Divorcing Foreign Assets: Navigating Changing Exchange Rates
I recently came across an interesting appellate decision, Gazelle v. Gazelle, that highlights some of the complexities that can arise when divorcing spouses have assets overseas.
This case involved a long-term marriage between Ayca and Guy Gazelle. A major marital asset was real estate Ayca owned in Turkey that was inherited from her family. Not surprisingly, valuing these foreign properties in U.S. dollars became a key issue.
Both sides had the Turkish properties appraised back in 2016 and stipulated to certain exchange rates through October 2017. However, the case dragged on for years after that. During the lengthy trial, the Turkish lira started falling dramatically compared to the dollar.
Ayca asked the judge to take judicial notice of the updated exchange rates, but he declined. When the judge issued the divorce judgment in late 2020, he stuck with the 2016 appraised values in Turkish lira and converted them to dollars using the earlier exchange rates.
Ayca appealed, arguing this shortchanged her in the property division because the properties were worth much less in dollars by 2020 due to currency fluctuations. However, the Appeals Court affirmed. It noted that exchange rate drops don't necessarily correlate with decreases in the actual value of foreign assets measured in local currency.
This case teaches some important lessons for divorcing spouses with foreign assets:
Appraisals and exchange rates can become stale during prolonged litigation. The value of overseas property in dollars depends on both local market conditions and currency swings.
Don't assume a falling exchange rate means assets are worth less in dollars. Local inflation could offset currency declines. The total picture matters.
Consider asset division options like selling properties and splitting proceeds rather than assigning them at fixed, disputed values.
For spousal support, regularly adjust for exchange rate changes through modification reviews, not automatic self-adjusting orders.
When international assets are involved, divorce gets even more complicated. Hire an experienced attorney to help navigate the financial complexities.
Disclaimer: The content provided in this blog is for informational and educational purposes only. It should not be construed as legal advice and readers should not act upon any information provided without seeking professional legal counsel. The author does not guarantee the completeness or accuracy of the information provided. This blog is not intended to create an attorney-client relationship between the author and the reader.