In Oklahoma this week, a court ordered a husband to pay approximately $1,000,000,000 in “property division alimony” to his former wife. Click here or here for the complete story. While California does not have “property division alimony,” the case provides a good starting point with regard to property division and the valuation of party’s services to a community property business.
In an earlier post, the blog discussed community property and how it is divided equally at dissolution. Before dividing the asset, the court needs to how to value it. In the Oklahoma case, one of the questions was how to value the community interest in an energy business started by Husband. Husband’s argument was that the business took off because of the inherent nature of the business. Wife countered that he made his millions because of his business skill and acumen.
In California, Husband’s tact would be known as the Van Camp approach; Wife would argue for a Pereira approach. In general, a party argues for the Van Camp approach when it is the initial investment and not the personal efforts that grew the asset while the Pereira approach would focus on the personal efforts of a party driving the growth of a particular asset or property. Pereira tends to favors the community while Van Camp favors the initial separate property interest (attributing the growth to that party’s separate property).
The Oklahoma case appears to have rewarded the community and based the company’s growth on the husband’s “skills and efforts” and less on luck and the increase in oil prices. If you are facing a dissolution and either you or your spouse run a small (or extremely large!) business, be sure to talk to an experienced family law attorney to determine the best and most favorable approach to valuing that business prior to the division of community property.