WON'T SOMEBODY think of the wine? A couple is getting divorced, and the wine cellar becomes a battleground. Usually one of the parties is the wine person and has a vested interest in trying to minimize the cellar’s value, while the other party sees the wine collection as a cash equivalent and is urging a high valuation. Who is right, and how do you do the best for your client?
Basically, there are three ways to value wine: Marketable Cash Value (MCV), Fair Market Value (FMV), and Retail Replacement Value (RRV). MCV is most favorable to the party in a divorce who will be retaining the wine, while RRV favors the party seeking to place the highest value on the wine. FMV is in between.
- MARKETABLE CASH VALUE is the probable proceeds of a sale less the expenses incurred in selling the wine. The word “probable” is key, as there are factors such as timing and condition of the wine that could affect the sale price. For instance, a forced sale, poor condition of the wine or less than ideal storage conditions would be relevant considerations and could lower the value of the wine.
- FAIR MARKET VALUE is most commonly used for tax purposes and is the price at which the wine would change hands between a willing buyer and seller, neither being under any compulsion to buy or sell. Note the absence of compulsion for this valuation. That can significantly affect the outcome, so reference to any recent tax valuation can inflate the value, at least in one party’s eyes.
- RETAIL REPLACEMENT VALUE is what will always be claimed by the party who is not retaining the wine. This is the amount required to replace the wine with its precise equivalent and maintain the oenological marital standard of living. An expensive valuation indeed, and one that is usually used for insurance coverage.
So how to navigate these vinous waters? An American Appraisers Association certified appraiser—one compliant with Uniform Standards of Professional Appraisal Practice—who also possesses high level wine credentials and experience is a good place to start. Email me at email@example.com for more information.