Home Finance The Macklowe divorce: How designer divorces have created a new arena for luxury assets

The Macklowe divorce: How designer divorces have created a new arena for luxury assets

by jcp
gawdo

By: Estella Newbold-Brown is a partner at Stowe Family Law

The rising value of luxury goods has led to an influx of couples arguing over designer handbags, watches and shoes, says Estella Newbold-Brown family law partner at Stowe Family Law, adding to the traditional pressure points of cars, art and antiques in divorce settlement negotiations for the wealthy.   

A substantial collection of artworks has recently made history as the most expensive art collection ever to sell at auction, breaking the $832 million set by David Rockefeller and his wife Peggy when they sold off their collection for charity in 2018.

On 16 May 2022, Sotheby’s saw the final tranche of Harry Macklowe and his ex-wife Linda Burg’s hefty trove auctioned off, raking in $246.1 million for 30 pieces. A grand total of $922 million was made by the full collection, as a selection was also auctioned in November 2021, setting a record of $676 million for 35 pieces – the most valuable Sotheby’s auction in its 277-year history.

This auction has ended one of the bitterest ‘designer divorces’, which has been an ongoing feud since 2018. Harry and Linda Macklowe split four years ago and have been battling over the value of their artworks ever since. The collection, amassed over five decades, has been divided among other collectors, and the Macklowe divorce has now finally been brought to a close.

It is not unusual to see celebrities fighting over their assets in a divorce, and the battle can be worsened by the role the media plays in these scenarios.

However, what has come to be termed ‘handbag divorces’ is no longer the realm of the super-wealthy. With the soaring price of luxury goods (particularly handbags over the pandemic), these seemingly lesser assets have taken centre stage in many divorce proceedings.

Items like handbags, designer watches and shoes are becoming some of the most hotly contested pieces in a divorce, rivalling the family home and pension pots.

Art collections can certainly be central, as proved by the Macklowe divorce. Harry and Linda’s divorce involved serious disputes on the value of jewellery, cars and their yacht. However, they were unable to settle the argument over the valuation of the art collection, leading to its being auctioned at Sotheby’s.

Another key example of this type of designer divorce was international model Christina Estrada, who battled with her ex-husband Sheikh Walid Juffali over a £3 million diamond ring which had mysteriously disappeared by the time the couple split in 2016. Juffali admitted giving the ring to someone else, and Estrada was eventually awarded a £75-million divorce settlement.

Although these kinds of designer divorces are not necessarily a new phenomenon among the super-wealthy, their existence on a smaller scale is growing.

In divorce proceedings, obtaining a financial settlement is an essential part of the process. Within this, the parties should declare all assets and debts, including any items worth £500 or more. With prices of luxury goods continuing to rise, many designer products easily break this minimum.

When a couple disputes the value of a collection of items, or even a single item worth hundreds of thousands of pounds, expert opinion is usually required to assess the true worth.

There are increasing cases of couples fighting over their favourite handbags, which is putting pressure on family courts. This can be particularly acrimonious in the case of gifts between parties during the marriage. For example, should a husband gift his wife a Chanel bag for a birthday or Christmas, the wife may consider this her legal property when it comes to the divorce.

However, the law is clear on this subject, and any gifts exchanged between the couple throughout the marriage are considered matrimonial property. This means they are added to the joint pot, as with Estrada’s £3-million diamond ring.

It may not seem obvious in a particularly hostile divorce, but such items can hold real sentimental value, which can surface bitterly during a divorce, leading to elongated proceedings, adding pressure and expenses to the couple and the court.

Gifts given for milestones in the marriage, like a special anniversary, can hold a lot of emotion and take precedence over assets that seem more abstract, such as pensions.

One of the most important questions here is can anything be done to mitigate the risk of a lengthy court battle over luxury goods?

Prenups

By putting in place a prenuptial agreement before the marriage, some of the most hotly contested elements of a divorce can be avoided, or at least softened. A prenup is not legally binding in England and Wales, as it is in the United States. However, if properly put together, it can hold significant weight in court.

Although many still imagine the prenup to be confined to the realm of celebrity and super-rich, family lawyers, like us at Stowe Family Law, are seeing a real increase in couples seeking legal advice on prenuptial agreements at all levels of wealth.

However, the prenup must follow a particular set of criteria if it is to be upheld in the court. Each party should seek independent legal advice, and the prenup should be signed by both willingly, with no pressure between the couple or external sources. The prenup should fully disclose all the assets from each side, it should be signed well in advance of the wedding and it should be fair.

It is highly recommended that any prenup is reviewed and amended throughout the duration of the marriage, particularly if there is significant change in assets, or upon the birth of any children. This can help alleviate any difficulties if the marriage breakdowns and divorce proceedings are initiated.

By having a prenup in place from the beginning of the marriage, each party protects their individual and joint assets. Down the line, this can prevent a handbag divorce, helping ease the process and emotional damage on the couple, and lessening stress on the court.

The Macklowe divorce is a key example of where a prenuptial agreement would have been useful. The couple did not have a prenup when they got married, which led to a bitter divorce termed ‘novel-worthy’.

The bigger picture

Given the emotional connection to these types of belongings, it is easy for people to lose sight of the bigger picture and ignore other marital assets, including pensions and property. A decision that can have far-reaching repercussions.

And, whilst it is understandable to want to keep luxury accessories, the most important focus should be on understanding and planning for as comfortable and financially secure life as possible after divorce.

Estella Newbold-Brown is a partner at Stowe Family Law

www.gawdo.com

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