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Valuation of Business Entities and/or Enhanced Earnings

In a divorce or separation, all of the marital property is to be equitably distributed taking into consideration the various factors enumerated in the Domestic Relations Law.  

New York State defines “marital property” more broadly than any other state in the country. Included in New York’s definition of marital property is the enhanced earning capacity available to a party as a result of advanced academic degrees or certifications or licenses acquired during the marriage.

For example, if during the marriage one of the parties acquired a college degree or a post-graduate degree such as an MBA or PhD and to the extent such an academic degree enhances the earning capacity of that individual over that person’s working life, the economic benefit derived from the academic degree is treated as a marital asset at the time of divorce.

The valuation of that earning capacity depends on numerous factors and the methodology utilized for valuation.  In any event, it is critical that at the time of divorce/separation, all parties be aware of the breadth and scope of “marital property” in negotiating and attempting to achieve a fair and equitable resolution of all economic issues.

In some marriages, particularly in short-term marriages of new professionals, including doctors, lawyers and accountants, the enhanced earning capacity may be the most valuable asset available for equitable distribution.  In simplest terms, enhanced earning capacity is the present value of the additional income a party will earn over his or her lifetime as the result of training or education received during the marriage.

There are also different methodologies available in determining the value of a party’s interest in a business entity.  This may necessitate certain legal proceedings in order to obtain the information necessary to have a proper valuation occur which usually involves various forms of discovery including obtaining various documents or conducting a deposition of relevant persons.

Protecting the value of an educational attainment earned during the marriage or an interest acquired in a business during the marriage or obtaining your equitable share of similar assets can be a significant component of any case and the members of our firm are experienced in this area.

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