If you’re a collector, you may have to divide the value of your collection in your divorce. Whether it’s wine, coins, stamps, trading cards or other valuables, your collection could be considered part of the community estate. Even if you bought most of your collection before the marriage, any increase in its value could be considered community property to be divided.
Be aware that not all collections are considered investments. To know whether your collection is considered an investment, you will need to find a way to estimate its value – and that can take some effort.
How is the value of a collection determined?
The first thing to consider when determining the divisible value of a collection is whether or not it is insured. If you could not get insurance for your collection, its value may be speculative.
Don’t assume the insurance value is your final number. Insurance valuations are generally based on replacement value, not fair market value.
The second thing to consider is that there are specialty indexes tracking the value of some more common collectibles. The index Liv-ex tracks the value of wines, for example, while the PWCC 500 indexes the most popular trading cards. See if there is an index that tracks your type of collectible.
Third, you could bring in a certified appraiser for any type of collectible. An appraiser who specializes in collections like yours will consider issues such as the initial cost, the quality of the pieces and what comparable collections have sold for recently.
A fourth consideration is whether you would be able to find a ready buyer if you actually wanted to sell the collection. The fair market value may be lower if there are no ready buyers.
The last thing to consider is that any sale of your collection would be taxed. Assuming you’ve held the items for a year or more, collectibles are generally taxed at a special capital gains rate of 28%.
Taking volatility into account
The value of collectibles is quite volatile, and you should take this volatility into account in your divorce agreement.
For example, if you believe the value of your collection is rising or falling, you may obtain a valuation now and then agree with your divorcing spouse that you should obtain a second valuation closer to the finalization of the divorce. You can agree to accept the second valuation as final, or you could agree to take an average of the two numbers.
Your divorce attorney can help you obtain a valuation and then apply it to the divisible portion of your collection.