Ideally, all high asset divorce attorneys in California would be very experienced with complex asset valuation because it almost invariably comes with the territory. Amy Laughlin, Founder and Managing Partner at Laughlin Legal Divorce and Family Law in San Mateo has been handling these cases for quite some time and has a particular affection for financially complex cases as they draw upon one of her greatest assets – the financial literacy she acquired over the years while practicing securities litigation and representing the C-suite elite for Big Law in Silicon Valley.
Ms. Laughlin shares her perspective on some commonly asked questions about complex asset valuation in high asset divorce.
How does a high net worth divorce attorney use forensic accounting to value complex assets?
AMY LAUGHLIN “We use specialized forensic accountants in many different ways depending on the type of asset we’re valuing. One forensic doesn’t fit all roles. For example, forensics can calculate the marital standard of living and opine on what someone should pay in long term spousal support. Other forensics are expert at opining on what share of carried interest should be considered community. But sometimes you need someone who’s even more specialized. I currently have a client who is the founder of a company and she is the company. She’s a software developer, the one who wrote the code. So we hired a brilliant software forensic to determine what portion of that software code was community property at the time of separation, and what it was worth on that precise date.
So it all depends. It’s very case by case, the number of forensic accountants, the type of forensic accountants. And sometimes you need a whole team of forensics because the task is so nuanced. Another client of ours owns 100s of entities, for instance, and that calls for a team of forensics.
What is the role of goodwill valuation in divorce as part of complex asset valuation in divorce?
AMY LAUGHLIN Tangible assets are physical items with a definite lifespan (cash, machinery, property), easily valued and liquidated. Intangible assets are non-physical items (patents, trademarks, goodwill) with indefinite or longterm value, which are harder to value and sell. Goodwill is an intangible asset that captures the value of things that can’t be easily qualified, like a strong brand or a highly skilled team. A client of ours was a former Olympic athlete who owned a swim school. So, the value of her name, talent, and her unique style of teaching added value to the goodwill of her company.
Are stock options, RSUs, and private equity valuation in divorce common elements? Or just in high net worth divorce valuation?
AMY LAUGHLIN They’re very, very common in high asset divorce in Silicon Valley. Our clients often become high asset folks because of these alternative forms of income.
Like all assets, if acquired during the marriage, RSUs, stock options, and private equity are presumed community property. But if a portion of the asset vests or is otherwise earned after separation, a separate property interest will develop. Private equity is extremely difficult to value and almost always requires the help of an expert. RSUs and stock options are less complex but often require the assistance of an expert.
What are the asset valuation methodologies for real estate & collectibles?
AMY LAUGHLIN The standard method of asset valuation for residential real estate in California is not unlike the way you determine the value of a residential property when you’re buying it – an appraiser will obtain comps or comparable listings to arrive at a valuation.
Commercial properties are similarly valued by a commercial real estate appraiser who will also consider the property’s income generation.
Collectibles are appraised by experts for their fair market value on the date of separation.
How are tax implications considered and calculated in high net worth divorce asset division?
AMY LAUGHLIN If it’s a really complex case, a tax attorney or CPA can help with this. Taxes are always a consideration. And certain assets, like cash, are not tax affected. For example, splitting cash is not the same as splitting an IRA. Most assets like complex equity compensation, trusts, retirement accounts, business interests have tax consequences. That includes real estate. Let’s say you want to keep the house and it’s paid off and worth $1M. You may not want to pay your spouse $500,000 for their share of the equity because unless you’re going to hold on to the house for a long time, you’d want to consider closing costs and capital gains when you sell it.
Is there a law that ensures that equitable distribution and property valuation is built-in to every divorce?
AMY LAUGHLIN It’s your lawyer who ensures equitable valuation and distribution. Divorcing parties occasionally agree to a wildly inequitable distribution of property. Generally when a settlement looks really egregious and everything goes to one spouse, there’s a backstory. Sometimes, when one spouse has committed a wrong on the other and they want to bring some equity to the situation, an inequitable distribution of assets is agreed to.
As an attorney who’s been in this situation more than once, all I can do is make sure that my client understands that this is a community property state and as such, they’re entitled to 50% of the marital assets. In other words, California is a no-fault state. But if both parties agree to an unequal distribution, it’s out of my hands. I must say, there have been times when I was relieved for that kind of an outcome given the size of the mess the one spouse left behind.
Should you consider a high net worth divorce attorney from Laughlin Legal for your divorce?
We hope you will! Laughlin Legal Divorce & Family Law Group is a collection of some of the most skilled divorce and family law attorneys and mediators in Silicon Valley. Laughlin Legal is trusted throughout California for their ability to skillfully help divorcing parties achieve a better outcome.
If you or someone you love is headed for a divorce or requires help with another family law issue, let’s talk. Call us now at 650.343.3486 to schedule a consultation with a Laughlin Legal high net worth divorce attorney. If you’d prefer, you can email us to set up your appointment. If we miss your call, we will respond promptly and call you back as soon as possible.
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