One of the lesser joys of the domestic practice is presiding over fights over personal property. My professional low point came twenty years ago while with another firm.  My opponent that day was my current law partner David Rasner.  In one afternoon we thought we settled a break up of a short term marriage where the couple had made a small fortune on the sale of their house. We were down to the personal property when both parties decided they could not each part with a particular hand held vacuum cleaner.  That dispute almost killed a deal to divide almost $200,000 in gains on their home sale.

Equally galling are fights over cars; especially old cars without any real useful future.  Folks love to park them in front of their separated spouse’s house and throw the keys in the mailbox.  Even better, cancel the insurance since the car is not really drivable anyway.

This game is fraught with peril.  The car is registered in both parties names and you park it in front of Evil Spouse’s apartment.  A child skateboarding nearby slams into the car or severely cuts himself while playing with the rusted fender. The kid’s lawyer asserts the car was in the lane of traffic or that the rusty fender was an attractive nuisance.  Who will have to hire the lawyer to defend you?  You will because the car has no insurance.

Second problem: One of the things the Motor Vehicle Financial Responsibility Law requires is that you buy something called first party benefits.  Essentially this is medical insurance for you if you have an accident.  You must buy this coverage in some amount and pay for it.  Most people don’t think about it because they have health insurance through employment.  But if you are unemployed, your first party benefits may be the only coverage you have.  And if you have a registered car that is uninsured in Pennsylvania, you lose your first party coverage even though you paid for it.  And it doesn’t matter that you were injured in a car that was insured.  The mere fact that you have an uninsured car is a forfeiture of your first party coverage.

The lesson is that car fights are expensive.  It costs lawyer fees in your divorce and could yield a property or personal injury claim for which you have no coverage.  Things like this can even make rich people poor in a hurry.

Jenice Armstrong of the Philadelphia Daily News wrote a column about Beth and Daniel Shak’s divorce. The Shaks divorce was finalized in 2009, but recently Mr. Shak filed a petition to enforce the parties’ settlement agreement and is seeking 65% of Mrs. Shak’s extensive (and expensive) shoe collection. Mr. Shak contends that this collection is an asset that was not disclosed as part of the parties’ property settlement agreement and that Mrs. Shak did not provide a “full and fair” disclosure of this collection nor did she list it in an inventory of her assets.

Continue Reading Expensive Shoe Collection Brings Divorced Couple Back to Court

Given the current economic climate, divorcing parties are more vigilant than ever about the value and disposition of their marital assets. This article discusses methods and concepts which will help divorcing parties streamline the process of dividing their marital personal property, or personalty, during a divorce. Personalty can mean anything from an apple corer to a Rolex. Basically, it’s the “stuff” you acquired during your marriage. 

While it is often the case that divorcing parties cannot agree on anything, let alone go through their home piece by piece and divvy up personal effects, to the extent you are able to divide your possessions amicably, you should.   The primary reasons you should be dividing your own property are twofold: first, no one will have a better understanding of your assets and their value to you than you will; second, you should not have to pay an attorney to argue about who is keeping the living room sofa. 

 

Get as much of a “head start” as you can on the division of personalty. By head start I do not mean taking the assets you want and hiding them, I mean you should familiarize yourself with the plausible means by which you can divide your asset and the concepts that will help you do so in a streamlined fashion. The following are points you should consider when you and your spouse are dividing personalty.

 

Make lists and take pictures of your personal assets: Lists and pictures are a comprehensive way of inventorying your assets. Having an inventory allows you and your spouse to review the assets available for distribution. Inventories also serve as a way for parties to understand what items you can agree on and which will be at issue. Pictures can be used to illustrate whether items have been moved, have gone missing, or were inadvertently omitted from a list.

 

Account for depreciation: It is often the case that parties utilize different “accounting methods” when reviewing the value of assets depending on which party receives the item. For instance, the party getting a five year old car will use the blue book value while trying at the same time to claim that the five year old sofa is worth the same amount it was the day it was purchased. 

 

Keep in mind that the majority of your possessions have depreciated significantly and account for that depreciation in your internal calculation of who is getting what value. While you may feel like you are not receiving as much you would like from some of your items, provided your “accounting method” is consistent, you do not stand to lose as much as you might fear by accepting that the purchase price is not necessarily the current value, your property division will go more smoothly and you and your spouse will not spend as much in attorneys fees.

 

Agree on what should be appraised: Items of significant value which cannot be agreed upon should be appraised. The caveat here is what items you and your spouse think need to be appraised, who bears the cost of the appraisal, and how an appraiser is chosen. 

Creating a “cut off” value or a rule will help you decide which items to have appraised. For instance, agree on a dollar amount and do not have items you think fall below that dollar amount appraised. Alternatively, you can use a rule to help you decide, such as “if it should have been, or was, individually insured, have it appraised.” Laying these ground rules should help you and your spouse prevent later squabbling over which assets should be appraised.

 

With regard to who will pay the appraiser and how he or she is picked, call your attorney. While you do not want to rack up your bill arguing about these issues, your attorney will have insight as to how appraisal costs should be divided and be able to provide you with the names of appropriate appraisers.

 

Create a valuation methodology: It is imperative that you bear in mind the potential difference in the replacement value of your assets and their actual resale value. While something might be insured for one amount, its “street value” may be another amount. If you are getting something appraised, find out both how much you could sell it for on the day it is appraised and how much replacing it would cost. While it seems these numbers should be the same, many times they are not. When you are accounting for how much an asset is “worth” to you, remember this distinction!

