Valuation in Divorce Cases

By Attorney Heather Krumm and Attorney Kristin Binder

Attorney Heather Krumm

Attorney Kristin Binder

The legislature has recently updated N.D.C.C. § 14-05-24(1).    This  new  provision  took  effect  on  August  1, 2021.  There  are  two  major  changes:  first,  the  default date of valuation has changed from the date of service of the summons to sixty days before the initially scheduled trial  date;  and  second,  the  district  court  now  has  more authority to adjust the valuation date as equity demands.

Although  apparently  a  minor  provision  in  the  lengthy statutory  provisions  relating  to  divorce,  the  valuation date can have significant effects on the course of litigation and in the overall distribution of assets. The valuation  date  has  far-reaching  effects,  affecting  everything from home value to the date of valuation for a QDRO. Particularly  in  our  current  period  of  economic  fluctuation,  several  months  difference  in  valuation  between when an action is commenced and until trial is held can be  the  difference  between  a  401(k)  valued  at  $250,000 and a 401(k) valued at $150,000.

Under the old version of the statute, the Supreme Court held that a district court had oversight discretion in considering  the  parties’  agreed  upon  valuation  date  and  no discretion  in  selecting  a  valuation  date  if  there  is  no agreement.    In  Berdahl  v.  Berdahl,  the  Supreme  Court determined  that,  absent  agreement  of  the  parties,  “the legislative assembly ‘has provided a definitive process for determining the date to value the  marital  estate  that  limits  the  district  court’s  discretion  to  accepting  or  rejecting  an agreed upon valuation date,” and ‘[t]he statute does not provide the court with discretion to select its own valuation date.’” 2022 ND 136, ¶ 16 (citing Messmer v. Messmer, 2020  ND  62,  ¶  19,  940  N.W.2d  622).  It  is  important  to  note  that  the  legislature  has  now  removed  the  provision  allowing  the  court  discretion  in  reviewing  the  parties’  mutually agreed upon valuation date. Meaning, if the parties agree on a valuation date, that is the date that should be used for valuation.

Under the updated provision, the date of valuation defaults to sixty days preceding the initially  scheduled  trial  date.  This  means  that  all  property  acquired  after  separation  is  included in the valuation of the marital estate. Therefore, income earned during the time of separation,  and  any  property  purchased  as  a  result  of  that  income,  becomes  part  of  the marital estate. Similarly, any debt incurred during the time of separation is also considered when calculating the equity in the marital estate.

Although the updated statute took effect on August 1, 2021, there may still be cases pending which were filed before the statutory change took effect. For cases filed before this update, the 2017 version will apply and the district court will have the discretion to accept or reject the parties’ agreement regarding a valuation date. If no agreement is reached, or the  district  court  rejects  the  parties’  agreement,  the  valuation  date  must  be  the  date  the summons is served or the date which the parties last separated, whichever occurs first.

In cases filed on or after August 1, 2021, the district  court  has  now  been  granted  explicit authority to adjust the valuation of the parties’ assets or debts if there has been a substantial change  in  the  value  of  the  asset  or  debt  between the date of valuation and the date of trial.  This  could  include  economic  fluctuations, but could also include consideration of a party’s  frivolous  spending  or  the  incurrence  of unnecessary debts. Further, as the valuation date under the updated statute is sixty days  prior to the initial trial date, if the trial gets continued and there is a significant change in valuation, the district court could exercise its discretion to determine a different valuation date appropriate. If a district court exercises this authority, it must make specific findings that the adjusted date of valuation is fair and equitable. If proposing a different valuation date to the court, it is important to have the documentation the court will need to support the appropriateness of that argument. As always when dealing with the marital estate, the court should be looking at what is equitable.


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