The divorce process can be complicated, regardless of a couple’s situation. However, when a couple has significant wealth, they may encounter some unique and potentially complex issues as they take steps to separate their lives and their finances and legally dissolve their marriage. In these situations, couples may focus on preserving the value of the assets they own, managing risks, and untangling complex financial arrangements without creating unintended tax consequences or disrupting their ongoing plans.

In a high net worth divorce, issues related to property and finances may include identifying what is marital versus separate property, valuing different assets, and dividing property in a way that is both equitable and practical. Asset tracing may be necessary when premarital assets, inheritances, or gifts have been mixed with marital assets. The proper timing of transactions, asset transfers, and withdrawals may be influenced by market conditions and vesting schedules.

During a high asset divorce, a person will usually want to take steps to protect against possible financial losses and ensure that they will be able to achieve a fair and equitable outcome. A divorce lawyer with experience in high net worth cases can provide assistance with these matters, and they may take steps to address issues such as:

Business Interests

When one or both spouses own a business, their interests in the business may be among the more significant assets to address during the divorce process. For a person who has established a business and who earns income through the company, maintaining ownership of the business may be an important goal. Both spouses may want to ensure that their contributions to the business will be recognized.

Business Valuation

A proper valuation can help ensure that both parties understand the value of the business. Common approaches taken during the business valuation process include:

• Income Approach: A business’s future earnings or cash flow may be projected to estimate the ongoing value of business ownership and how the business is expected to grow in the future.

• Market Approach: By comparing the business to similar companies that have been sold, a couple can get an approximation of the business’s current value.

• Asset-Based Approach: A review of the business’s assets and liabilities can help determine the full value of the business.

Options for Handling Business Ownership

There are several ways that a couple may choose to assign ownership of business assets and divide their marital property. Practical solutions may include:

• Buyout: If one spouse plans to be the sole owner of the business, they may compensate the other spouse for their share of the business with a cash payment, a promissory note, or a larger share of other marital assets.

• Co-Ownership: In cases where both spouses have been involved in managing a business, they may agree to continue to own the business together after getting divorced. This option will require ongoing cooperation, and a couple can make sure a partnership agreement is put in place to establish clear roles and mechanisms for dispute resolution.

• Sale to a Third Party: As an alternative to sole or joint ownership, a couple may agree to sell a business and divide the proceeds during the divorce process.

When determining how to address business ownership and how to divide business interests and other marital property, a divorce attorney with an understanding of business valuation methods and experience addressing complex financial issues can help determine the best ways to proceed.

Real Estate

A couple with a high net worth may own multiple homes or other properties. Different types of real estate property may raise unique concerns during the divorce process:

• Primary Residence: A couple may need to decide whether either spouse will own their family home or whether the home may be sold. These decisions may depend on factors such as who is currently living in a family’s home, whether one spouse can afford to maintain sole ownership, and how refinancing may be handled.

• Vacation Homes: A couple may also need to determine how other properties they own will be handled. Either spouse may assume ownership of these properties, or vacation homes may be sold. Seasonal rental revenue, HOA rules, and local taxes may influence these decisions.

• Investment Properties: Issues such as rental income, vacancies, depreciation, and taxes may need to be considered when determining whether either spouse will maintain ownership of these types of properties. If properties are held in partnerships or LLCs, transfer restrictions, lender consent requirements, and other issues may need to be addressed.

• Out-of-State or International Property Holdings: Title issues, tax laws, and other concerns may play a role in decisions about whether either spouse may maintain ownership of these types of properties or whether properties may be sold.

If a property will be sold, the timing of the sale and the fees that will be required may need to be addressed during the divorce process. If either spouse will retain ownership of a property, issues such as mortgage payments, maintenance, insurance, and other expenses may need to be considered. A divorce lawyer who has experience addressing concerns related to real estate can help ensure that all legal, financial, and tax-related issues will be addressed correctly in these cases.

Spousal Support

In situations where one spouse earns a significantly higher income or has access to extensive financial resources, the other spouse may potentially be eligible to receive ongoing spousal support. When addressing this issue, factors that may need to be considered include:

• Income Sources: The calculation of the payments that one spouse may make to the other may depend on factors such as salary, bonuses, distributions from business entities, and deferred compensation.

• Lifestyle: A couple’s historical spending patterns and recurring costs may be considered when determining the amount of support that will be paid.

• Duration and Step-Downs: Spousal support may be gradually phased out as the recipient gains financial independence or after specific milestones.

Depending on the situation, a couple may include spousal support in their divorce settlement, agreeing on the amount of payments and the duration they will last. In other cases, the person requesting spousal support may need to make their case to the court, and decisions about whether support will be paid and the amount and duration of payments will be made based on the applicable state laws. A divorce attorney can answer questions about when spousal support may be appropriate, how much a person may pay or receive, and how disputes related to this issue may be resolved.

Investments, Retirement Accounts, and Executive Compensation

When a couple has an extensive financial portfolio, or when either spouse has a high-value compensation package, determining how marital assets will be divided may require assistance from financial professionals. This can help ensure that they will be able to avoid unnecessary taxes and minimize risks as they divide different types of assets. Issues to consider may include:

• Brokerage Accounts: Unrealized gains and losses may need to be addressed when transferring ownership of stocks or other investments. Post-divorce trades can trigger capital gains taxes, and a divorce settlement may specify who will be responsible for paying these taxes.

• Retirement Plans: 401(k) accounts and pensions may be divided between spouses using a qualified domestic relations order (QDRO). This will ensure that transfers can occur without early withdrawal penalties or taxes. IRAs follow different rules, but steps can be taken to transfer funds without incurring taxes or penalties.

• Deferred Compensation: When a spouse is eligible to receive these types of benefits based on income they earned during the marriage, the amounts that have been deferred may be considered marital property. Arrangements may be made to pay a portion of these benefits to the other spouse when future payments are received, or these benefits may be offset with other marital assets.

A proper consideration of retirement benefits and investments can help ensure that both spouses will have the financial resources needed later in life. A divorce lawyer can provide guidance on how different types of assets may be handled and how a person can protect their financial interests.

Hidden Assets and Asset Dissipation

When a couple owns extensive assets, they may encounter concerns about assets that one party has failed to disclose. A spouse may also raise concerns about wasteful spending by the other spouse or other actions that have depleted the value of marital assets.

A person may believe that their spouse has hidden assets due to issues such as unexplained transfers, debts that a person claims need to be paid to friends or family, large cash withdrawals, or unusual business expenses. Assets may be hidden in family businesses, trusts, offshore accounts, digital wallets, or underreported income streams.

If one spouse has spent marital funds for purposes unrelated to the marriage, such as making luxury purchases, wasting money on gambling, or buying gifts for an affair partner, these issues may be considered when dividing property. A person may be required to reimburse the marital estate for dissipation that has occurred.

A skilled divorce lawyer may take steps to uncover hidden assets or asset dissipation through methods such as subpoenas, forensic accounting, lifestyle analyses, and reviews of business records, bank statements, and tax returns. By addressing these issues correctly, a person may be able to avoid financial losses as they take steps to finalize their divorce.

Putting the Pieces Together

A high net worth divorce may involve a significant financial reorganization. It may be necessary to address concerns related to business interests, real estate holdings, support obligations, and other financial issues. An attorney can assist with these matters, helping to resolve disputes and providing advice on the suitable ways to maintain financial stability after completing the divorce process.

Disclaimer: This article is intended for informational purposes only and does not constitute legal advice. For personalized guidance regarding your specific situation, it is recommended that you consult with a qualified attorney.