Divorce is never a simple process. Between the emotional toll of a split, and the legal and financial details that need to be worked out, it has an undeniable impact on anyone going through it. For couples with a higher net worth and more substantial financial assets at stake, ending a marriage can be even more challenging.
This discussion explains the challenges that often come with high net worth divorces and how they differ from typical divorces to help you make more informed decisions about your own situation.
What Is a High Asset Divorce?
First, it is important to clarify what is considered a high asset divorce. Generally, high asset or high net worth divorces involve more than $1 million in liquid assets. Those assets can be anything from property and business shares to overseas interests and family heirlooms. High net worth divorce often involves professional athletes, actors, entrepreneurs, and other public figures.
Considerations with a High Asset Divorce
Because there is more to lose with a high net worth divorce, they require more time, money, and legal manpower to resolve. Here are some of the major issues that come up in high asset splits.
Identifying assets. When a married couple separates or divorces, they have to account for and divide all of the “stuff” they either brought with them, accumulated, or helped to grow during the marriage. Obviously, wealthy couples have more assets to split.
The first step is to make a list of all the assets in question, including:
- Checking and savings accounts
- Assets held in a trust
- Businesses or professional practices
- Stock options
- Stock voting rights
- Deferred compensation
- IRAs, profit-sharing
- Homes, vacation properties, and rentals
- Valuable vehicles, boats, jewelry, art, and other collectibles
Separate vs. marital property. After all assets have been identified, it is time to determine if they are separate or joint property. Separate property refers to assets one spouse owns prior to the marriage, or money or property specifically gifted to them during the marriage. An inheritance is a common example of something a married person might receive that is still considered separate property. Joint property, also called marital property, refers to income and other assets acquired and shared by both partners during the marriage.
Although it is unwise to oversimplify this point, especially when talking about a complex, high asset divorce, each spouse generally receives their respective separate property when they divorce. Also, couples split marital property equitably in New Jersey.
It should be noted that equitably does not mean equally. It means that assets are distributed fairly according to various factors, including how each spouse contributed to the household, the earning capacity of each partner, and the income and debts they brought to the marriage.
International interests. When a high-asset couple has investments or assets in a foreign country, there are significant tax implications that arise. In this case, it is a good idea to hire a lawyer with experience managing oversees matters, specifically those that impact divorce. Tax and divorce laws in other nations may not be compatible with those in the United States and require extra attention to resolve.
Complex asset valuation. It is simple to determine to attach value to funds in a checking or savings account. However, high asset divorces typically involve more complex assets that are not always as easy to valuate.
Consider for example a couple that owns multiple properties or has interests in several businesses. Their assets are harder to untangle. This is especially true if both partners still want to be involved in the business, or when one wants to sell but the other does not. Again, the guidance of a skilled lawyer and a financial advisor can be invaluable for assisting couples in this regard.
Forensic accounting. Because a high asset couple’s portfolio is more complicated, it may seem easier to hide money from a spouse. However, to fairly and reasonably split assets according to New Jersey’s principle of equitable distribution, an accurate inventory of every single asset is necessary.
Asking a spouse for their financial records does not work for many divorcing couples, especially for those involved in a contentious split. Forensic accounting may be necessary to track down hidden assets and determine each spouse’s financial dealings and how and when they acquired certain assets.
If forensic accounting fails to uncover income or property you suspect your ex-spouse is hiding, your lawyer can use a formal, legal process to get that information. They can demand financial statements, tax returns, information about loans, and any other pertinent records. You can even ask to inspect a safe or other property if you think there may be clues there.
It is true that taking legal action will add time to your divorce. However, if your ex-spouse is hiding assets that are rightly yours, it will be worth it.
Prenuptial and postnuptial agreements. High asset couples are more likely to have a pre- or postnuptial agreement. A prenuptial agreement is a mutually agreed on, legally binding contract completed before the marriage. It describes exactly what happens to your assets and finances if the marriage ends. A postnuptial agreement is essentially the same thing, but it is completed after the couple has already married.
Because these agreements are created and signed by both parties, along with their respective lawyers, they generally take precedence when making divorce determinations. Really, the only way you can challenge a prenuptial or postnuptial agreement if is fraud was involved, you were pressured to sign it, or the contract is grossly unfair to either partner.
Privacy concerns. As mentioned above, high asset divorces often involve public individuals. Think about the recent spilt between Bill and Melinda Gates. The public has been privy to way more information than the Gates probably would have preferred, including their combined net worth prior to the divorce, which is approximately $152 billion.
As the divorce progressed and highly personal details started leaking about the couple’s relationship, it became clear just how accessible their private lives became for the public. There were allegations of infidelity and questions about the viability of their future philanthropic efforts.
High income couples can take steps to protect their privacy, but their efforts are not always successful. If both parties agree and provide a valid reason, the judge may agree to seal any court records related to the divorce. Couples may want records sealed to protect the identity of minor children, protect proprietary business information, or prevent false allegations from tarnishing their reputations.
However, if the judge believes it is in the public’s best interest to have access to the court records, he or she will deny the request.
Lengthy proceedings. Owing to the complicated nature of high asset divorces, they can take longer than the typical divorce. It takes time to identify and valuate assets; determine if they are separate or joint property; and hammer out the details of child custody, child support, and alimony.
If you and your spouse are like-minded and willing to compromise, mediation may be an option to resolve divorce matters peacefully and avoid costly, drawn-out court battles.
A Look at Low Asset Divorce
If after reading about the unique challenges that come with a high asset divorce, you do not think they apply to your situation, consider yourself fortunate. High asset divorces tend to be more expensive, more time consuming, and more stressful than the average divorce.
However, that certainly does not mean your divorce matters are any less valid or important. That is hardly the case.
The issues you face during divorce are just as vital to you and your family’s future. That is why it is always best to hire an experienced divorce lawyer to handle your case; protect your interests; and help you achieve a positive outcome for child custody, support, property division, and any other divorce matters that come your way.
Somerville Divorce Lawyers at Lyons & Associates, P.C., Advocate for You Through Every Stage of Divorce
Whether you are a high profile celebrity, or a typical parent trying to provide for their family, the Somerville divorce lawyers at Lyons & Associates, P.C., provide superior legal representation for every client going through divorce. Because we understand the unique challenges that come with every type of divorce, you can feel confident knowing you are receiving the right guidance and support for your case. To learn more or to schedule a free consultation, call us at 908-575-9777 or contact us online. Located in Somerville and Morristown, New Jersey, we proudly serve clients in Somerset, Woodbridge, Morristown, Parsippany, Rockaway, Short Hills, Chatham, Randolph, Madison, and Morris Plains.