Dividing personal property after a divorce
This category includes furniture, decorations, linens, and kitchen gadgets.
The underlying principle in this category is that after purchase, these types of items retain very little of their original value. However, their existence is necessary to live. This means that they have value that is not represented by their fair market value.
For example, assume that a couple has a drawer full of kitchen gadgets such as spatulas, peelers, and tongs. The fair market value of the entire drawer may not exceed ten dollars if they were sold at a yard sale. However, the cost to replace the items may exceed a hundred dollars. This difference is at the heart of the conflict over these types of assets.
Another example is a living room sofa. Assume that the sofa will cost $1,000 to replace. The fair market value of the sofa in the marital house is $50. If the wife is keeping the couch, she will claim that $50 is appropriate. If the husband takes the couch, the wife will contend that she has to replace the couch and in order to secure enough assets from the marital estate to effect the replacement she will argue that the couch should be valued at $1,000. The husband will argue back that the replacement value of the couch he is taking should be the value that a couch could be purchased for at a second hand store not the value of a new couch. These arguments can grow to significant proportions citing, for example, health concerns, safety of the children, and standard of living. The arguments can also stymie the progress of the divorce.
The economic standard of value for household goods is fair market value. Failure to stick to the standard can easily cause the divorce settlement to fail. However, there are means of solving this issue that do not require the application of any particular standard of value.
Valuation of household goods follows the same steps as other types of assets with an additional caveat. That is, the parties can agree on values for all of the household goods, they can research the values by referring to second hand stores or Internet sites, and they can actually have all of the household goods appraised by an independent authority. All of these steps are time consuming and arduous, and an actual appraisal can be expensive and out of proportion to the value of the items being appraised.
A far better solution is to divide the household goods by utility. For example, one person takes the linens from the master bedroom and the other person takes them from the guest bedroom. One party can take the every day dishes, and the other can take the dishes that are used on special occasions. This offset process avoids the necessity of valuing each and every asset and can be an extremely efficient method of resolving the problem.
This category covers campers, boats, all terrain vehicles, motorcycles, and snowmobiles.
It is typical that either the husband or the wife would want to keep these assets rather than have them sold and the proceeds divided. Consequently, valuation of the items for inclusion in the marital estate is necessary.
The methods and means of valuation follow that of automobiles. That is, value can be determined by agreement of the parties. If the parties cannot agree on a value, then reference to Internet information can be used to estimate a value. Many recreational vehicles have very large markets, and values can be readily assessed. The value of recreational vehicles can be significantly affected by damage or mechanical problems. As with automobiles, the cost of returning the equipment to reasonable condition is deducted before the amount is entered into the marital estate.
Finally, if the parties cannot agree, then a dealer can be asked for a value or an independent appraiser can be hired. The problems associated with dealers and appraisers are the same that are encountered with automobiles.
This category covers stamps, coins, precious metals, ceramics, jewelry, and art.
Collections are considered high risk areas in the construction of marital estates. This is because of the variables that are involved and the possibility of very high values. The variables include condition of the components (very important in coins) to what is currently popular. For example, the rage a number of years ago was Beanie Babies, with individual components selling for hundreds of dollars depending upon their perceived scarcity.
Another risk in this category is the confusion of purchase price with fair market value. Some collections which cost hundreds or thousands of dollars to amass may have little or no value on the open market. For example, some “collector plates” have been sold on a subscription basis. That is, every two or three months a subscriber would receive a plate at a cost of $50.00 each. No doubt subscribers would be led to believe that these items were retaining and actually gaining value. The truth was that the value of the collections tended to fade as production of identical plates soared into the hundreds of thousands or even millions.
The relative worthlessness of a collection may easily become an emotional issue during the course of a divorce. For example, in one situation a wife had been amassing collector plates for years. Valuation procedures revealed that the value of the collection was insufficient to cover the cost of delivering the collection to any purchaser. That is, it was cheaper to haul the collection to the local landfill than sell it. Since over $12,000 had been spent on the collection, the husband claimed that that amount should go into the marital estate on the wife’s side. The wife, totally chagrined by the situation, took every opportunity to attack the husband on everything he had ever bought during the course of the marriage and challenge every value that he proposed. The situation was mitigated by pointing out that the standard of value that is used in divorce is fair market value, and the purchase price of the plates was not relevant. It was also pointed out that not every investment succeeds. People can lose money collecting even when their intentions are the best and markets appear strong at the time of purchase.
