EAR: One for the Lawyers: Cigars and Divorce

[El Presidente]

EAR: Email Assistance Required. 

The following gent is in the US (Idaho). I suspect the law will differ depending on country and even state. 

Let us know how the law applies in your neck of the woods. FOH legal input most appreciated 

"I have no idea if you can help me but maybe you could ask on the forum. Rob, unfortunately my marriage has come to an end after 19 years and during that time I have been fortunate enough to have bought, aged, and put away a large selection of cigars. I would have valued the collection at $120K five years ago based on cost  but with the new pricing structure and box values, it would be north of $500K today.  Having lost my business during covid, there are not a lot of assets liquid or otherwise lying around. In terms of disclosure I am not sure whether to list my cigars at cost or current market value? Any advice would be welcome." 

 

[Çnote]

I'm not a lawyer. I'm fairly studied in TX divorce law.

An inventory is an asset. If you have an inventory, you have an asset. Assets are market value.

Unfortunately (in TX), any collection that your wife knows about that you amassed during the marriage is fair game to fight over. The best thing (in TX) would be to either liquidate the entirety of the collection for cash and give over half, or to negotiate a balance of an another asset that will go to her so that the cigar collection is off the table. A compromise solution aimed at keeping some cigars would probably cost more in legal hours than you can imagine. This is going to be exceedingly complicated as to the legality of the collection in the US. You -might- be able to say the collection is worth nothing as it's contraband; I don't recommend this strategy. Walk away from the loss and get top dollar.

I'm sorry.

Why is divorce expensive? Because it's worth it.

 

[JRB]

I live in Idaho, I can help with reducing your on hand assets.  

 

[NSXCIGAR]

26 minutes ago, Çnote said:

I'm not a lawyer. I'm fairly studied in TX divorce law.

I think I can guess how that came about...

[Çnote]

2 hours ago, NSXCIGAR said:

I think I can guess how that came about...

Ha. I know several divorce lawyers, was in the riptide of two, and yes, know things the hard way.

I do not have any paper list of my cigar collection, have no receipts, and offered to give them away in the divorce for custody considerations. I was told to keep them as they were not inventoried and had received a discrete percentage as gifts, so they we not considered communal property by several opinions. 

[Monterey]

3 hours ago, Çnote said:

The best thing (in TX) would be to either liquidate the entirety of the collection for cash and give over half, or to negotiate a balance of an another asset that will go to her so that the cigar collection is off the table.

But per US Law, this asset has no value.  The law is clear about selling Cuban products. 

This just sounds like a total mess.  Legally I would think you could only divide this up 50/50.   Having the cigars isn't contraband.  Over the past 5 years you could easily legally obtain and bring back cuban cigars. It is the selling of the cigars once owning them that is the problem

 

[Fuzz]

Take an inventory of her shoes, handbags and jewellery, then offer her a compromise, "You take the shoes, handbags and jewellery, I'll keep the cigars".

[Greenhorn2]

You can't sell them so there shouldn't be any monetary value, they are worthless.

[PuroDiario]

Getting creative here for fun as to deliver “fair market value” or to simply deliver some cash to bridge the situation (and assuming this person wanted to do so in which case you should consider time to realize the value of the collection, transaction and other costs, taxes(?), etc) I see an alternative …asset warehousing of sorts.  
 

buy collection from you for cash at cost, warehouse it for a pre-arranged term with pre agreed clauses for any time extension, then contractually bound to sell it back to you at pre-determined price (assume cost+whatever expenses+rate of annual interest). The annual interest can be a mix of implicit margin on repurchase and/or Paid in kind interest (cigars itself), agreement can contemplate time extensions or failure to repurchase…could be fun 

[SCgarman]

4 hours ago, Çnote said:

I'm not a lawyer. I'm fairly studied in TX divorce law.

An inventory is an asset. If you have an inventory, you have an asset. Assets are market value.

