A fine art: dealing with high value assets on divorce

Treasured artworks, antiques and heritage property assets must be disclosed by those seeking to resolve the division of their matrimonial finances when going through a divorce. Within financial remedy proceedings, each party is required to provide full and frank disclosure of all their assets, including high value pieces such as fine art, sculpture, furniture, jewellery, watches, silver and porcelain collections, and classic cars.

Possessions of this kind usually have a personal and sentimental value beyond their financial worth in real terms. They may have been collected over several generations, inherited, given to mark a significant occasion, used and enjoyed in the family home or, in the case of a piece by a well-known artist, perhaps even sent on temporary loan to a museum or exhibition for public display.

With any collection, complex legal structures may be in place for tax or other purposes which require careful consideration at the outset with your solicitor, so that they are properly dealt with in the settlement. For example, where artworks are legally owned by a trust vehicle or a company, and hang in the offices of the family company; when one party claims an interest in such artworks, the trust or company may need to be joined to the proceedings to establish whether that person is entitled to them or not.

Whatever the value of the overall pot, the general starting point for division is that the matrimonial assets (ie. those acquired during the marriage, such as the family home or paintings purchased jointly) should be divided equally.

Non-matrimonial assets (ie. those acquired before the marriage or after separation, such as a business, pension, share portfolio or indeed inherited art and heritage property) may be retained by one party, provided that the overall resources are sufficient to meet the needs of both parties and any children.

When deciding how to determine the fair division of the assets, the court has a duty to consider all the circumstances of the case and to take into account a range of specific statutory factors set out in Section 25 of the Matrimonial Causes Act 1973 (known as the Section 25 factors).

The Section 25 factors are:

• The income, earning capacity, property and other financial resources that each party has, or is likely to have in the foreseeable future, including anticipated future earning capacity.
• The financial needs, obligations and responsibilities that each has or is likely to have in the foreseeable future.
• The standard of living enjoyed by the family before the breakdown of the marriage.
• The age of each party and the duration of the marriage.
• Any physical or mental disability of either party.
• The contributions that each party has made, or is likely in the foreseeable future to make, to the welfare of the family, including any contribution by looking after the home or caring for the family.
• The conduct of each party, if the court considers that it would be unfair to disregard it.
• In the case of proceedings for divorce or nullity of marriage, the value of any benefit that one party will lose the chance of acquiring as a result of the dissolution or annulment of the marriage, as well as the loss of any benefits under a pension scheme.

Particular care must be taken in cases involving high value artworks, antiques and heritage property assets. Many cases are contentious and sadly do involve high conflict; as one judge recently put it, the parties may reach ‘gladiatorial combat’ over the fate of their art collection, where they can neither agree the value of the pieces nor who should ultimately receive them.

In order to determine the value of a collection, those involved would typically need to jointly instruct a specialist art and antiques expert to provide a formal valuation. Once the valuation has been obtained, it is for the parties to negotiate how to divide the artworks within the framework of the overall negotiations. They may decide on a 50:50 split by taking it in turns to select individual pieces, or they could each agree a specified inventory of items to achieve their half share.

However, one party may assert that they should keep the entirety of an art collection, for instance on the basis that it was inherited by them solely. They may also have convincing reasons to argue why the artworks should not be dispersed – if the collection has an intrinsic value or it can be demonstrated to be in the public interest that it remains intact.

If they cannot reach a settlement between themselves, the court will determine how the assets are to be divided. A judge may decide that the collection is a non-matrimonial asset and ring-fence the artworks from the divorce proceedings. In one recent case, it was held that the family art collection had been principally created by one party’s parents and should therefore be retained by them.

Alternatively, if a judge does consider the collection to be a matrimonial asset, they may be persuaded that it should remain with one party alone, simultaneously guaranteeing other assets of equivalent value to the other party, in order to achieve a fair outcome. Ultimately, a judge has the discretion to order that the collection is divided up between the parties or make an order for sale of the individual artworks with the proceeds being divided between them.

In such cases, as with the sale of any real property, it is in the interests of both parties to achieve the best possible price for the artworks, antiques and heritage property assets. Parties will need to take advice from specialist agents in the art world in relation to any sale. It is also important to carefully consider any potential tax or licencing implications arising from a sale.

London undoubtedly holds a pivotal position within the global art market, so those who choose London as the forum for their divorce and financial remedy proceedings may benefit from the expertise of art market professionals within this jurisdiction to resolve ancillary issues around an art collection, ultimately helping them to achieve a final settlement.

If you have the opportunity to plan ahead, a pre or post-nuptial agreement can be a practical way of protecting art, antiques and heritage property assets, to avoid the stress and uncertainty of negotiating who will keep them if you separate or divorce.