Valuable Household Assets

When a couple splits up, they usually need to divide up shared property, including their household items. While there is rarely cause to fight over cutlery and clothing, some personal property is valuable enough that it needs to be considered as a marital asset. Assets such as antiques, art, fine jewelry, and vehicles can form a part of the asset pool for division in a property settlement. The Family Law Act 1975 establishes the process for identifying and valuing valuable household assets, and provides guidance about how such assets should be divided at the end of a relationship.

Dividing household assets

The Federal Circuit and Family Court of Australia and the Family Court of Western Australia are responsible for making property orders for former couples who cannot agree on how to divide their property. Although this is an important aspect of family law proceedings, the courts are generally reluctant to become involved in the allocation of household and personal belongings. Former couples are encouraged to reach a private agreement over these domestic items, especially as the cost of litigating any disagreement is likely to outstrip the value of the objects themselves. As the courts assess furniture and household contents on their second-hand value (rather than, say, the insurance value), the contents value of most Australian homes is less than $10,000. The cost of drawn-out litigation could far exceed this amount. If the parties have trouble agreeing, they will be encouraged to use low-cost mediation. As a last resort, when there is no hope of settling matters amicably, the courts may order all household items should be sold and the profits divided equally between the parties.

However, the situation is slightly different when the household items have significant monetary value, such as valuable antique furniture and art. In such cases, the court may include these items in the asset pool for division using the standard five-step process.

Five-step process

The first step in a property settlement is to identify and value all of the assets and liabilities of the relationship, including assets held jointly and solely by one individual. This usually excludes household items, which are not considered to be sufficiently valuable to warrant inclusion in the common property pool.

The next step is for the courts to determine whether the current asset distribution is just and equitable. That is, whether it would be fair if each person merely took their own property from the relationship and divided joint property according to their current ownership percentage. In most cases, the status quo would not be just or equitable. In some relationships, for instance, one party holds all the assets in their name, even though both parties have contributed to the acquisition and upkeep of the property. In cases where it would not be fair to leave the situation as it currently stands, then the court will go through the remaining steps to determine an equitable and just distribution. This approach usually involves the transfer of property from one party to the other, or the sale of assets so the value can be divided between the parties. How the former couple’s assets are divided depends on the type of item and the overall property settlement. For instance, certain assets may be allocated to one party, with an adjustment to the balance in terms of cash or property to the other party. Alternatively, if both parties are claiming ownership, the courts may order the item to be sold, and the proceeds divided equitably.

To determine how this redistribution should occur, the court will explore each person’s individual contributions to obtaining and maintaining those assets, as well as each person’s future financial needs.

What are valuable household assets?

Valuable household assets are items that have significant monetary value, such as designer furniture, collectable antiques, original artwork, fine jewelry and watches, and high-end electronics.

As identified above, it is necessary to identify assets and assign a value, before determining what should happen to each item. It is not unusual for allegations to arise that valuable items are being hidden or sold without consent. Both parties are legally required to make full and truthful disclosure of all assets, including household and personal items of notable value. Failing to disclose or undervalue these items can lead to serious penalties. An experienced legal team will have strategies to address a spouse’s non-compliance with disclosure of assets.

Once all assets have been identified, the next step is to determine their value. Again, this will be the ‘market value’ of the item, which is the price a willing (but not anxious) seller would accept from a willing (but not anxious) buyer (as established by the High Court case Spencer v Commonwealth in 1907). This is usually a straightforward process when valuing items that have direct market comparisons, such as houses and cars, but pinning down the value of a specialty item can be more complex. Disputes frequently arise over the accuracy of valuations provided by industry experts, particularly if the item is rare or unique, because two different experts may put forward very different valuations for the same item. To avoid this scenario, the two parties should agree to a single valuer and agree to accept their impartial judgment. In addition to providing a valuation report, this expert should be prepared to provide an affidavit to the courts and may even be asked to testify in person.

Sentimental vs actual value

A common complaint about taking a market-value approach to household assets is that these items often also carry sentimental value. If one party has a sentimental attachment to an item, they may be distraught at the prospect that they will lose ownership to the other party, or that it will be sold and the profits divided. The courts have made exceptions in the past for items of great personal significance, such as heirlooms, and allowed the party with attachment to keep the item. However, this is only likely if the parties can still come to an equitable settlement using other marital assets.

When valuable household assets are at stake in a property settlement, there are steps to take to ensure that there is a fair and equitable division of property. Call Go To Court Lawyers on 1300 636 846 for more advice on how to hang on to valuable household assets or assistance with finding hidden assets. Contact our offices for more information on any family law matter.