If you own a collection that is considered marital property, you may be wondering if you need to divide its value during your divorce. In general, you probably will have to divide it if it has demonstrable value. The division should be equitable, meaning it may not be divided 50/50. Instead, the factors to be considered include whether you obtained part of the collection during the marriage and whether the collection has increased in value during the divorce.
Whether you collect wine, cars, trading cards or art, the first step toward proper division is to establish the value of the collection. It’s important to realize that not all collections are valuable. You may love every piece of your collection, but it may not be selling for any more than you paid for it in the first place. If it truly is not marketable, you have a strong argument that the collection shouldn’t be divided at all because it has no value.
The top performers in the collectibles universe are those that are high quality and have broad name recognition. Those are easier to sell and may be easier to value. However, more obscure collections can also have value – and the greater the risk, the greater the reward.
Here are five things to consider:
- Consider using a valuation index. For some common collectibles like wine and trading cards, there are companies that are already tracking the value. You could simply agree to accept what they estimate.
- Your insurance valuation is a clue, but not an answer. This is because insurance companies focus on the replacement value, not the fair market value, of collectibles.
- A certified appraiser may be necessary. Ideally, you will find an appraiser who specializes in collections like yours. They will consider the base cost of the items, their quality, and what similar collections have sold for recently.
- Take the taxes into account in your valuation. If you’ve held on to your collection for a year or more, it will generally be taxed at a capital gains rate of 28% upon sale.
- Take volatility into account as you divide. An economic downturn or a simple change in fashion might affect the ultimate value of your collection. You may wish to get an initial valuation to work with and then agree to accept a final valuation closer in time to the finalization of your divorce. Or, you may wish to sample valuations at several points in time and agree to accept an average.
If you are like most people, you will attempt to divide your property by agreement instead of sending the issue to the family court to decide. Agreeing in principle to divide based on a certain valuation at a certain time may make doing this easier.
Don’t want to sell your collection? You may not have to
Just because you have to divide the value of your collection does not mean you have to sell it. In your divorce agreement, you and your spouse could agree that you will get to keep the collection but pay half its value to your spouse. You could offset its value against other items that your spouse wants to keep. Work with your divorce attorney to determine how important it is to maintain the collection and what options you have.
When dividing valuable collections, it’s important to have a caring, thorough divorce attorney who will go the extra mile to help you get what you need.
