Divorce: what happens to my designer closet?

iStock-626234448-281340-edited“I like my money right where I can see it…hanging in my closet.”

Carrie Bradshaw’s iconic line in Sex in the City seems to have been vindicated in recent years, with ever-increasing auction records for clothes and accessories. Most recently, a diamond-encrusted, crocodile skin Hermès Birkin handbag sold for nearly £150,000 at Christy’s in Hong Kong. 

Even slightly less extravagant handbags are routinely sold at four or five-figure prices; a classic vintage Chanel ‘2.55’ bag will set you back around £5,000 in pristine condition, which is more than some new models.

It pays to be honest

It is clear that our wardrobes and shoe shelves have become ever more significant when considering our wealth. When going through a divorce, all valuable assets must be accounted for, whether that’s your VW Polo or your Prada purse collection and transparency really is the best policy in these situations; the Court will come down heavily and penalise deceitful and uncooperative parties for any misconduct or dishonesty.

A 2017 report suggested that an overburdened court system is increasingly likely to overlook personal possessions not worth a ‘major proportion’ of the couple’s wealth in divorce proceedings, due to strict time constraints. Furthermore, the Daily Mail recently reported on a case where a wife persuaded the courts to not take into account her collection of 25 Christmas baubles – worth an estimated £60 each.

Types of property

In the UK, there are two types of asset during a divorce: matrimonial and non-matrimonial property. Matrimonial property is anything that you or your partner may have bought during the course of your marriage and both parties have an equal claim to these. Whilst this obviously includes standard assets such as houses, cars and pensions, valuable ‘chattels’ such as watches, sports equipment, and collectables (including expensive, desirable clothing) are included too.

If you bought your Birkin before you got married, then this may be a slightly different situation, as this would be listed as a non-marital asset; an item you owned before the marriage started. You can ask for such items to be removed from any financial settlement, but the court may not always grant this – for instance if the marital assets alone don’t sufficiently provide for your ex-partner or any children that may be involved. 

Inheritance Tax

Your Personal Representatives or Executors are responsible for declaring what assets you have at the date of your death and making sure that any inheritance tax due is paid. Personal possessions are included and it is important that as well as valuing the obvious vase that has been in the family for years, items such as handbags, shoes, vintage clothes and the like are checked and an appropriate value ascribed to them.

Advice

It seems that Carrie Bradshaw was right and that clothes and accessories can be a great asset and a surprisingly canny investment; but also that, as such, they must be declared.