Unfortunately (in TX), any collection that your wife knows about that you amassed during the marriage is fair game to fight over. The best thing (in TX) would be to either liquidate the entirety of the collection for cash and give over half, or to negotiate a balance of an another asset that will go to her so that the cigar collection is off the table. A compromise solution aimed at keeping some cigars would probably cost more in legal hours than you can imagine. This is going to be exceedingly complicated as to the legality of the collection in the US. You -might- be able to say the collection is worth nothing as it's contraband; I don't recommend this strategy. Walk away from the loss and get top dollar.

I'm sorry.

Why is divorce expensive? Because it's worth it.

 

Technically anything of Cuban origin is considered contraband. FWIW, these types of threads seem to be appearing in more frequency than in the past. Unfortunate.

[NSXCIGAR]

3 hours ago, SCgarman said:

Technically anything of Cuban origin is considered contraband.

If it was brought to the US before Nov 2020 it may be legally possesed. Even before the Obama 2016 loosening US travellers were allowed to bring back $50 or $100 worth of Cuban goods during approved travels. No way to tell if any given box of cigars made prior to the Trump rollback was legally acquired. 

Still can't sell it however as any Cuban good would be for personal use only.

4 hours ago, Monterey said:

But per US Law, this asset has no value.  The law is clear about selling Cuban products. 

I seem to recall a thread specifically addressing this issue in the context of a divorce by a lawyer or two here. I'll see if I can find it. 

Found it:

Actually, disregard that. The thread I recall was actually in reference to determining the actual value of a cigar collection for insurance purposes and whether that's even possible which is a pertinent issue in the divorce context as well:

 

[anacostiakat]

11 hours ago, Fuzz said:

Take an inventory of her shoes, handbags and jewellery, then offer her a compromise, "You take the shoes, handbags and jewellery, I'll keep the cigars".

I like this strategy!  

[BrightonCorgi]

Sorry to read you are going through a divorce.

Divide the boxes between the two of you and make a fair low ball offer for the other half.  If that doesn't go over, do as other mentioned and inventory and divide her stuff in the same manner.

While you're trying to figure out how to deal the cigars, start smoking your best ones.

[MrBirdman]

12 hours ago, NSXCIGAR said:

Still can't sell it however as any Cuban good would be for personal use only.

What I’ve discovered is that for the purposes of estate taxes, the IRS includes the FMV of assets even if they cannot legally be sold (the precedent arising from a case involving a very valuable piece of art made with a bald eagle, which is illegal to sell in the US). Whether this would have any bearing on valuation for divorce is another matter. I expect it will come down to whether it’s raised and either the judge or state precedent on the matter.

Most divorces settle. My advice would be to include them at cost in a settlement and see if your spouse’s attorney raises it as an issue. Hopefully he/she isn’t a CC smoker. 

[MrBirdman]

16 hours ago, Monterey said:

But per US Law, this asset has no value.  The law is clear about selling Cuban products.

See above. At least for the IRS the inability to sell them is irrelevant for estate tax purposes. That would be persuasive authority for using the same rule in a divorce case. 

[LizardGizmo]

Maybe someone has a mid-2010s undated HSA price list for the emailer to base his FMV off of?

Given what we can assume from his collection, a lot of this stuff might not be available to price anywhere else. Hopefully they don't find BR in the process. 

[dominattorney]

4 hours ago, BrightonCorgi said:

Sorry to read you are going through a divorce.

Divide the boxes between the two of you and make a fair low ball offer for the other half.  If that doesn't go over, do as other mentioned and inventory and divide her stuff in the same manner.

While you're trying to figure out how to deal the cigars, start smoking your best ones.

I shudder to think of the consequences of giving legal advice on a cigar forum, but this seems like the smartest thing to do (from a purely personal strategic standpoint of course). Obviously the state precedent and law will control what is and is not an asset, and for better clarity on that front consult with a good local divorce lawyer, and maybe even an estate lawyer while you're at it. Estate lawyers are wonderful at questions like this, but they're a tight lipped, by the book bunch in my experience. Best way to get their advice is to lay a few hundred down and buy an hour or two of their time. 

[MrBirdman]

4 hours ago, BrightonCorgi said:

Divide the boxes between the two of you and make a fair low ball offer for the other half.

