Portrait of John K Grubb

Texas Divorce and Prenuptial Agreement

5005 Riverway Drive, Suite 450 • Houston, Texas 77056

Phone: 713-877-8800 • Fax: 713-877-1229

Divorcing? Make sure you don’t undervalue marital assets

Many Houstonians and people nationwide are following the McCourt divorce case with interest. The case is what is commonly called a complex divorce which included a sports team as part of the community property.

Jamie McCourt has asked the California Courts to throw out her divorce settlement. Jamie McCourt received $131 million for the Los Angeles Dodgers as for her share of community property valued at the time at approximately $300 million.

Shortly after the divorce settlement was final, the Frank McCourt sold the Dodgers for $2.15 billion.

Jamie McCourt claims Frank McCourt submitted a fraudulent valuation of the Los Angeles Dodgers during disclosure. She asserts that Frank McCourt gave her various estimates for the team’s valuation. Frank McCourt claims Jamie McCourt failed to perform due diligence, meaning obtain her own independent valuation. The judge in the case ordered the Dodgers to make the details of the deal public.

Many Houstonians are wondering if the same thing can happen in Texas.

It is exceedingly difficult modify a divorce agreement in Texas once your divorce is final. Texas recognizes the need for a conclusive end to the marriage that will allow people to move on with their lives. The Texas Family Code provides only a small set of specific instances for community property division where a divorce case can be reopened and reviewed.

It’s important to have an accurate valuation of marital assets at the time of the settlement in complex divorce cases. Overvaluation or undervaluation of assets can put a spouse at an advantage or disadvantage, which negates the concept of “fair and equitable” distribution of community property.

There are several methods of valuing complex property such as businesses, retirement plans, stock options and other investments, and yes, sports teams. Valuation methods can have materially different results. Some of the valuation methods commonly used are

  • Fair Market Value – what a buyer is willing to pay for the property
  • Real (Intrinsic) Value – the actual value of the property when fair market value can’t be determined. Such valuations include asset valuation, income capitalization, sales of similar businesses, and cash flow projections.
  • Liquidation Value – the net amount received, less expenses or debt, after the property is sold
  • Replacement Value – the amount paid to replace the property with a similar or identical property

Houston divorce attorneys advise their clients to seek independent valuation of marital assets. Most good attorneys insist on the independent valuation because they know that the value your spouse includes at disclosure will be the most conservative valuation possible. If your valuation is materially different your spouse’s valuation, it becomes a point of negotiation for your attorney to argue. When the valuation is agreed upon, it becomes part of the final divorce settlement.

The McCourt case makes it very easy to understand why you should hire your own professionals for an independent valuation of marital assets. You cannot rely on the valuation provided that your spouse provides during the disclosure period. Houston has many divorce attorneys and financial professionals with experience in complex divorce similar to the McCourt case.

Regardless of the outcome of the in the California courts, it will cost Jamie and Frank McCourt plenty in terms of time, headaches, financial expert compensation, and legal fees.

John K. Grubb & Associates, P.C.
Houston Divorce Attorneys

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