Common Issues in a High-Asset Divorce

When a marriage ends, dividing assets and reaching a fair settlement can be challenging. But for couples with a high net worth, the stakes are even higher.

A high-asset divorce is typically one where the combined value of the marital property exceeds a certain threshold, often around $5 million, though it can vary depending on location, types of assets, and specific circumstances. These divorces involve unique complexities that require careful consideration and strategic planning.

Here's why high-asset divorces are different and what common issues you should be aware of:

Separate vs. marital property

High-net-worth couples often have intricate financial portfolios with diverse assets. This can include investment accounts, real estate holdings, stock options, and even ownership in businesses. Identifying all marital assets, determining their value, and ensuring a fair division becomes paramount. Distinguishing between separate property (assets owned before the marriage or inherited) and marital property (assets acquired during the marriage) is crucial. Separate property generally remains with the spouse who owned it before the marriage. However, tracing the growth or commingling of separate funds with marital funds can complicate matters.

Hidden assets

The temptation to conceal assets can be strong in a high-asset divorce. Forensic accountants may be needed to uncover hidden accounts, income streams, or fraudulently transferred assets.

Tax implications

Decisions made during the divorce can have significant tax consequences. Dividing property and wealth can trigger tax consequences. Selling assets to create a fair split could result in capital gains taxes. Also, retirement accounts, a significant portion of many high-net-worth estates, require careful handling to avoid tax penalties on early withdrawals. Understanding the tax implications of dividing assets, spousal support payments, and property sales is vital to protecting your financial future.

Business and IP valuations

If a business or intellectual property is a significant marital asset, valuing it accurately is essential. This often involves hiring valuation experts to determine the asset’s current and potential value.

Other high-value assets

It is also important to determine the value of other marital assets to ensure a fair division. For instance, valuable items like, art, jewelry, and boats/automobiles should be appraised.

Pitfalls to Avoid

If you are involved in a high-asset divorce, it can be a mistake to:

• Try to go it alone. The emotional strain of a high-asset divorce can cloud judgment. Hiring an experienced attorney specializing in complex divorce cases is crucial to protect your rights and work toward an equitable outcome. They can also connect you with other experts who are needed for your case.
• Rush the process. Taking the time to meticulously understand your financial situation and explore all options is essential. Don't be pressured into a quick settlement that may not consider all your needs.
• Underestimate the emotional impact. Divorce is emotionally taxing, even more so in high-asset cases. Seek emotional support from therapists or trusted confidantes to cope with the stress and make clear-headed decisions.
• Fail to be honest and transparent. One common issue is a lack of financial transparency. One spouse may attempt to hide assets to avoid division. Assets can be uncovered, and you can face serious consequences for hiding assets.
• Forget to value certain assets. Another pitfall is underestimating the value of non-financial assets, such as intellectual property or business goodwill.
• Fail to consider a settlement or mediation instead of litigation. A settlement or mediation allows you to maintain your privacy as details are not public, as they are with court records. You are also afforded more autonomy when you opt to negotiate or mediate, and the cost of the process is often less than going to trial.

We Can Help Protect Your Interests

An experienced legal team knowledgeable in these matters can give you an advantage in navigating a high-asset divorce. Our team is backed by decades of experience in divorce cases involving significant assets and complex financial issues and is committed to providing exceptional and personalized client service.

Schedule an initial consultation today by calling (206) 625-9600.