Equitable Distribution in Divorce

The 2014 Virginia case Brake v. Brake, addresses the equitable distribution of a husband’s law firm interest during a divorce proceeding. 

In this case, the parties divorced after being married for 11 years.  They settled all issues out of court except the value and division of the husband’s 10% interest in his law firm.  During trial, each party had an expert who testified about three different possible valuation methods: 1) income or excess earnings approach, 2) asset or net-asset approach, and 3) market or contract approach.

 

Differing Expert Opinions

The husband’s expert found that the market approach was the best approach because this method coincided with the law firm’s Shareholder Agreement, which paid out $20,000 if the husband left the firm.  However, the wife’s expert testified that the net-asset approach was the best method.  Under this theory the value of the husband’s interest in the firm was $308,439.  The wife’s expert further found that the market approach was inappropriate because the law firm was so small and because the husband’s 10% share represented more than $20,000.  The wife’s expert also stated that the husband’s 10% share gave him a portion of the firm’s profits through quarterly distributions and bonuses.  Additionally, the expert noted that shortly before trial, the husband received a bonus distribution of $124,000. 

 

Trial Court Ruling 

The trial court found the wife’s expert more persuasive and ultimately valued the husband’s interest in the law firm at $308,439.  Consequently, the trial court awarded the wife 144,966.33 (47% of the asset) to be paid to the wife in 90 days.  The husband filed Property Divisiona motion for reconsideration and asked the court to reconsider its determination of the value of his interest since the only asset to pay such an award was his 401k.  After the husband’s motion, the court modified the payment schedule and allowed the husband to pay the wife either by lump sum or periodic payments plus interest. 

 

Court of Appeals Ruling

The husband then appealed this ruling.  However, the Court of Appeals upheld the trial court’s ruling and noted that the value of property is an issue of fact and not law and therefore could not be addressed by the Court of Appeals.  Additionally, the Appeals Court did not consider the method of payment to be an abuse of discretion since the trial court concluded that the husband was able to pay the wife from the $124,000 bonus he had recently received as well as future payments he would receive from the firm.

As is evident from this case, valuing and distributing assets can be a complicated task.  Therefore it is necessary that you have an experienced attorney on your side to navigate cases like these.

H. Van Smith
Trusted Virginia Family Law Attorney Serving Richmond to Williamsburg