To the ears of many gemologist-appraisers, the assignment "divorce appraisal" has a hard, unpleasant ring to it. As Rita Mae Brown once said, "Divorce is the one human tragedy that reduces everything to cash." The hostility associated with the task has never been a recommended way to promote popularity amongst valuers. For that reason, many professional appraisers prefer to avoid divorce appraisals. They claim they are too busy, or specialize in insurance, or they will simply charge expensive fees. Statisticians will alert you that the odds of couples seeking a divorce is commonplace. Thus, from a gemologist-appraiser's perspective, this should be an obvious opportunity for making money. Maybe some nuts and bolts will erase the un-easiness. Let us start off with a little history.

        The British are Coming

Dissolution of marriage (divorce) laws in the United States have two origins. The thirteen colonies immediately after separating from the British, adopted their legal system. Thus, the English Common Law was the basic legal system. Of course, as time went on, the U.S. developed their own version of English Common Law. As far as marital property, the original laws were not favorable to wives. In essence, if a woman married, she lost control to her property.¹ The husband could sell his wife's real and personal property, without her permission.

One slight protection for the wife was that if she held formal title to a property, she was considered the owner in a divorce. However, formal titles were for real property. Worse yet, her personal property was not considered hers during a divorce. Eventually, the laws evolved providing women's rights to their real and personal property during a marriage and during the division of marital property. But wait, we need to address the second origin of divorce laws.

        All Roads Lead to Rome

In the United States there are two legal systems. The second one was an adoption by acquisition.² Those states that were originally Spanish or French colonies had a legal system based on either French or Spanish Civil Law. And that was retained when they became part of the United States. These civil law systems³ viewed a marriage like a partnership with each spouse as an equal contributor to the marriage, including property. Marital property, as a result, was divided equally in the event of a divorce.

You may have heard the legal expression "community property." That is our modern-day name for the French and Spanish Civil Law systems in the United States. The U.S. is exceptional because we have two legal systems existing side by side in our legal system! No wonder that most gemologist-appraisers are confused on the proper methodologies that each system require.

Today each state will have their own nuances, but the good news is that all states are evolving towards community property style law. Now let us stop and change our terminology.

        Protocol

Dissolution of marriage assignments will have their own parlance. You may have already learned that divorce is better stated as a dissolution of marriage. The courts do not see a spouse as a plaintiff or defendant but as a party to the action. The couple's property is either marital property property or separate.⁴ These are not major changes to your vocabulary, and you will impress the attorneys representing the parties to the action when you value marital property in a dissolution of marriage assignment.

        Equal or Equitable?

You will hear these terms a lot. There are states classified as "equal states" and others as "equitable states." Yes, these classifications apply to both common law as well as community property states. Those that are equal states take the route of dividing marital property equally. The separate property will be kept separate in most cases. It is the marital property that will be split fifty-fifty. Sounds great from a gemologist-appraiser perspective but the reality is that the legal squabbles will be over property categorization. Do not take sides or even suggest that a property is marital or separate property! Now is the time to take that impersonal non-advocate position as a valuer.

But wait, there are equitable states. Equitable states seek to make the division fair.⁵ Often the personal property is lumped in with the marital property to achieve that goal. Often the couple will use property as a bargaining chip in leveraging child custody disputes. Just enjoy the extra hours you will invoice and distance yourself from the antagonistic legal quarrels.

How do these terms affect the gemologist-appraiser? Well, the courts have the ability in equitable states to add separate property into the marital property pool to make the division fair. Instead of trying to determine what is separate or marital property, leave that to the attorneys. What you are advised to appraise, just render a valuation. Your task is to value property correctly and to avoid the legal tussles.

        First Question to Ask

Where was it lodged? The state where the dissolution of marriage is lodged is the state's requirements that will govern your appraisal methodology. If, for example, a client seeking an appraisal comes into your office located in Virginia, do not assume that Virginia's mandatory requirements apply. What if the other spouse lives and lodged the action in Nevada? Then Nevada would be the state requirements with which you must comply. This a must-ask question!

        Effective Dates

An effective date is the date that your value conclusion is linked to. There is no one-size-fit-all for this important date. Some states use the date of separation, while others use the date of filing for a divorce, whereas others rely on the judge to select a date, or the date of decree may apply, or the date for the hearing to divide the property, and there may be a choice between the available options depending on which occurs first. Thus, you have retrospective dates and anticipated dates! That should put your valuation training into a nosedive. Handle the fortune telling effective date assignments by determining values as close to the date as possible and watch the market closely for any ups or downs that may affect the values up to the time of the anticipated event or date.

For example, in North Carolina, the date of separation is the effective date. California will seek an appraisal closest to the date of decree. See the problem? You need to know what the proper effective date for the state that has jurisdiction. Then you must ask for the date you need.

Whatever you do, do not use the date of inspection as the effective date.

        Value Definitions

Of course, each spouse either wants a high value or a low value depending on their needs. Your task is to render a value that complies with a mandatory value definition. But what definition? The courts do not embrace liquidation unless agreed to by the parties. Since the marital property is owned, in theory, by both parties, they can decide to have a different value rendered that is customarily required by the state of jurisdiction. However, get the stipulation in writing with both parties' signatures.

Most trained gemologist-appraisers assume that Fair Market Value (FMV)⁶ is the correct value definition to use. Believe it or not, there are multiple FMV definitions in the legal arena. Using the one for federal estate tax liability would not be correct. Instead, expect one tailored by the legal system for the state of jurisdiction and specifically for divorce. Do not panic, the FMV definitions are usually generic and not complicated. And yes, most states do require FMV but not all.

Michigan requires present value.⁷ By state law, North Carolina requires net value be derived from fair market value.⁸ But what is net value?

Net value is fair market value minus encumbrances. For example, there is an emerald ring worth $20,000 but it has $15,000 in encumbrances (owed to the bank), then the net value is $5,000. Are appraisers expected to ask what are the encumbrances for an item? No, not at all. Report the FMV and state that it is not net value but to be used to determine the net value.

Trained gemologist-appraisers usually have knowledge about tax liability valuation theory. Do not assume that you will merely be retained to follow the state's dissolution of marriage legal requirements. The court has a responsibility to not divide the marital property and leave the couple with a tax burden. Do not be surprised if you are requested to render a second valuation for tax liability to help the court decide how to divide the marital property that you just appraised for a dissolution of marriage.

        Is That All?

Of all the appraisal valuation assignments a gemologist-appraiser performs, this is probably the most unpredictable. Why? The parties who once were a loving couple are now hostile and the marital property is involved in a legal tug-of-war. As a gemologist-appraiser, you may find yourself in some extremely uncomfortable situations. You may have to examine property in a bank vault, in the home of the opposing spouse, an attorney's office, in a court provided location, and the list goes on and on. You may suggest, if you are the first appraiser to be retained, that you work for both parties as a neutral expert. The backlash to this smart move is that either or both parties can cross examine you - or should I say, "crossly examine you."

Now you have a basic idea of what the valuation assignment for dissolution of marriage involves. The basic rule of rendering appraisals in compliance with legal mandates is to know the rules. Avoid any appraisal assignment if you are doubtful what is required.

Written by Bill Hoefer