New Jersey Forensic Accountant Robert A. Bonavito discusses Value to the Holder, a matter that often arises during discussions of business assets in the event of a divorce. Robert emphasizes the importance of understanding Value to the Holder depending on the state you're in, and how your business assets might be affected by a divorce.

➡️ Value to the Holder and Divorce Business Appraisal:
One of the most difficult conversations I have with business owners going through a divorce is that their business does have a value. I was recently confronted with a woman who built a very successful consulting firm. She had seven employees, but she basically ran the firm and was responsible for the vast majority of the consulting engagements. I explained to her that the business would have to be valued and her husband would be entitled to a portion of that value.

❓ Essentially, even though her husband was not involved in the business, and without her the business would cease to exist, she would still have to write a check to her husband. She was adamant and explained the business had no value and was worth nothing without her.
Obviously, the business does have value to her. New Jersey courts have already weighed in on this issue; 'value to the holder'. It means that there is a marital asset that is subject to equitable distribution.

➡️ Value to the Holder
:
Value to the holder States like NJ are generally those that look to identify the value the asset or assets created during a marriage as a result of joint efforts of both spouses, regardless of whether a marketable asset was created or not.
In the value to the holder states, the view of property is broad and recognizes that the title holder will continue to function as an owner benefiting from the asset already in place.

❓ States that favor the value to the holder premise consider the cash flows received by the title holding spouse regardless of the assets’ transferability.
States that follow an investment value standard seemed to apply the notion that although the business may not be immediately salable and may not have value beyond its net tangible value without the owner employee in place, the business has an ongoing value to the owner and therefore to the marital estate.

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Robert A. Bonavito, CPA
1812 Front St.
Scotch Plains, NJ 07076
908-322-7719