I can tell you that if I was opposing counsel I’d demand an accounting of estimated value for each box to ensure the division was equal. Might still end up being the best approach but perhaps not as simple as dividing the number of boxes by 2. 

[SCgarman]

5 minutes ago, MrBirdman said:

I can tell you that if I was opposing counsel I’d demand an accounting of estimated value for each box to ensure the division was equal. Might still end up being the best approach but perhaps not as simple as dividing the number of boxes by 2. 

How exactly would one do that? Where would you find a Cuban cigar specialist to determine value of a collection? As been said, Cuban origin products possessed in the usa may be "legal" for personal use, but not necessarily for sale to others for profit. 

[El Hoze]

I’ll tell a quick story. I was lucky enough to marry my first girlfriend ever, we got back together right after college. I was even luckier to divorce her within a year and a half while we were still young and relatively poor and were renters and didn’t have kids or even a dog. I did however have a disproportionate amount of my/our assets in high-end wine as we lived in San Francisco during the credit crisis and I loaded up on the 2007 cult cabs as an investment, was a no brainer. By 2011 when the lawyers got involved they were worth alot more than I paid for them. We had two cars, a Jeep Grand Cherokee and and BMW 3 series and the wine was worth significantly more than both cars combined. I spoke to her directly and said effectively you don’t really want to be left with this wine, take the cars, take whatever, but be reasonable. I am guessing she does not want the cigars. He does. Trade things he assigns a lower value to personally vs. her, or the market. I actually had a 2007 Harlan the other day and we laughed…I am lucky I got my wine back. I luckily get along great with my ex now, but when the lawyers get involved….man…tensions rise. Just try to be reasonable (easier said than done I know), cigars should be easy. Luckily at that point I was not into cigars, it was my now-wife and her dad who got me down that rabbit hole! She’ll go after them no doubt if I step out of line! LOL

[MrBirdman]

3 hours ago, SCgarman said:

How exactly would one do that? Where would you find a Cuban cigar specialist to determine value of a collection? As been said, Cuban origin products possessed in the usa may be "legal" for personal use, but not necessarily for sale to others for profit. 

Again, the local precedent (if any) would control and it could say anything. But the Feds at least think it’s entirely fine to use FMV of assets that can’t legally be sold (even for one offs like art). Don’t ask me how they valued a bald eagle-containing piece of art in the 7-figures, but they did!

If the parties can agree on an appraiser, then they can use anyone they want (even a certain forum host 😉) to determine the value of the lot. 

The other option is valuing them at cost (supported wherever possible with invoices/statements) and seeing if you’re called out on it. Again though, your jurisdiction may have rules about how to calculate value and deceiving the other party in violation of those rules isn’t wise. You could also try to make the argument that any increase in value can’t be realized and thus shouldn’t be included. Can’t say whether that will fly though.

In short, you’ll need to hire a divorce lawyer! Don’t do anything solely on the advice you get here. And do your best to settle - otherwise your cigars will be divided up by a stranger.

[SpecialK]

On 4/4/2023 at 6:50 AM, JRB said:

I live in Idaho, I can help with reducing your on hand assets. 

As do I,  very sorry to hear of your Divorce. 

[El Presidente]

4 hours ago, MrBirdman said:

 

If the parties can agree on an appraiser, then they can use anyone they want (even a certain forum host 😉) to determine the value of the lot. 

 

Brett......no need to add to my workload 

If your collection is predominantly Cuban, head to BR and click the advanced search feature at the bottom of the page. (Run a search for your cigar for sales over the last 12 months).  Half a day and you will have a fair value of a 100 box collection at roughly current market prices. There are near enough to 14000 sold parcels now in the data base. 

[Çnote]

7 minutes ago, El Presidente said:

If your collection is predominantly Cuban, head to BR and click the advanced search feature at the bottom of the page. (Run a search for your cigar for sales over the last 12 months).  Half a day and you will have a fair value of a 100 box collection at roughly current market prices. There are near enough to 14000 sold parcels now in the data base. 

How to be a Cuban cigar expert 101 w lab.

[Timothy556]

Sell the entire collection to a friend for $1. After the divorce papers are signed buy it back.