Clients often complain that trying to pin down a property settlement when the market is fluctuating wildly, as it has recently, is impossible. You are working with constantly changing balances. This has been especially frustrating when the market changes by the hour; not just the day.
There are ways to compensate for the fluctuations.
- Establish a valuation date. This is the date on which the assets will be valued and divided. It may be wise to pick a date at the end of a month or a fiscal quarter, when statements are readily available.
- If some of the assets are only valued once per year (such as pensions), perhaps that should be the valuation date.
- Consider dividing as many of the assets as possible by splitting them between husband and wife. That way, if they fluctuate, each will receive the increase or decrease. Be careful to include language that indicates each will receive half of each class of assets.
- If you have assets that cannot be transferred, such as stock options, try to use constructive trusts to allow the non-employee spouse to receive a share of the options when they vest and divide the options using percentages.
- For retirement plans, agree that each party will receive the gains or losses attributable to his/her share from the valuation date to the date of distribution. This applies to 401(k), 403(b), 457 plans and individual retirement accounts (IRA’s).
- Even if you have selected a valuation date, consider checking to see whether the changes in the market have significantly altered the division scheme before you finalize the settlement agreement.
All of these strategies require that the couple work cooperatively to exchange valuation documents during settlement discussions. This works well if they mediate or collaborate. For couple who are in the litigation process, they will be limited to the values that existed on the date of the trial or whatever date the judge selects.