Equitable distribution is the fair division of assets between two or more entities (people or businesses). The division is based on a method agreed upon by the entities or is at the direction of a third party or court.
Parties to a divorce or heirs to an estate are often faced with the need to equitably divide personal property according to its value. The overriding concern for equitable distribution appraisals is the fair division of property among all parties. Appraisers are in the best position to provide an impartial and objective professional opinion of property values to assist with the division process.
The appraiser establishes a defined type of value (often net value or marketable cash value) for each item of property. The parties or the court, then, divide the property accordingly in an equitable fashion. Note that laws governing the appropriate value level for division of property vary from state to state. States may require net value, cash value, marketable cash value, fair market value, or value-in-use. It is imperative that you understand the state and/or local laws that pertain to these types of appraisals. When identifying the appropriate type and definition of value to use for equitable distribution appraisals, it is advisable to consult with the client and/or the client’s lawyer.
In equitable distribution appraisals the need is to arrive at a just and fair compensation for property once held jointly. The underlying concept is value-in-use which recognizes the monetary worth (to the owner) that is necessary to substitute for the portion of property being divided away. Since the overriding concern in dissolution appraisals is one of fair compensation for all parties, compensation should be such that the desire to keep the property is no greater or less than the desire to be compensated an appropriate amount of money for the property.
For equitable distribution appraisals, the appraiser could make use of USPAP’s Summary appraisal report option, but for potentially litigious situations, making use of the Self-Contained appraisal report option would be more advisable.