Part three: Gifts and Mutual Funds
Divorce or separation for a couple can be a drawn out affair, particularly when it comes to dividing loved assets. From property and investments, to valuables and keepsakes, all must be negotiated and agreed upon. But who has a right to a work of art can get complicated.
Max Meyer, special counsel with Pearson Emerson Meyer, and a family law specialist, has extensive experience in the settling of separations and divorces, both in court, and through negotiated agreements.
In the first two parts of this series we’ve covered the basics, from questions about who contributes more knowledge and money to an art collection – and whether those factors have any weight in a court’s determinations – to questions of taste, specialised art education, entrepreneurial skill, and even prenups. But what of gifts? If a work was given as a gift, how does that influence a court determining who gets the work of art… and if it was a gift to you should you get to keep it on top of your share of the property pool?
“It doesn’t have an impact in a court’s deliberations, except in that [the court] has to make an order that is fair,” says Meyer. “A gift will go into the property pool [the sum total of the couple’s property]. Any judge would be loath to make an order that it had to be sold or given to the party who didn’t receive the gift, if other property was available.”
Meyer explains that a judge will look at the total property pool when making decisions about individual items. “Let’s say you and I had a million-dollar apartment, and we were squabbling over a painting that was worth $50,000. You could easily get another $25,000 worth of credit out of [the split] of the million-dollar apartment.” So courts tend to favour the recipient of the gift in keeping it? “Other things being equal, yes, and you’d get extra credit if it’s a gift to you, even though you might not have paid for it.”
In the case of a joint purchase of a work of art, as Meyer told us in part one of this series, there are a range of determining factors including how long the relationship, and the collection, has been in existence, and who has made contributions to both, in terms of both money and expertise.
But what of works bought with mutual funds? “The answer to that can be quite complicated, but in essence, the answer is no – it doesn’t matter whether it came out of joint funds or a sperate bank account because, conceptually, the Family Court treats all funds as joint during the relationship.”
There is one exception. “It’s quite rare, but it does happen,” says Meyer. “And that’s where a couple have kept their finances utterly separate throughout their relationship, and they’ve never had joint bank accounts or owned things together, but always used their own incomes separately, and maintained their incomes separately. If in those circumstances one of them has bought artworks with his or her own income, then at the end of the day each party will walk away with what they’ve got because the court says, there’s nothing to it, they’ve both operated equally, and to make a fair outcome we don’t have to change anything.”