When a divorce involves a privately held business, professional practice, or ownership interest, one of the most critical questions is how that interest will be valued. In New Jersey, courts generally apply a standard known as fair value when dividing marital business interests. Understanding how this standard is applied can have a significant impact on the outcome of your divorce.

What Is Fair Value?

Fair value is a legal standard generally used in New Jersey divorces to determine the value of a marital business interest or professional practice. Unlike some other valuation approaches, fair value generally does not include certain considerations that are typically applied under the fair market value standard, which is defined as the price at which a hypothetical buyer might pay for the interest in an open market.

Why Fair Value Matters in Divorce

In many valuation methods outside New Jersey, experts may apply certain discounts that reduce the stated value of a business interest, such as:

  • Minority discounts, which reflect a lack of control for shareholders who do not hold a majority stake.
  • Discounts for lack of marketability, reflecting the difficulty of selling an interest in a privately held business.

Under New Jersey’s fair value standard, these discounts are typically not applied, meaning a business or professional interest may be valued higher than it would be under other approaches. This difference can directly affect:

  • The total value of the marital estate
  • How assets are allocated between spouses

“In divorces involving closely held businesses, understanding ‘fair value’ is critical,” says Jonathan Wolfe, Co-Managing Partner and Chair of the Matrimonial and Litigation Departments at Skoloff & Wolfe, P.C. “The general inapplicability of otherwise well-recognized discounts can certainly come as a surprise to certain business owners and can have a meaningful impact on the value or perceived value of the marital estate.”

Fair Value Is Not One-Size-Fits-All

Even within New Jersey, fair value is not a purely mechanical calculation. Courts may consider:

  • The structure of the business or professional practice
  • The nature of the ownership interest
  • Specific facts of the case

Expert testimony often plays a critical role in helping the court understand these nuances. That’s why understanding fair value early in the divorce process is essential, particularly when complex or closely held assets are involved.

Working With a Valuation Expert

A qualified valuation expert can provide an objective assessment of the business or practice, ensuring assets are fairly valued and divided. Their analysis can be crucial in mediation or court, helping both the parties and the judge understand the financial realities and reach a fair outcome.

How Fair Value Shapes Your Divorce Strategy

Valuing a business or professional practice in divorce is complex and high-stakes. Knowing that fair value is the applicable standard and how it can be presented and defended can influence decisions as you prepare your case for settlement, which is everyone’s goal, or trial if that should be necessary. 

Skoloff & Wolfe, P.C., represents clients in all matters of family law, including Divorce, High Net Worth Divorce, Child Custody, Child Support, Separation, and Mediation. Leaders and the spouses of leaders of finance, law, entertainment, sports, real estate, and members of America’s prominent families, rely upon the attorneys of our family law group. From start to finish, we work side-by-side with our clients to identify reasonable objectives and achieve the best possible results.