Valuing Businesses and Trusts in Family-Law Property Settlements
In family law matters, one of the most complex tasks in a property settlement is determining the value of a business or trust connected to either party.
As a result, getting the valuation right is critical as it can ensure the division of property is just and based on accurate financial information. This article will discuss everything you need to know.
Businesses in property settlements
Why should I get a valuation?
When a business forms part of the assets to be divided, an independent valuation ensures a fair and accurate assessment of its worth at the relevant time. This gives both parties the reliable information needed to negotiate a reasonable property settlement.
A valuation also removes the risk of either party overstating or understating the business’s performance. If your former partner wants to keep the business, they may try to minimise its value; if you plan to retain it, an inflated figure will work against you. An impartial expert provides a balanced, evidence-based valuation that helps prevent disputes and supports a more informed and efficient resolution.
Choosing a valuer
A business valuation should be completed by an independent accountant with specialised valuation expertise rather than the company’s usual accountant. The valuer must be properly instructed on the factors to consider and how the report should be prepared, particularly if it may be used in court. Their report will provide an objective assessment of the business’s value, either as a single figure or within a range.
In most cases, you and your former partner are expected to jointly agree on a valuer and provide joint instructions. This is generally more efficient and avoids conflicting valuations. However, if you cannot agree on a joint valuer, disagree with the approach taken by the jointly appointed expert, or if circumstances in your case make a joint appointment unsuitable, you may ask the court to rely on separate valuers.
Courts will only permit separate valuation reports where there is a valid reason. For example, if the joint expert lacked key information or prepared the valuation in a way that departs from accepted professional standards.
Who pays?
When the parties agree to appoint a joint valuer, the cost of the valuation report is usually shared equally. If one party chooses to engage their own separate valuer, they are generally responsible for that expense.
Although joint costs are the norm, you and your former partner can negotiate contributions, particularly if one party wants to provide additional or specific instructions that may increase the overall cost of the valuation.
Make an online enquiry to learn more or read about our Principal Family Lawyer, Damian Phair.
Trusts in property settlements
When will the Court consider a trust?
The Court will consider several factors when determining whether a trust forms part of the property pool. For example, the Court will consider which party has control over the trust, the purpose for which the trust was established, and the history of how the trust has been used to evaluate its significance to the property pool.
Why trust valuations matter
Where a trust is involved in a property settlement an accurate valuation which considers underlying assets such as businesses, property, liabilities and tax implications is essential. Similar to a business valuation, an independent valuer reduces disagreements on the true value of the trust and empowers parties to come to an informed resolution.
Additionally, trust valuations come with an additional level of complexity. The valuation process extends beyond adding the value of the trust’s assets and may involve:
- Reviewing the trust deed to understand the nature of the trust powers, control and entitlements
- Determining whether income or capital distributions are fixed or discretionary
- Considering the taxation consequences that may occur if assets are realised
These unique complexities mean that it is essential for parties to obtain a valuation from a specialist valuer with experience in family law matters. Such expertise ensures that challenges in complex property settlements can be navigated with expertise and confidence.
Read: Dividing Assets After a Short Marriage or Relationship: What’s Fair?
Chatswood Family Lawyers: The Family Law Specialists
At Chatswood Family Lawyers, our competent team of solicitors is dedicated to assisting families in navigating complex property settlements and ensuring the best possible outcome for the needs of our clients.
We support you with divorce, family law, child custody, complex property division, and prenuptial agreements cases.
Call us on (02) 9412 4500, email us at enquiries@chatswoodfamilylawyers.com.au, or visit our office in Chatswood.