often there is a battle of the experts to determine the value which should be attributed to the asset in question, when determining what division of assets is fair to all.

    Similarly, retirement assets like 401Ks or IRAs can present a problem.
    Taxes have not yet been paid on these retirement assets.  Thus, a dollar in an IRA is not worth the same as a dollar in a bank account.  If you withdraw a dollar from a bank account, you have a dollar to buy something else with.

    If you withdraw a dollar from an IRA account, you must first pay the taxes on this dollar.  Under the current tax schedules, an Oregon resident might, for example, pay 15% federal tax plus 9% state tax on this dollar, meaning that a dollar withdrawn from an IRA account would be only 76 cents net, after these tax payments.

    Depending on the age of the person, there might also be penalties associated with a withdrawal from an IRA.

    The percentage attributable to taxes will also change as tax laws change.  There can also be differences depending on the state in which a person resides when he or she makes the withdrawal, and the other taxable income of the person in the year in which the withdrawal is made.

    For this reason, similarly, it can often be simplest to divide retirement assets equally, rather than trying to determine the net value of a retirement asset, and then setting that value against the value of a car, or a bank account, or any other asset.

    In these and other situations, the advice of a skilled Oregon divorce lawyer can be very important.