Divorce lawyers typically define a “high-net-worth couple” as one that has a million or more dollars in liquid assets. In these types of divorces, there are challenges and complications that don’t usually arise in divorces of people with lesser assets. Typically, the financial issues are complex, with a variety of properties, businesses, stocks, and other assets to be appraised and divided. A Bethesda alimony attorney can ensure that you get what you’re entitled to in a high-net-worth divorce.
Regardless of the value of your assets, all divorcing couples must follow the same basic format. In most jurisdictions, these are the first steps that you take:
- Put together a list of all assets owned by each spouse individually and the household together;
- Determine the value of such assets;
- Determine whether the assets are marital, separate, or something else;
- Identify the third-party responsibilities, such as child support, that the parties will have
- Identity whether another party has claims to any of the marital assets;
- For the assets that both spouses have a claim to, divide those assets as equally as possible.
Complicating Issues in a High-Net-Worth Divorce
The Complications of a Trust
Significant amounts of a high-net-worth couple’s assets are typically tied up in trust. In some cases, these trusts may be offshore. In cases where a spouse does not have an interest in or access to the other spouse’s trust, that spouse will want to argue that the trust is a financial resource that should be evaluated. Obtaining information about a trust can often be difficult – this is particularly true of an offshore account.
Wealthy families often share joint and inter-generational financial interests. This is especially true when long-established trusts or other sources of family wealth are involved. Sometimes, children, siblings or others may have a direct financial stake in the outcome of someone’s divorce. More significantly, sometimes they have a direct legal claim to the disputed assets. This can make the divorce more complex by introducing new parties and new questions of ownership.
What to Do With a Family Business?
If you and your spouse own a business, there is an added set of complications in figuring out your divorce details. It’s difficult to value a business and sometimes equally as hard to find liquidity for a buy-out. In most cases, there are three scenarios for how to deal with a business interest in a high-net-worth divorce: a buyout, a sale or co-ownership.
On balance, most couples prefer a buyout because it results in a clean break so the ex-spouses aren’t in business together. But in an unstable economy, valuation can be difficult. And equalization is hard because often it’s the largest asset a family has, so there may not be adequate assets to award the other spouse in exchange for the business.
A second option is the sale of the business. In addition to the problems of valuation, this is often emotionally difficult for both parties as they have been growing their business for many years.
Co-ownership is the third option, though fraught with peril. The major challenge is how to structure the co-ownership of a business interest. In most cases, co-ownership is a temporary measure that will be in place only until a sale or buyout can be arranged or until there’s enough cash to equalize the other spouse’s interest. Often it makes sense to build a purchase option into a co-ownership agreement so there will ultimately be a way to make a final disposition of the business.
Managing Jurisdictional Questions
High-net-worth households tend to have assets across numerous states. Such a couple will often hold money and own land and investments located in different states or even different countries. This creates problems because divorce is highly jurisdiction specific. Each new state and country potentially introduces an entirely new divorce code to the proceeding, multiplying the complexity.
Note that this is not an exhaustive list of the complications and challenges that can arise in a high-net-worth divorce. Every high-net-worth divorce is potentially much more challenging than a divorce of couples with lesser assets, not from an emotional perspective but rather from an asset valuation and division perspective.
Helpful Thoughts As You Navigate Your High-Net-Worth Divorce
Here are a couple of points to keep in mind as you and your lawyer navigate your high-net-worth divorce:
Don’t panic if you don’t have a prenuptial agreement. Some very rich people don’t or didn’t have one, including Bill and Melissa Gates. But they were able to get to a fair and reasonable settlement through divorce mediation. When you pursue a high-net-worth divorce through the courts, you relinquish control of the terms of your settlement and leave it in the hands of a family law judge.
Don’t fail to disclose your assets. During the discovery process, you will disclose your net worth, assets, and debts to provide a complete financial picture to the judge or mediator. Failing to fully disclose these items can result in serious legal and financial repercussions. And note that it typically won’t take long for a forensic accountant to uncover them.
Recognize that alimony and child support are more expensive in a high-net-worth divorce. In the United States, all states have guidelines for child support, but they are difficult to apply to high-income earners or self-employed people. In regard to alimony, one or both parties may believe they are still entitled to live in the same manner to which they had become accustomed, even though that lifestyle may not be possible once divorced.
Schedule a Free Consultation with a Bethesda Alimony Attorney Today
Because high-net-worth couples have more assets to divide, the process takes longer and involves more decisions. Every day that a divorce continues, it creates opportunities for conflict. If you would like legal guidance with your high-net-worth divorce, schedule a free initial divorce consultation with Brandon Bernstein at 240-395-1418, or TELL US HOW WE CAN HELP ONLINE.