Dividing luxury items in divorce

Vehicles, art collections, antiques, jewellery and wine

Divorce is never a word spoken lightly. Whether a marriage has lasted five years or 50, the end of what was meant to be a lifelong partnership is difficult. We’ve written about child custody and a range of issues parents of minor children have to consider when they divorce. It’s tempting to think that a couple with grown children will face a more straightforward divorce process. Unfortunately, this is rarely the case. The longer a couple has been together, the more entwined and sophisticated their financial circumstances and assets are. A couple in their 50s or 60s with a high net worth may have a very complex estate comprising not only the matrimonial home but possibly a second home, complicated investments, luxury vehicles, works of art and/or antiques, heirloom jewellery, and possibly even a valuable wine collection. How are assets like this to be divided, when an equal distribution is not practical (or even possible)?

Matrimonial regime

As always, the starting point is the matrimonial regime in place. If the marriage is out of community of property and there is an antenuptial contract (ANC) or a postnuptial contract (PNC) in place, with or without accrual, the distribution of assets will be determined by the mandate of the ANC or PNC. If the accrual system applies, valuation could be very convoluted, and is beyond the scope of this article. One of our attorneys will be able to help if you are considering divorce and are married with the accrual system. For the sake of simplicity and illustration, this article covers marriage in community of property, where assets are divided equally on the dissolution of the marriage. 

Monetary vs. personal value

From a purely mathematical perspective, the simplest way to divide valuable assets is to sell them and share the proceeds. This is unequivocally fair. It is also totally impractical. In our experience, all but the most unemotional or spiteful people would rather sacrifice a portion of their entitlement than see a cherished heirloom or much-loved painting fall into the hands of a stranger. But divorcing couples are rarely so magnanimous as to forfeit their right to an asset without a fight. And this is why high-net-worth divorces can drag on for years. High-value possessions have often been collected and curated with emotional investment over the years. Parting with a treasure or splitting a collection can be a wrench because of the sentimental or personal value attached.

Valuation

For this reason, the assets of a high-net-worth estate must be accurately valued by a professional in the relevant field, and the lawyers for both sides must also be cognisant of the intrinsic value of certain assets beyond their financial worth. Although a forensic accountant can be very helpful in determining the value of a complex estate, when it comes to specialist goods like antiques, artwork, rare books or wine, an appraisal by an expert is essential. An art appraiser, for example, will assess the historical importance of a work or the rarity value of an antique. Provenance and scarcity will also be factors in valuing rare books and heirloom jewellery. A wine collection will need to be evaluated by a vintage wine retailer or auction house. However much a forensic accountant may enjoy a tipple, they are not skilled in the valuation of fine wine.

When it comes to the sentimental value of an asset, a good lawyer will recognise emotional attachment and seek to negotiate appropriately. For example, if the couple owns an extensive art collection – or even just a few valuable pieces – it may be possible to divide the art according to personal preference. One spouse loves Picasso; the other favours the Impressionists. Any difference in value can be adjusted via other asset distribution. A wine collection can be similarly despatched. Each spouse selects their favourites, or if one spouse is an afficionado and the other is indifferent, the wine lover keeps the collection and compensates the spouse in another way. If the collection is not divided, a total valuation will suffice. Otherwise a bottle-by-bottle valuation will be necessary.

Jewellery is trickier, especially family heirlooms. A man may have given his wife a piece that belonged to his mother, expecting it to be passed down eventually to the couple’s children, i.e., to stay in the family. However, something given as a gift is not a jointly held asset. It technically belongs to the wife. If negotiations are amicable, or if a mediator is involved, it may be possible to discuss the future ownership of the jewellery, or agree that it remains the property of the wife but is intended to pass to the daughter.

Appreciation vs. depreciation and maintenance

Another factor that is rarely an issue in the “average” divorce is potential appreciation or depreciation. The luxury SUV parked in the drive (assuming it is not a vintage car) can only reduce in value. By contrast, a painting, antique or wine collection is likely to appreciate. A valuer will take future value into account in arriving at a valuation. This may make the Range Rover less worth fighting over than the Rembrandt!

It’s also worth thinking about maintenance costs. Art and wine need controlled environments to maintain their value. If one spouse is moving out of the family home that contains the necessary conditions for the luxury possessions, will they be able (or want) to carry the additional costs of maintenance for the assets they take away from the marriage? The financial implications of asset ownership should be part of the negotiating process. 

It’s not hard to see why high-net-worth divorces can sometimes take years to finalise. Even where there is no animosity and the couple is willing to consider compromises, the calculations alone are time-consuming. 

Be sensitive and seek creative solutions

Sensitivity and creativity are vital qualities in reaching a settlement that both parties can live with. If each spouse can honestly and without rancour recognise their genuine emotional attachments, and differentiate between the personal worth of an item and the base urge to prevent their spouse having it, they will be able to advocate meaningfully for what really matters and avoid drawn-out, “tit for tat” battles. Items that don’t have sentimental value for either spouse can be liquidated and the proceeds evenly distributed, to simplify the process. It may even be possible to negotiate joint ownership, for example of a holiday home or the family heirlooms. A trust could be established to protect valuable collections, particularly if there are children of the marriage. 

Ultimately, if a couple cannot reach agreement through negotiation or mediation, the court will decide the distribution of assets. And the court’s decision is seldom exactly what the parties want, though it will be just and equitable in law. It is rare indeed for a couple to walk away from a marriage with all their wishes met. Whether through high-conflict litigation or a gentler, more respectful mediation process, compromise is inevitable. At SD Law, we always advocate for mediation over litigation. Minimising the trauma of divorce makes it easier for both parties to move on and build new lives. 

Consult with a family attorney

This article provides an overview of the division of luxury assets in divorce but does not constitute legal advice. Each situation, particularly in a high-net-worth divorce, is unique and requires careful financial, legal and tax planning. Specialists often need to be engaged to handle specific asset classes. 

SD Law is a firm of attorneys based in Cape Town, with offices in Johannesburg and Durban, who are experienced in high-net-worth divorce and asset division in divorce. We can assemble an expert team to ensure you arrive at the best possible outcome and all parties are treated with respect. If you are considering divorce and want to discuss your options, call family lawyer Simon Dippenaar on 086 099 5146 or email sdippenaar@sdlaw.co.za for a confidential discussion. 

Further reading:

• Protecting high-value assets during divorce
• Dealing with hidden assets in divorce
• Property division in divorce
• Protecting business interests during divorce
• Forensic accountants and divorce
• Investment division in divorce

Divorce Attorney Cape Town

http://divorceattorneycapetown.co.za/

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