Valuation of Non-Economic Contributions with Respect to Property Division in Divorce
The concept of equitable distribution of marital property takes into consideration both economic and non-economic contribution of the spouses towards marital property acquisition. During divorce, all marital property is divided between the spouses according to the distribution scheme available in the state where the divorce occurs. Unequal division between spouses can result from factors such as the length of the marriage, the property brought to the marriage by each party, whether one party has substantial assets not subject to division, the parties’ contributions to the marriage, and other factors. Spouses’ non-economic contributions have become a major factor in the division of marital assets during divorce. Sometimes, they are mentioned as the “services rendered by a spouse.” Non-economic contributions become a critical factor in cases where the contributing spouse does not work at all.
Usually, a party’s testimony about their efforts may suffice to prove the non-economic contributions. More substantial evidence may be required in the case of a long-term marriage in which the parties have accumulated significant assets and one spouse has not been employed outside the home after many years of marriage. In such cases, it usually is the responsibility of the spouse who has contributed the non-economic services to establish the contributions and their economic value.
Replacement Cost Approach
One way to establish the value of non-economic contributions is the replacement cost approach in which in which assumptions are made regarding a wage rate for the contribution performed. The general replacement analysis simply hypothesizes hiring outside help to perform the role filled by a non-economic contribution, such as housekeeping services.
Opportunity Cost Approach
In contrast to the replacement cost approach, the opportunity cost approach focuses on the value of the occupation that was forfeited by the spouse who claims the non-economic contribution. This approach assumes that, if there is a typical occupation in the market place that the spouse reasonably could have performed, he or she forfeited that opportunity in order to make the non-economic marital contribution. In theory, that contribution would be equivalent in value to the career opportunity that was “lost” due to the marital contribution.
In situations in which of one of the divorcing spouses does not work at all, non-economic factors may be taken into account by the court when distributing the parties’ property.
Copyright 2011 LexisNexis, a division of Reed Elsevier Inc.