Model ship building, stained glass production, sewing, wood crafting and numerous other leisure time activities fall into this category.
Hobbies are usually husband or wife specific. That is, it is unusual for a husband or wife to share a hobby, and it is unusual for a husband or wife to abandon a hobby willingly. Consequently, valuation of the hobby assets will be necessary for inclusion in the marital estate.
As in collecting, the problem in valuation is the confusion of purchase price with fair market value. Typically, hobbies are relatively expensive to get into, and the items purchased to conduct the activity do not retain their value.
For example, buying a stained glass inventory to get started is relatively costly. Finding someone to purchase the unused inventory may be very difficult. This example holds true for hobbies such as sewing and wood crafting. One approach is to offset the hobbies of the husband and wife. For example, the husband takes his photographic supplies and equipment, and the wife takes her sewing machines and cloth inventory, and, by agreement, the activities are excluded from the marital estate. However, this concept may not work because of highly disparate values of the activities or the presence of extremely expensive tools or equipment.
Tools and equipment
Trade tools are generally considered as part of business values and should be considered in that context. However, parties can invest significant funds in tools and equipment that are not associated with a trade or business.
The handling of tools for marital estate valuation purposes is generally dependent upon their value. Big ticket items may have readily identifiable markets and significant resale value.
For example, cabinet-quality table saws can sell for thousands of dollars and retain a significant portion of their value. However, smaller tools such as small electrics or hand tools generally do not have a significant residual value. This general theory can also be applied to other types of tools and equipment. The idea is to ferret out of the mass of personal property those items that can have a material effect on the value of the marital estate.
One approach is for a mediator to place an arbitrary value on items that will be reviewed. For example, a mediator can dictate a value of $1,000 to differentiate items that will be valued from those that will not. That is, anything that had a purchase price of over $1,000 will have valuation procedures applied; anything below that amount will not. If this meets with resistance from one or both of the parties, then the threshold can be reduced. The idea is to work on items that make a difference and avoid working on items that will not. Numerous low value items can also be lumped together for valuation purposes or to offset them. For example, the husband may agree that his wood inventory and small woodworking tools will be offset against the wife’s cloth inventory and miscellaneous sewing equipment.
Goods such as tennis rackets, golf clubs, and skis are treated much like tools. Just as some tools will retain value, so will some sporting equipment. There is also a correlation between the original purchase price of the equipment and its value for divorce purposes: The higher the original purchase price, the more likely it is that the equipment will have value for marital estate purposes.
Livestock refers to animals that are owned and/or bred to make money. Unless an animal has been making more money than it has been absorbing, it is a pet. Pets are animals that are owned to provide companionship or to share recreational activities with their owners such as the role filled by hunting dogs. Admittedly, animals can fill dual roles being both pets and livestock that earn money. However, what distinguishes pets in the division of marital estates and can cause significant problems is the emotional attachment that develops between owners and pets. The emotional attachment that owners can develop for their pets can actually rival those that owners develop in human to human relationships. Consequently, some care must be exercised in the disposition of the animals.
It is highly unlikely that pets will be sold as a process of the divorce. This means that a value may have to be placed on the animals for marital estate division purposes.
A dog with marketable skills (e.g. hunting or tracking) or has genetic lines favorable for breeding purposes may have a market value. This value can be determined by the processes employed to value any other asset. That is, the parties can agree on a value, reference can be made to trade magazines or Internet markets, or as a last resort, an individual knowledgeable in the field can be engaged to assess the value of an animal. However, in the vast majority of cases, the dollar value of pets is zero. In fact in most cases, the dollar value of pets is a negative number that will vary directly in proportion to the attachment that has developed between pet and owner. The more attachment owners have, the more they will spend to enhance and prolong the life of their pet.
Pets usually bond more with one individual in a family than equally to all family members, and that member is usually the one who feeds the pet. Allowing the pet to go with the person to whom it is bound will be less traumatic to the pet.
A relationship can also develop between children of the marriage and pets. For example, dogs may develop a littermate relationship with the children. Pets can also be instrumental in easing the transition from living in one household to living in two for the children. If the pet is allowed to accompany the children when they change residences, they will have a familiar constant in both households.