How Are Fine Art and Collectibles Valued in Divorce?

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by | Apr 13, 2022 | Blog, Property Distribution

In divorce, all marital property is split between the parties. Depending on the type of asset, different rules apply to the division. Fine art and collectibles are valued in divorce as passive assets. A passive asset is an asset that increases or decreases in value due to external market conditions, rather than because a party has been regularly contributing to the asset, such as with a business or professional practice. Passive assets are generally divided equally between spouses.

Where the parties have difficult to value assets, such as art and collectibles, an appraiser is typically used to determine the value of the property. However, a frequent problem with valuations for divorce is that the parties cannot agree on the neutral appraisal. Instead, one or both sides hire his or her own appraiser and then want the court to accept the appraisal he or she sees as most favorable to his or her case.

Judges often hesitate to decide what fine art and collectibles are worth if there are multiple appraisals with substantial differences. The valuation of a piece by experts can vary drastically because of a limited number of comparable sales, a small market of interested buyers and current tastes and trends. In the event of a dispute, the court will most likely instead order the sale of the art since that is the only way to be certain of the value. This is seldom beneficial to the parties as a judicial sale may not result in the best price and both parties lose the opportunity to retain the pieces they want.

To avoid this result, the parties should settle valuation on their own. An effective way to accomplish this is to first agree on who will conduct the appraisal. Next, if one or both parties objects to the appraisal amount, a second appraisal can be done. The parties can either agree to average the two amounts, pick one of them or decide to get a third appraisal. If there is a third appraisal, said appraiser will typically be selected by the other 2 appraisers. Undertaking this process is usually preferable to leaving it to a judge and risking a judicial sale or prolonged litigation.

If you are considering divorce, it is important to have experienced legal and financial advisors to ensure financial issues are resolved effectively. Contact us to discuss how we can help you achieve the best result in your matter.

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