High Net Worth Divorce

High-net-worth divorce involves significant assets, businesses, and investment portfolios, which creates unique challenges in the divorce process. Considerations include asset valuation, tax implications, and privacy concerns. Estate planning can help avoid some of the issues in divorce cases. However, divorcing couples generally benefit from financial and legal advice.

Divorce laws vary depending on the state where you file. Speak with a divorce lawyer for help with your high-asset divorce.

High Net Worth Divorce Challenges and Considerations

High-net-worth couples have more decisions to make in a divorce. Divorcing couples still must deal with property division, spousal support, child custody, and visitation. However, property division can take much longer and goes further in-depth.

Wealthy couples often have business interests, real estate holdings, investment portfolios, and other financial interests. All these substantial assets are accounted for in a divorce, which requires full financial disclosures and appraisals of the marital estate.

The couple can decide how to divide marital property and liabilities. The family law court will handle the property division if the couple can’t decide.

Asset Valuation and Division

Division of assets can depend on where the couple files for divorce. States generally follow equitable distribution or community property rules for divorce cases. In community property states, all assets acquired during the marriage are marital property. In other states, property remains separate unless it is in the name of both spouses.

Most states use equitable distribution and divide assets fairly between the spouses. Factors in equitable distribution include:

• Length of the marriage
• Spouse’s age and employment opportunities
• Each spouse’s contributions to the marriage
• Income and assets of each spouse
• Child custody arrangements

Finding Hidden Assets

Some spouses suspect their former spouse is hiding assets in a divorce. A spouse can hide assets in many ways, including opening secret accounts, underreporting income, and investing in collectibles, antiques, and jewelry.

As part of the divorce, your ex-spouse should make financial disclosures for an equitable division of marital assets. If you suspect your spouse is hiding assets, your attorney can use a forensic accountant to identify hidden bank accounts, real estate, and other valuable assets.

Alimony and Spousal Support

Alimony provides financial support for one spouse after a divorce. The couple can agree on spousal support payments and terms. The court can also grant spousal support. The court considers many factors in determining alimony in a high-asset divorce, including:

• Spouse’s income
• Standard of living
• Length of the marriage
• Contributions of each spouse to the marriage

For example, one spouse may have given up their career to raise children and take care of the home, losing out on career opportunities that would benefit the marriage. In a divorce, the court can award the spouse a monthly payment to keep them in a lifestyle they have become accustomed to.

Prenuptial Agreements

High-net-worth individuals often use prenuptial agreements before getting married. A prenup determines how certain assets are handled in a divorce. Prenups can provide information about what property each spouse keeps and any alimony award. You can also use postnuptial agreement after marriage.

The court generally enforces the terms of a prenup as long as each party agrees voluntarily, has signed the document, and there is no fraud or misrepresentation.

Privacy Concerns

Family law proceedings are part of the public court record. A contested divorce will have a lot of personal information in the court record. You can request the family law court to seal your divorce records, but that is not always an option.

You can keep some parts of your life private by filing for a no-fault divorce. No-fault divorce doesn’t require you to say who is to blame or what went wrong. You only have to claim irreconcilable differences. At-fault divorce includes infidelity, substance abuse, or domestic violence grounds. If you allege fault, these become relevant in the lawsuit and can reveal a lot of private information.

Using alternative dispute resolutions can also keep your divorce private. Mediation and arbitration allow the couple to resolve the dispute with a neutral third-party mediator or arbitrator. They can sign the agreement and go to court to get a divorce decree. They can keep all their negotiations private so they won’t be part of the public record.

Tax Implications in High Net Worth Divorce

After a divorce, you can no longer file as married filing jointly. The IRS considers you no longer married in the tax year you get a legal divorce or separation. Filing separately can change your tax bracket, deductions, credits, and dependents.

After 2019, spousal support is not tax-deductible to the paying spouse and is not considered income for the receiving spouse. The same applies to child support. Child support payments are not tax deductible and are not taxable income.

For divorcing couples with kids, one parent can claim each child as a dependent. Generally, the custodial parent claims the child on their taxes. However, specific rules exist for parents who share custody 50-50.

If you are dividing up retirement accounts in the division of assets, talk to a professional about the tax consequences.

The Importance of Expert Legal and Financial Advice

Divorces are complex and can get messy. With more assets and property involved, the risk of a complicated divorce increases. Legal professionals can help explain your legal options and take action to protect your property rights. Reach out to an experienced attorney for legal advice during your high-net-worth divorce.