Dividing Property in a Divorce Can Get Sticky

If you’re getting divorced, chances are you’re going to have to deal with assets that may not readily lend themselves to division: antiques, collectibles, and other one-of-a-kind objects or collections whose values are not immediately obvious and might have increased since they were purchased.

These are known as “illiquid, non-income producing assets,” and they include art collections, as one rather wealthy Seattle couple recently discovered. In that case, involving retired Microsoft manager and minority owner of the Seattle Mariners Christopher Larson and his philanthropist wife Julia Calhoun, the divorcing couple couldn’t agree on how to divide up their $102-million art collection that included pieces by Renoir and Monet.

So it fell to the judge in the divorce to divide up the property. Because Washington is a community property state, that means all property acquired during the marriage is presumed to be owned by both spouses and must be split down the middle in a divorce.

In the Larson and Calhoun case, the judge asked both husband and wife to explain what they wanted and why, and he used that information to divide up the art. But it’s never really that simple.

Sale!

A sale of the whole collection and equal division of the proceeds is the easiest solution, but both spouses can get attached to their Madame Alexander dolls, so sometimes a divorce means the division of the actual collection. In that case, you have make sure each side gets an equal piece of the pie.

“When you have a valuable illiquid, non-income producing asset, the divorcing couple has to agree on a value,” explains Los Angeles-based divorce lawyer Galen Gentry. “That is usually done by using a valuation expert.” There are two ways to evaluate the collection: using an accounting method that looks at book value (think the Blue Book for cars), or using a sales method in which a broker determines value based on the market.

So if a divorcing couple in Texas has to value the spur collection bought by the husband, they have to find a bona fide spur expert to place a value on that asset. Gentry recommends brokers, curators, or legitimate sellers who are experts on the things you’re trying to value. You could have competing experts to testify for each side, or if the parties can agree, one expert can do the job.

But if division is not an option – say it’s one giant Civil-War-era quilt – what then? The spouse who wants the item can buy out the one who doesn’t get to keep the asset, Galen points out. Or one party can always force a sale: “You can force a sale in all states, whether they are community property or non-community property states,” he says. In either case, the court takes up the issue in a trial and will hear evidence in order to determine the value or order a sale.

But what if there’s no market for the collection or piece, and it simply can’t be sold? “That will influence the value for divorce purposes,” Galen says. “It’s not a valuable art collection just because you say it is.” The total lack of a market for the item could lead to a low (or no) buy-out price to the spouse who doesn’t keep it. Again, the court will decide what to do if the couple can’t agree.

At least gifts are forever

In a community property state, gifts from one spouse to the other are considered separate property and do not go into the kitty to be divided up when things go south. The engagement ring is the classic example: Wife keeps it, unless husband can overcome the presumption that it was meant to be hers forever. This might happen in an awkward engagement: “Here’s a ring, my darling, but it’s Grandma’s, so I get it back when you take off.”

In a contentious divorce, there is often a fight over whether valuable antiques and other items were meant as gifts, and the judge will want to hear testimony on that. Anything you can offer beyond he said-she said will come in handy.

In fact, video recordings – especially of weddings, notes Galen, where people are feeling magnanimous and have large audiences – and other evidence including testimony by witnesses can sink a claim that a valuable object should be community property. If you made it clear it was a gift and someone else heard you, a gift it truly was – forever.

by Michele Bowman

The experienced family document prepares at Discount Divorce assists clients throughout Arizona, including the cities of Ahwatukee, Avondale, Buckeye, Chandler, El Mirage, Flagstaff, Gilbert, Glendale, Goodyear, Mesa, Peoria, Phoenix, Scottsdale, Sun City, Surprise, Tempe, Tolleson, Tucson and Youngtown.

Visit www.discountdivorcepro.com or call (602) 896-9020. Discount Divorce is located at 13817 N. 19th Ave., Phoenix, AZ 85023-6105.

As always you should seek legal advice for specific issues like the one above before coming to Discount Divorce to have your documents done and processed so that your legal rights may be protected.