Property Valuation in Family Law
Introduction
In the world of family law, property valuation is a critical and often contentious issue. It is particularly complex when it comes to assets such as real property or business interests, whose value is not as straightforward as, for example, a bank account's. This post will explore three key aspects of property valuation: the onus to value assets, the difference between resale and replacement value, and the valuation of pensions.
Onus to Value Assets
The responsibility of valuing an asset falls to the party who owns it. It is not enough to simply claim a value; tangible proof must accompany the claim. If the opposing party disputes the proposed valuation, they should provide their own evidence for a different value. Should a party fail to offer an appropriate valuation, the court has the discretion to assign a lower or null value, prefer the opposing party's value, or mandate an independent valuation.
Resale Value not Replacement Value
It's important to distinguish between an item's replacement value and its resale value. The latter, which refers to what the item could fetch on the open market, is the relevant factor in family law cases. This often leads to confusion, particularly with items like vehicles, jewelry, or furniture, where the perceived replacement cost may far exceed the resale value. For instance, an appraisal of a piece of jewelry's resale value might need to be conducted by a certified appraiser, while the value of a used car could be estimated from similar listings online or quotes from a dealership.
Pensions
Pensions represent a unique challenge in property valuation. As of January 1, 2012, the process for valuing certain pensions was changed to avoid "battles of the experts" in court. The new procedure requires the pension plan's administrator to prepare a valuation of pension benefits for equalization purposes, using standardized forms from the Financial Services Commission of Ontario. However, this only applies to pensions under the Pension Benefits Act, covering pensions for people employed in Ontario. Federally-regulated pensions and pension plans from other provinces still require expert valuation.
Conclusion
Navigating property valuation in family law cases can be a complex terrain. However, by understanding how the law views the onus to value assets, the difference between resale and replacement value, and how pensions are valued, parties can better prepare for these discussions. The assistance of a certified business valuator or appraiser can also be invaluable in ensuring accurate and fair asset valuation.
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