It’s well-known that marital assets must be divided in a divorce. Homes, cars, businesses, investments, bank accounts, and art are significant items frequently addressed in a divorce. However, in recent years, closer attention has been paid to items couples may own that were previously ignored. With the rise in value of items such as handbags and designer clothing, the items in couples’ closets can have significant value and should be considered in a complex divorce.
Marital vs. Separate Assets
The first question in dividing assets in New York is determining what is a marital asset and what is a separate asset.
Separate assets include:
- Assets each spouse owned before the marriage and continued to own separately during the marriage
- Assets spouses received as gifts from third parties during the marriage
- Proceeds from lawsuits or settlements involving personal injury
- Inheritances received during marriage
- Assets designated as separate in a prenuptial or postnuptial agreement
Marital assets include any assets or items acquired by the couple during marriage. It may also include the increase in value of separate assets that occurred during marriage if the other spouse contributed to the upkeep or maintenance or growth of the asset (a repair to an expensive handbag would fall in this category).
Gifts that a couple gives to each other during marriage are marital property. This is an important point to keep in mind when considering the division of personal items such as clothing and accessories, which are often given as gifts in a marriage. Gifts received from people outside the marriage are separate assets, but gifts the couple gives each other remain marital assets.
Valuation of Marital Assets
Before assets can be distributed in a divorce, they must be valued. It is not uncommon in a divorce for the court to order each spouse to simply keep their own personal items such as clothing and accessories—in fact, that is the norm. Courts are not interested in valuing every suit or sweater in your closet. However, this approach is changing as many complex divorces include high-value accessories. It is not uncommon for a spouse in a high-profile divorce to have a significant handbag collection. Such a collection could be valued in the millions depending on the number and quality of the bags. A Chanel Classic handbag could be worth $8000. A crocodile Hermes bag encrusted with diamonds sold at auction for almost $400,000 in 2017.
Handbags are not the only high-value item in a closet. Gucci sells a diamond-encrusted belt priced at $250,000. An off-the-rack gown from Neiman Marcus could easily cost $10,000. Most high-profile divorces include closets full of designer clothing totaling hundreds of thousands of dollars. And while menswear can certainly be expensive (suits, watches, cufflinks, shoes), women are more likely to have hundreds of high-end gowns, dresses, shoes, boots, coats, and accessories reaching a high valuation.
While used clothing has a low resale value, vintage designer pieces can be sold at a premium, and a large collection of high-end designer items could be a very valuable collection.
If your spouse has a large collection of designer bags, shoes, accessories, or clothing, getting the entire collection valued is an important step in your divorce. If you are the spouse with such a collection, you will likely wish to downplay the value. Be aware that each spouse must make a full financial disclosure to each other and the court. Note that New York’s Net Worth Statement is the form that must be completed in the state, but it does not ask the litigant to value clothing or accessories specifically, so it is easy to see how this can be overlooked in valuing the marital estate.
Impact of High-Value Designer Items on a Divorce Distribution
If the court is aware of the presence of high-value designer items, their value will be included in the marital estate. The existence of tens or hundreds of thousands of dollars of clothing or accessories could significantly impact the distribution of assets. In most cases, the spouse who wears or uses those items would be granted them, but the other spouse would receive other assets of similar value as compensation.
The value of the designer items increases the total value of the marital estate, thus increasing the share each spouse will get. However, if the designer items were not considered by the court and not included in the valuation of the estate, the spouse who holds them would essentially keep them in an under-the-radar way. Their value would not be counted as part of their share of the marital assets, so they would end up with a higher share of the marital estate.
If you or your spouse owns valuable designer items, or you believe your spouse has such a collection and you are not certain, you should discuss this with your attorney.