Separate Property Valuation

Increase in Value of Separate Property Business During Marriage

There is a California family law presumption that provides that a business acquired during the marriage is community property. But if a business is acquired prior to the marriage it is deemed to be the separate property of the business owner-spouse and the other spouse does not have any interest in that separate property business. HOWEVER, if the separate property business increases in value during the marriage the community may be entitled to reimbursement of a portion of that increase, if the increase in value is due in part to the effort of a spouse, the community will be allocated a share of that increase in value.

To schedule a confidential consultation contact BROWN | DAHAN to discuss your matter further, please complete the “Contact Us” form or call  (949) 724-8857.

The California courts have used several different theories to approach these types of allocations to require that the separate property owner must repay the community for any unreimbursed community effort expended on the separate property business during the marriage. One of the theories commonly used is called Pereira, named after a precedent setting California case, which assigns to the separate property business a reasonable interest rate of return on the value of the business as it existed on the date of the marriage and credits the community with the remaining portion of the increase in value. This may create an issue over what interest rate is applied to the value of the separate property business. The other widely used theory is Van Camp, also based on a precedent setting California case, which gives the community a right to reimbursement of an amount equal to the total under-compensation of the business owner-spouse during the marriage and assigns the remainder of any increase in value to the separate property of the owner-spouse.

As each case has its own particularity in terms of commingling of assets and other variances, Brown|Dahan studies each claim of separate property businesses in-depth to come to the proper allocation of reimbursement to the community.

These matters are highly complex, so couples seeking divorce should seek experienced legal counsel right away. Because divorce courts can determine how assets are divided, an experienced divorce lawyer can help you understand the process and ensure that your rights and finances are duly safeguarded during the process. We invite you to contact the divorce lawyers at Brown|Dahan to discuss your situation.

To schedule a confidential consultation contact BROWN | DAHAN to discuss your matter further, please complete the “Contact Us” form or call  (949) 724-8857.

Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with a Brown|Dahan attorney. For specific technical or legal advice on the information provided and related topics, please contact Brown|Dahan.