The “Handbag Divorce”: Finding & Valuing Overlooked Luxury Assets In Divorce

During the divorce settlement process, spouses must make important decisions about how to divide their marital property. Most divorcing couples can immediately rattle off their most valuable marital assets, with the family home, retirement plan, and stock and business portfolios usually right at the top of the list. However, lurking in the back of a closet or tucked away in a storage tote could be another big ticket marital asset at risk for being overlooked. Do you or your spouse, or the client you’re working with, have a taste for the finer things, including pricey designer handbags?

Unlike most personal items that depreciate over time, designer handbags and other designer haute couture goods can end up being worth far more than their initial purchase price. Some vintage or rare Hermes Birkin bags, for example, are currently valued in the six - or even seven - figures.

As I wrote in a new article for the New Jersey Law Journal, "Personal Property and the Handbag Divorce: Who Gets the Birkin?," the challenge of a “handbag divorce” is making sure these types of high end personal items don’t get lowballed or end up completely missed during the asset division process. With expensive handbags still very much in style, here are some key takeaways for keeping up with this latest divorce trend.

What happens to personal items in divorce?

With few exceptions, most personal items acquired during marriage generally qualify as marital assets to be divided in divorce. In other words, every time you went shopping during your marriage and paid with your joint credit card, whatever personal items were purchased — from shoes and hats to handbags and jewelry – instantly became marital assets.

In some divorces, spouses often decide to forgo inventorying personal items and instead assign them “in bulk” (e.g., whatever is in your spouse’s closet is theirs, and what is your closet now belongs only to you.). The reasoning for this is that it’s just too tedious and pointless in most cases to take the time to assign values to second hand clothing that only has thrift shop or yard sale value. If your spouse has an expensive collection of high end goods, however, this approach could cause you to lose out on thousands in overlooked assets.

Even if your spouse’s designer collection doesn’t include a Crocodile Himalayan Birkin bag, valued at almost a half million dollars, their designer duds could still be worth a pretty penny. If your spouse owns multiple designer items purchased over time, there is a good chance that they have appreciated in value. Thanks to the pandemic, appreciation of some items soared over the past couple of years.

Designer items are not the only personal items with potentially high hidden value. Collections of coins, stamps or comic books can also be more valuable than they appear. Does your spouse play golf or a musical instrument? Some hobby accessories can be worth a lot too.

Rule of thumb: Before agreeing to any “bulk” assignment of personal goods, take time to inventory personal items

Do Some Detective Work

If you are planning to move out of the family home during your divorce, make take an inventory first of both what you are taking and what you are leaving behind. Be sure to check the garage, attic and basement for things you may have forgotten about. If your spouse is moving out, insist on examining everything they plan to take with them. Keep an eye out for things you might not immediately think of as valuable. If you are not a fashionista, you may not stop to consider the significance of a designer label. Names like “Gucci,” “Louboutin,” “Chanel,” “Rolex,” or “Yves St. Laurent” may ring a bell, but these are just the beginning. If a label sounds expensive, look it up. Sure, there are plenty of fakes, knockoffs, and fancy-sounding but cheap labels around, but don’t let that stop you from missing what could be the one diamond needle in the haystack.

If you are not a sports fan but your spouse owns autographed sports’ memorabilia, look up the athlete who signed the ball, bat or boxing gloves. The value of the memorabilia will be linked to the success and fame of the athlete. The same goes for certain autographed books, as well as some vintage, demo, or signed vinyl records.

The Difference Between Personal And Separate Property

People often confuse the words “personal” and “separate,” but these are different legal categories. “Personal property” generally includes not only personal effects, but also all other belongings except real estate. “Separate property” is any property, including real estate, that is not “marital property.”?

Property purchased during marriage, including gifts from one spouse to the other, is marital property, unless the source of funding was separate property. Property owned before marriage or acquired during marriage as an inheritance or a separate gift from a third party, is separate property. Separate property remains separate unless it is commingled (mixed in a way that cannot be disentangled) with marital property. NJSA 2A:34-23(h).

So, for example, if you gave your spouse an engagement ring before marriage, you no longer own it. But if you gave each other valuable items for birthday, Christmas or anniversaries after you were married, those technically belong to both of you, unless one of you used your own separate property for the purchase. If you owned a designer bag before marriage and after marriage you sold it for $5,000, ownership depends on what you did with the money. If you kept in in a separate account, it is still yours. If you put it into your joint checking account and spent it on joint expenses, it is not.

Sorting out what is separate property and what is marital property can be challenging. It is not enough to know when a purchase was made or a gift received, you need evidence. For purchases made after marriage, you also need to know the source of funds. If you are claiming that a gift you received from a third-party during marriage was intended only for you, and your spouse disagrees, you will need evidence for this as well. The person who claims that the item is separate property bears the burden of proof.?Painter v. Painter, 65 N.J. 196, 214 (1974).

Few people retain receipts, even for expensive items, years later. If this is the case, then other evidence can help. For example, you might have a dated photo of the item that shows you owned it prior to marriage, or you have a photo of you giving your spouse the item as a gift on a special occasion during your marriage.

Who keeps the Birkin??

In New Jersey, any items determined to be marital property must be distributed equitably, meaning fairly, but not necessarily equally under the state’s equitable distribution laws. Often when there is a collection to be divided, it will be in an estate sale or auction and the proceeds shared between spouses in a pre-arranged split.

However, what if you really want to keep that $50,000 designer collection intact? In that case, you might need to put $25,000 in your spouse’s column to balance it out, and you need to find that money somewhere else in the settlement. Do you really want to give up a $25K chunk of retirement savings in order to save your handbags? Avoid letting your emotional connection blind you to what you will need to live a comfortable life after divorce.

If you are not yet married, or if you are married but you are just realizing that you have significant separate property, you may want to consider a prenuptial agreement or a postnuptial agreement. Listing each other’s separate property in such an agreement will guard against having to make those difficult assessments if you do ever find yourself divorcing.

After all, fashions may come and go, but the “handbag divorce” is good proof that making sound decisions about asset division never goes out of style.

Read more about Handbag Divorce.