Valuable Household Assets
When a de facto or married couple separates, the assets of the relationship must be divided in a property settlement in accordance with the Family Law Act 1975. The courts have broad powers under this legislation to divide the asset pool in a fair and equitable way given the particular circumstances of the separating couple. The asset pool includes all the property of the couple, including any valuable household assets that were located in the family home. This article outlines what valuable household assets are considered by the courts and examines the way the court distributes these assets during property settlements.
Dividing Normal Household Assets
The Federal Circuit and Family Court (FCFCA) are typically loath to become involved in the distribution of household and personal items. It is highly recommended that the two parties try to reach an agreement over the division of these assets, especially as the cost of litigating will often exceed the value of the average household items. As the court assesses ‘furniture and contents’ on a second-hand market value, instead of the insurance value, the total worth of the contents of a home (excluding collections and antiques) in Australia is rarely valued at more than $10,000.
The court will often encourage the parties to resolve the problem with a ‘two list’ approach, where one party to the relationship drafts two different lists of assets and the other party chooses one of the lists. If there is no possibility of agreement, as a last resort the court may order that all household items are sold, and the profits divided between the parties.
Dividing Valuable Household Assets
For property settlements involving valuable household assets, such a valuable art or furniture, these items may be included in the asset pool and divided according to the standard family court five-step test. Courts calculate property settlements by determining the total assets and liabilities of the relationship, the previous contributions and future needs of each party, and whether the asset distribution is just and equitable. The first step of this process, when the assets of the couple are identified and assigned value, includes not only assets held jointly but also those that are the property of only one party.
Dividing Valuable Household Assets of Long Term Relationships
In shorter relationships, the court will often take more notice of the initial contributions of the couple, including who originally purchased individual assets. The court may also make a ruling that a particular item is clearly a belonging of one of the parties, such as a gift or inheritance.
These factors are significantly less important when the relationship has been long term. In a long-term relationship, there is an assumption that there has been a full merger of assets, and consequently, the court will see the asset pool as shared property.
Valuation for Family Law Proceedings
The first step in the property settlement test is to identify and value the assets of the relationship. Household assets are assessed at market value. The meaning of ‘market value’ was established in a High Court 1907 case Spencer v Commonwealth as the price that a willing but not anxious seller would accept from a willing but not anxious buyer.
If there is disagreement over the value of an item, the parties may submit assessments from qualified valuers. Where practical, the two parties are encouraged to decide on a single valuer and agree to accept the impartial judgment, which will save considerably on fees, and streamline the process of the court accepting the valuation. The valuer must provide an affidavit to the court in addition to their valuation report, and may be called on to testify in court. Armstrong Legal can help to make enquiries of expert valuers.
Valuable Household Assets: Furniture
During a property settlement, household furniture is not generally viewed as valuable household assets, and certainly, the court does not value regular furniture highly. Apart from antique furniture, which may attract a higher market value, the other type of valuable household asset is designer furniture. There are furniture brands, such as Herman Miller, that sell for tens of thousands of dollars and largely hold their value on the second-hand market.
In a recent family law proceeding, the court decided that each spouse should retain the assets already in their possession, which meant that the wife could hold on to several Persian carpets that were located in the former marital home where she was residing. The husband in the case appealed the judgment on the grounds that the judge had not considered the value of the carpets in the property settlement. The appeals court found that if a party wants to include valuable furniture in a property settlement, then the onus is on them to present evidence to the court pertaining to the valuation of the asset. In this case, the husband had not done so during the first trial, and the appeal was dismissed.
Valuable Household Assets: Collectables
A collectable is any item that is worth more than the original purchase price because of its popularity or its rarity. The value of a collectable is often predicated on the number of identical items there are available as well as the overall condition of the item. Popular categories of collectables include coins, stamps, toys, books and antiques.
When possible, former spouses should reach an agreement on the division of assets such as collectables. This may involve the collector retaining possession of the entire collection in return for the other party keeping assets of commensurate value, or the spouses dividing the collection equally between themselves, or the sale of the collection and division of the proceeds.
Valuable Household Assets: Designer Goods
Designer goods are another category of valuable household assets that may be included in the asset pool. Clothing, handbags, sunglasses, luggage and accessories in average households would not normally constitute high net worth assets, but when they are from brands like Louis Vuitton, Hermès and Gucci, they need to be considered because they may be valued, even on the second-hand market, higher than a luxury car. As such, separating couples should obtain independent valuations of designer items, and include these in the total asset pool for division.
If you have further questions about how valuable household assets are treated in property settlements or need advice about the division of assets after the dissolution of a relationship, please contact the Family Law team at Armstrong Legal on 1300 038 223 or email us to make an appointment.