High-asset or high net worth divorces have historically been those in which more than $1 million in liquid assets are involved. Given the skyrocketing values of property in recent years, simply owning a modest home in certain cities may be enough to technically qualify as a high-asset divorce. However, the typical high-asset divorce today involves multi-million-dollar property ownership.
The issues in a high-asset divorce are the same as in any divorce. Property and debts must be divided, alimony may be considered, and where children are involved, child support, custody, and visitation need to be addressed. The issue that usually makes high asset divorces more difficult, costly, and time-consuming is property division.
Spouses in high net worth divorces may own multiple properties or businesses, have investments, intellectual property, stocks, retirement accounts, and valuable items of personal property such as artwork, furniture, jewelry, and vehicles. There may be issues involving deferred compensation, stock voting rights, and real estate or business partnerships that can prove difficult to sort out.
Unless there is a prenuptial or postnuptial agreement in place, identifying, valuing, and dividing property can become complicated and often requires the assistance of multiple professionals.
As with any divorce, the first task when dealing with property is to identify what is separate and what is marital property. Whether state law employs a community property or equitable distribution scheme for property division, items determined to be separate property stay with the person who owns them. Marital property is then split close to 50/50 in community property states. In states that employ equitable distribution, marital property is to be divided fairly which does not necessarily mean equally.
Issues relating to alimony or spousal support cannot effectively be addressed until property division is worked out. The amount of alimony or whether it should be provided at all requires examining what each spouse’s financial situation will look like after the divorce.
Problems arise if one spouse’s separate property has been used to purchase or improve marital property or if separate property funds have been commingled with marital assets. Determining what remains separate and what has become community property presents the same challenge as any other divorce. However, because there is usually much more property in high-asset divorces, the process usually takes more time.
High-asset divorces are usually more costly. Both spouses need experienced attorneys who have handled high net worth divorces before. Multiple professionals will likely have to be retained to appraise property, provide financial and tax planning guidance, and determine values for business holdings and retirement accounts. Unless spouses can agree to accept and use the results of a specific professional, each spouse will need to hire his or her own professionals, further increasing divorce costs.
High-asset divorces typically take far more time to resolve. This is generally due to the amount and type of property that must be evaluated and the need for consultation with financial and tax planning specialists.
High-asset divorces often create greater frustrations for the spouses. This results from a combination of higher costs, a lengthier process and difficulties reaching an agreement that will resolve the case short of trial.
High-asset divorces often attract more publicity. If one or both spouses are celebrities or well known in the government, business, entertainment, or sports communities, the announcement of divorce will often attract media attention. This is the last thing most spouses desire.
Despite these challenges, there are positive actions that can help to resolve a high-asset divorce and reduce the stress that accompanies it.
Hire an attorney with experience handling high-asset divorces. Such an attorney will likely know how to minimize publicity. The attorney should have a list of trusted professionals employed in past divorces who can quickly be called upon to assist. Based on experience, the attorney may be able to resolve disputes through mediation or negotiation and significantly reduce the cost of litigation.
Make a list of all property. If you know a divorce is coming, copy documents related to each item that may indicate value, purchase price, or other important details. Identify items that were obtained as a gift or by inheritance, as those items are usually considered separate property. Identify which items you hope to keep following the divorce.
Don’t hide assets. Failing to disclose property that is later discovered will damage your credibility with your spouse and the court. Settlement may prove more difficult, and costs may substantially increase if a forensic accountant has to be hired to determine whether there may be any other undisclosed property.
Think outside the box. Craft creative settlement proposals and be open to creative offers. Work closely with financial and tax advisors to understand the long-term implications of retaining specific property, then brainstorm approaches that will reduce your financial liability while still obtaining a fair share of available property.
Try to maintain a positive relationship with your spouse. Seeking revenge can be financially and emotionally draining. While you may be angry or resent the situation, treating divorce as a business transaction may streamline the process in the long run. Look for solutions that address common interests and benefit both parties.
Be realistic. Understand the property distribution scheme followed in the state. If you understand how a judge will view the situation and what the likely result will be if the divorce is settled by trial, that knowledge may help keep you focused on finding ways to resolve the case short of trial.
Be patient. Realize the process is going to take some time. Do not be in a rush to settle or make snap judgments based on emotion. Being in a hurry to get the divorce over with may risk losing valuable property or incurring financial liabilities that can prove burdensome. Treat the divorce as a business transaction. Remain calm, be informed and work with your professionals to craft a strategy to follow in negotiation or mediation.
Going through a divorce is rarely a pleasant experience. However, it can be made less stressful and often less costly if you have experienced, trusted professionals assisting you. Begin by finding an attorney with a reputation for successfully resolving high asset divorces. Choosing the right professionals and maintaining a positive relationship with your spouse during the process will go a long way toward ultimately achieving a favorable result. If you have a high asset divorce call Peter Van Aulen, Esq. at (201) 845-7400.