A valuation date refers to the precise date that the value of an asset is determined. Often, this word is used in connection with real estate and financial instruments, such as stocks and bonds, but it is also commonly used in probate matters as well as within the insurance industry. When the market price of an item is known to fluctuate, a valuation date is important in determining that item’s true market value. This includes calculating situations that impact an item’s overall value, such as any interest rates that may have applied at the time an asset was offered for sale.
Courts often use an estate valuation date when distributing assets contained in a will or that will be distributed in a divorce settlement, lawsuit or some other court action where monetary damages or settlements are due. In situations of divorce, the valuation date of a home or other assets may be determined differently in various jurisdictions. For example, some courts may use the date that an asset was actually appraised, while others may determine the value of an asset based on its worth when a couple first legally separated. Whether determined by a particular appraisal date or an alternate valuation date, courts use this information to determine what interest rates were at a set point and to determine how to equitably distribute assets between individual parties.
In some jurisdictions, a fixed date of valuation is used in determining real estate property taxes. While a property may be assessed on one date, the actual property valuation date may fall on a certain uniform date each year, which may differ from the date the assessment was actually made. If information concerning a change in a property’s value between the assessment date and date of valuation is needed, this information may need to be manually obtained.
Within the insurance industry, a valuation date is also important in determining final dates for adjustments. In cases involving personal injury, insurance companies often estimate what the total cost of a claim will be. Money is then set aside in a reserve account to pay for things like medical costs and any additional treatments a person may require to fully recover from an accident. Establishing a valuation date helps insurance adjusters report appropriate losses, as these dates firmly establish a cutoff date for spending. Such is also sometimes referred to as a freeze date.
