All marital assets are valued in a divorce case. The date selected for valuing an asset can significantly vary the value of the asset. In New York, the Court must select a valuation date as soon as possible after the divorce action has been commenced.
In determining a valuation date, a distinction is made between “active” assets and “passive” assets. The value of an active asset is dependent on the actions or labor of the spouse to whom the asset is titled. Generally, active assets are valued as of the date of commencement of the divorce action to prevent the titled spouse from manipulating the asset’s value after the action is commenced. An example of an active asset is a business that is solely managed by one of the parties.
The value of a passive asset depends solely on market forces. Generally, a passive asset is valued as of the date of trial in a divorce action. This prevents the titled spouse from suffering financially due to post-commencement market fluctuations beyond his or her control. Examples of a passive assets are real estate that is not improved during the pendancy of the divorce action and a 401k that changes in value due to changes in the market.
The above illustrations of active and passive assets are not steadfast rules that are rigidly adhered to. New York divorce courts have discretion to determine which category an asset should fall into. For example, a substantial and continuing recession may impact the value of a business, compelling a court to determine that a business is really a passive and not an active asset.