 

When you cannot agree, use a neutral mediator or arbitrator: Using a neutral third party will save you money, time and hassle. Rather than having both you and your spouse pay your attorneys to listen to you bicker back and forth about personalty, choose one party to simply make decisions regarding the division of assets. Make the arbitrator’s or mediator’s decision binding. By having a third-party make a binding decision, you are essentially giving that person the power to make decisions about your property. 

 

While you may not be happy with any or all of the mediator’s or arbitrator’s decisions this process is more expedient and less expensive than many alternatives. Binding mediation or arbitration will move the process along and will allow you to move on to other (more important) issues. This method also has the benefit of keeping the division of personalty out of the judicial system. Court fights about property tend to be very costly and annoy the Court. Also, it is common practice for Family Court Master’s and Judges to enter an Order for equitable distribution and give the parties (30) days to divide personalty or appeal to binding arbitration. Remember, you are better off deciding the outcome than letting someone else.

 

Know your motivation: In most cases, there are two primary motivating factors affecting parties’ behavior as they attempt to divide their personalty; emotion and economy. While both these factors will play a role in parties’ decisions, they cannot be allowed to overwhelm your decision-making. Moderating, or at least staying attuned to, your motivations is essential. An over-emotional or overly economic approach will cause parties problems and cost money.

 

An example of an overly emotional reaction would be one spouse attempting to claim every chair, seat, and sofa from the house. Sadly, this does happen. While the spouse that does this may feel temporarily vindicated by the knowledge that his or her ex-spouse will not be able to sit down comfortably until he or she buys some seats, this impractical approach ultimately fails. The spouse who was controlled by his or her emotions will most likely lack artwork, tables, a bed… you understand my point. 

 

By the same token, an overly economic motivation will also lead to failure. For instance, adamant refusal to negotiate with your spouse over an item because of its economic value without taking into account other significant factors will lead to a negotiations deadlock. 

 

Even if you cannot control your motivating factors, at least be aware of them! Being cognizant of your motivations will allow you to “step back” and consider whether fighting about a particular item will help or hurt you in the long run. If you can understand your spouse’s motivations regarding the division of assets you will have even greater negotiating success.

 

Finally, if you and your spouse are at odds about an item, ask yourself whether you will care, remember or replace that item in (6) months or a year. If the answer is “no” then give it up and move on to something that really matters to you.

 

Keeping in mind the above points will allow you to make better decisions about dividing your personalty. Good luck!

 

Although the Bible tells us we should not covet property, the plain truth is that we do and we spend lots of time acquiring what lawyers call personalty. Most of us like to own things and nothing makes us happier than to acquire things that are rare, handsome or both. When couples divorce it often happens that dividing the household contents becomes an enormous side show under the big top called equitable distribution of property. For those inclined to have such battles here is some free advice.

Most of what we own is pretty close to worthless. Buy a sofa for $2,000 and take it home. Put it on your front lawn and you might get $800 for it if it’s still wrapped in plastic. Let your kids jump up and down on it a few times and you can halve the price again. Want is appraised? Plan to spend $100-200 an hour so that you have something to fight about.

Having said that, there are valuable things in life. If there weren’t we would not be able to watch Antiques Roadshow on public television. Just about everyone owns a collectible piece of something. But we also tend to misunderstand value and just how volatile the market is.

The good news is that we are not alone. Even people who profess to be experts on personal property often are wildly wrong. This is especially true if the article in mind is rare or unique. The cleanest way to decide value is at public auction. But public auctions are useful but can have their own limitations.

Take the case of the two major auction houses: Christie’s and Sotheby’s. America’s finest collectibles whether tall case clocks or vintage wines are sold weekly by these houses. They have expert staffs to assist sellers in marketing the consigned items and in helping to determine the appropriate price at which an item will sell. Open their catalogues either in person or on line and they will give you an estimate of what any given item is expected to fetch based upon their century or more of experience.

Usually the pre-sale estimates are close to what the object sells for although in times like these you will see the range of possible sale prices broaden. But even the experts can be left dumbfounded on some of the lots. In January, 2007 Sotheby’s had its annual “big” sale of American Antiques. In January, 2007 one such lot was a New Hampshire tea table estimated to bring $7,000-10,000. It was knocked down at $36,000 even though it had been extensively restored. Also stunning was another New Hampshire piece; a fairly conventional bow front chest of drawers that was estimated by Sotheby’s to bring $3,000-5,000. The hammer did not fall until the piece reached $70,000 and that meant $84,000 by the time the auction house was paid. The surprise of the auction was a fairly important dressing table made for a prominent Philadelphia family in 1765. The estimate was not shabby at $300,000 to $600,000. Bidding stopped at just over $4.4 million. It’s not all uphill either. Another Philadelphia piece, a tilt top tea table was expected to fetch $15,000 to $30,000. The bidding never made it to $10,000 and the reserve was not met.

Chances are you don’t have much stuff of this caliber in your household. But the lesson is that appraisers are often as baffled as we are. If you are trying to figure out value, a good first step is to see what you can learn from Ebay by looking for items similar to yours. If you are an Antiques Roadshow fanatic listen carefully to when the appraiser says what an item could or would expect to obtain at auction and what they describe to be the insurance value. The difference is like that between wholesale and retail. A good portion of the buyers at auction are antique dealers. They don’t pay $5,000 for a piece of silver with the expectation of selling it for the same price. They pay $5,000, polish it, put it in a shop they rent, hire sales people to show it off and ask $12,000 for it while you are roaming through the shops in Carmel or Nantucket. That’s how they make their living. Unless you are willing to do what they do; don’t expect that something is “worth” what you see it for in a retail setting. These principles apply in the free market and in valuing assets in a divorce proceeding as well.