Divorce Attorney Scott J. Stadler

    • 28 MAR 15

    Special Considerations in a High Net-Worth Divorce

    High Net-Worth DivorceDivorce can be a complex matter in a person’s life. Between the property division, support arrangements, and possibly even child custody considerations, even the most typical of divorces can have life changing consequences. In a high-net divorce, however, there are special considerations that should be taken into account when going through the divorce process. Due to the amount of assets that can potentially be split between the parties, there is more chance of a decision being made that would hurt one or both parties. Some special considerations include the existence of any pre or post nuptial agreements, income calculation, and even the expenses of the case, to name a few.

    Pre or Post Nuptials

    While the existence of pre or post nuptials in a relationship is not too uncommon in marriages, in high net-worth divorces the existence of such an agreement could create severe complications. Remember, spouses can agree to divide property through either pre or post nuptials that the court might not be able to divide, or might divide property that was either undervalued or under-developed at the time of the agreement.

    Property Division

    An issue that is common among all divorces is that of property division. In a high net-worth divorce, however, it is likely that there is much more property to divide than in an average divorce. Property to consider includes, among other things:

    • Businesses
    • Real property
    • Retirement assets
    • Bank accounts
    • The marital home
    • Automobiles
    • Family pets
    • Antiques, works of art, or other forms of personal property

    Another consideration to take into account is the type of property division model your particular jurisdiction follows. There are two basic types of models in the U.S. The first is known as the community property model, which means that marital property is owned jointly and that upon divorce it will be split equally. The next model, which is the majority in the U.S. today, is the equitable distribution model. Under this model, marital property is divided based on equity or fairness. In either situation, however, the division will be based primarily on the dollar value of the assets, and can be circumvented by a separation agreement.

    Calculating Income

    In addition to the issue of property division is the issue of income valuation. Income valuation has major implications on various aspects of a divorce. Not only are spousal and child support determinations based on the income of the parties of a divorce, a person’s income can affect the equitable division of property, as well as the child custody determination. For example, in the issue of spousal support, the spouse paying support will need to provide enough financial support to help the other spouse maintain the same standard of living after divorce, based on guidelines provided by the court. (How child support is calculated)

    Adding in a child or children to the mix increases the amount necessary to reach an equitable balance. Furthermore, in high net-worth divorces, the combined income may exceed the guidelines of the court. In such a case, the court is generally allowed to increase the support amount as necessary. This concept of court action applies to both spousal support and child support.

    Children

    Support issues are not the only place where persons involved in high net-worth divorces need to be aware. There is also the matter of any children in the marriage. In this issue, the court will take a look at what is in the best interests of the child when making a custody determination. While ability to support the child financially is a factor, it is not solely indicative of what is in the best interests of the child. Parents should take a serious look at how much time they can realistically commit to caring for their child. Some factors the court will take into account include:

    • a parent’s ability to provide a stable, loving environment
    • prior relationship with the child
    • willingness to take on the child
    • the age of the child
    • the physical and mental health of each parent

    Expert Advice

    While you should see an experienced attorney in divorce situations to ensure that your interests are being protected, there are a number of additional experts that you should see to make the best possible determination based on the facts. Such experts include financial estate experts, accountants, and business valuation experts. For example, a financial advisor can assist parties to divide property by helping them better understand the assets in the marriage beyond their dollar valuation.

    Businesses

    In many high net-worth divorces, the issue of how a business is divided, if at all, can arise. Getting a valuation on your business is important, not only for property division purposes, but also for support purposes. A business valuation can give an idea of how much a party earns, or even how much a party is projected to earn.

    Disclosure of all Assets

    Documents submitted to the court, such as a statement of income, are made in penalty of perjury. If a party forgets to list an asset, or if a party intentionally misleads the court and other parties as to what is and isn’t available, then the court would be able to hold the party who concealed the assets responsible. This can be a special concern in high net-worth divorces, where there are plenty of assets that parties might not think about, or might wish to conceal from the opposing spouse.

    Overall Cost

    Finally, while it is vital to determine which assets are involved in the divorce, it is almost as important to keep in mind that the divorce process can turn out to be a costly one. A simple high net-worth divorce could prove to be very costly due to the necessity of expert valuations, attorney fees, and the overall length of the case. While it is important to protect your investments, it might not be worth all the fuss if you wind up spending more than you can afford to keep them.