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Property Division

Albuquerque Property Division Attorneys

In a collaborative divorce, one of the team members is a financial specialist. The financial specialist is a jointly retained neutral expert hired to assist in developing solutions based on the parties' interests, goals and expectations. The divorce settlement will impact the financial well-being of both spouses, and their children for many years. The financial specialist will request, gather, analyze and evaluate financial data regarding assets and liabilities, income and expenses to assist in developing financial options. Parties in a divorce must exchange complete financial information for the financial specialist to conduct an appropriate analysis and to allow each spouse to make well-informed decisions.

Although the guidance of a financial specialist will help each party evaluate options to protect their financial interests, a jointly retained neutral specialist is not in a position to protect or advocate for one spouse's interests over the interests of the other spouse. You and your attorney will evaluate options with assistance from the financial expert and then develop a financial plan for the next stage of your life.

Depending on the complexity of your financial and business affairs, resolution of your financial matters may require the expertise of more than one financial expert. For example, valuation of a business or ownership interests in a business may be performed by a financial professional with expertise in business valuation matters.

The business professionals may undertake various services which may include gathering financial details; developing budgets; financial modeling; presenting possible financial options of settlement; valuing property; evaluating tax and economic issues; forecasting cash flows, examining retirement and insurance issues; preparing inventories and financial settlement scenarios; and tracing and characterizing property (separate vs. community).

Complex issues which may require a financial specialist include:

  • Determining community versus separate property components of assets owned by a married couple or by one spouse
  • Valuation of accrued retirement balances and related issues
  • Life insurance policies
  • Stock options
  • Deferred compensation arrangements
  • Health insurance considerations
  • Social security benefits
  • Income tax considerations - asset allocation and equalization
  • Income tax considerations - child support and alimony

BUSINESS VALUATIONS

Often, when a spouse has an ownership interest in a business, and that interest or its income was acquired during the marriage, its value may need to be assessed.

Businesses which need to be valued in divorce proceedings include operating companies, asset holding companies and professional practices. Business valuation involves determining the value of an entity and ownership interests in an entity. A business is often worth more than the sum of its "tangible" assets, i.e. its cash, accounts receivable, land, equipment, etc. The excess of the value of a business over the value of its tangible assets is often referred to as intangible value, which can include goodwill as well as other intangible assets as customer lists.

There are many methods of valuing a business; the various methods typically fall into three general approaches - asset, income and market. One approach often considered in divorce proceedings in New Mexico, for valuation of professional practices, is the "excess earnings" method, which is a hybrid of asset and income methods to valuation.

The value that is established for a business for divorce purposes may not be the value that would be established for other purposes such as for estate tax purposes. Furthermore, a value may be established in divorce proceedings for a business that either cannot be sold, or will likely never be sold - - as the primary concern in divorce proceedings is determining the value of the business to the marital estate.

Determining a value of a business does involve assumptions and judgment. An assumption or limiting condition noted in many business valuation reports is that valuation is not an exact science where a given formula can be applied to a set of data and a conclusive result be determined. Informed judgment, reasonableness and common sense must be inherent in the valuation process.

Given that variances in conclusions of value often result in business valuation, one "neutral" valuation expert is often agreed upon and engaged in the collaborative divorce process to reduce the potential for additional disputes related to variances in value conclusions.

PENSION PLANS

Pension plans, also known as defined benefit plans, can be a significant portion of the divorcing parties' asset composition. Depending on the circumstances of the divorce, the pension plan may need to be valued to assist with the division of assets. One of the most common methods used for this is the discounted present value method, which considers the future benefit stream of payments to be received by the community and calculating the "present value" of that payment stream to determine an approximation of the value in today's dollars. Depending on various factors such as the length of the marriage, length of employment with the company in which the pension is derived, and other assets owned by the parties, there may not be any other options available to the parties other than dividing the pension as part of the equalization of assets since there may not be enough of other assets to reach an equitable division.

Dividing a pension plan requires a Qualified Domestic Relations Order ("QDRO") be filed with the court so the alternative payee (nonemployee spouse) receives his/her portion of theasset  at some point in time. The alternate payee would receive either a lump sum amount or a stream of payments depending on the plan documents governing the payout to the alternate payee. Things to consider when dividing a pension are survivor benefit options and the cost associated with the option chosen; the options typically available to participants upon retirement are no survivor benefit (payment would cease upon the death of the participant), fifty percent (alternate payee would receive fifty percent of the total monthly payment) or one hundred percent (alternate payee would receive one hundred percent of the total monthly payment). The survivor benefit options are a way to ensure that the alternate payee continues to receive a payment stream from the asset in the event the participant predeceases them. Depending on the cost associated with the survivor benefit option chosen, it may be more cost effective to purchase a life insurance policy on the participant that would provide the equivalent payment stream to the alternate payee as would be received if the fifty or one hundred percent survivor benefit option were chosen.

Qualified Domestic Relations Orders (QDRO)

Qualified domestic relations orders provide instruction to pension plan administrators regarding the division of the participant's accrued pension benefits or account balances with the nonemployee spouse or dependent pursuant to the divorce. A QDRO is needed to divide a retirement plan and avoid tax consequences. The QDRO is filed with the court; it can be done at the time of the divorce or anytime after the divorce is final. The QDRO divides the retirement asset based the final decree of divorce or the marital settlement agreement of the divorcing parties. If the parties have more than one pension plan, a QDRO will need to be prepared for each plan. The order must include the name of the plan, the participant's name, alternate payee's name, last known mailing address, social security number and date of birth. The language required to be included in the order by various plans differs, so now many pension plans have sample language available to help with drafting the QDRO's to ensure that the order complies with the requirement of the plan itself.

Albuquerque Collaborative Divorce Alternatives represents clients throughout the greater Albuquerque, New Mexico area in communities such as Los Lunas, Belen, Bosque Farms, Moriarty, Corrales, Bernalillo, Rio Rancho, Santa Fe, Pecos, Las Vegas, Taos, and Kirtland Air Force Base, Bernalillo County, Valencia County, Torrance County, Santa Fe County, Sandoval County, and Cibola County.

Practice Areas

  • Collaborative Divorce
  • Property Division
  • Child and Spousal Support
  • Child Custody and Time Sharing

Options to Consider

There are three common options for all couples to consider as they try to make their divorce as successful as possible:

  • Mediation
  • Collaboration
  • Litigation

Valued Professionals

The goal of Collaborative Divorce Practice is to help the divorcing couples to work successfully within the collaborative structure to achieve a positive resolution that minimizes the negative economic, social and emotional consequences the family often experiences in the traditional adversarial litigated divorce process.

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The information you obtain at this site is not, nor is it intended to be, legal advice. You should consult an attorney for individual advice regarding your own situation.

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