In the eyes of the law and in divorce law, we are all treated the same, regardless of how much money we make or how many assets we may have. But that does not mean that all cases are handled the same way. And when it comes to high-net-worth divorces, there can be complexities and legal issues that may not be encountered in other kinds of divorces.
What is High Net Worth?
There is no actual legal definition of what a “high net worth” divorce is. It obviously is a divorce where one or both of the spouses have a higher income or significant assets. But there is no dollar figure where above or below that amount, the divorce is considered officially high net worth.
More Assets, More Discovery
Although it is dangerous to stereotype, it is safe to say that in many high-net-worth divorces, one or both of the spouses will have income that may be generated from a number of different sources. And although, as in any divorce, the parties will have to fill out a complete financial affidavit, in high net divorces, that affidavit often only tells part of the story, financially.
Because of this, high-net-worth divorces may require that the parties do discovery more extensively than what may otherwise be the case.
In a high-net-worth divorce, there often is not just one job, a paycheck, and a single bank account. Rather, there could be income from multiple sources like investments, appreciating real estate, businesses, or intellectual property ownership. Spouses with businesses or other financial investments may have money held in mutual funds, business accounts, PayPal accounts, cryptocurrency, or even overseas bank accounts.
Getting a Value on Assets
Much of what is owned in high-net-worth divorces is not so easy to value.
If someone owns a home, there can certainly be differing views on what the home is worth, but there is a generally accepted range of values for that home.
But in high-net-worth divorces, things like businesses become hard to value. Business valuation requires an expert witness, and there are many different ways to value a business. A business can have more or less worth or value, depending on the methodology used to value it.
Many spouses getting divorced, whose spouses have businesses, will insist that the business is doing well and making plenty of money. But the spouse who owns the business will insist the business is struggling and on its last legs. Getting to the truth of the matter often requires accountants and extensive reviews of corporate and banking records to actually see how the business is doing.
Selling Valuable Assets is Not Easy
Assets in a high-net-worth divorce are often difficult to sell and divide. For example, someone may have a stock or investment (or many), or land or real property.
Sure, the court could just order the investment or property to be liquidated and the profits from the liquidation divided—but what if keeping the asset intact is in the best interest of one of the spouses (or perhaps the children of the marriage)? What if the asset would incur a penalty for liquidation, like a CD, where you can stand to lose a lot of money by cashing out on the CD too soon?
In some cases, assets or property cannot legally be liquidated, such as where a spouse has an interest in an LLC or a partnership, and the corporate documents do not allow the sale (or legal transfer, as in a divorce) of an interest in the business to a third party.
Parties may not even be able to keep an asset even if awarded to them; a spouse may have a one-half interest in the marital yacht, but if that spouse only makes $45,000 a year, that is not enough to keep and maintain that yacht. That spouse may need an asset to be sold to get value from it.
In these kinds of scenarios, the parties may have to work out a payout, leaving one party the asset, and the party that keeps that asset must pay the other spouse what their interest in the asset would be if it was liquidated.
This often happens with real estate, businesses, or intellectual property. It means that these assets must first be fairly valued first, and then, the party keeping the asset, must find a way to pay the other spouse their interest in the asset or property.
Issues With Kids
Division of assets becomes more difficult when there are kids involved. Aside from child support issues, some property may have to be kept to accommodate the kids, regardless of what the spouses want to do with that asset.
For example, if, for some reason, it is in the best interest of the kids to remain with Mom most of the time, those kids may need to remain in the marital home to maintain stability in their lives. That means that the home cannot just be sold, and Dad may not be able to live there, even if he wants to.
Issues like private school, tutoring, summer vacations, and other resources utilized for children of higher-earning families may need to be accommodated in any child support agreement.
When Only One Spouse Has Money
High-net-worth divorces can present different legal issues when only one of the spouses is a high earner. In that case, the spouse without the assets or income will often seek temporary attorney’s fees or temporary alimony or support from the spouse who has the assets.
This is done through a motion with the court that is often heard at or near the commencement of the divorce case. Although temporary support is not final—it can be changed by the final divorce judgment when entered—it can sometimes be an indication of how the entire divorce case will ultimately turn out when it comes to support issues.
Temporary support can make it fair and allow a spouse to hire attorneys to defend their interests—but for the paying spouse, it can increase the cost of the divorce.
In any case where there is an imbalance of assets or income, alimony will also be an issue. Assuming the marriage lasted long enough, courts will usually not allow one spouse to leave the marriage destitute while the other takes their business, real estate, and investments and walks away.
Anthony J. Diaz is an experienced family law attorney focusing on Mediation and Collaborative Divorce. His offices are located at 2431 Aloma Ave Suite #124, Winter Park, FL. 32792 and 3720 Suntree Blvd., Suite 103G, Melbourne, FL. 32940.
You may contact Anthony Diaz by calling 407-212-7807 or by email an*****@************aw.com or visit anthonydiazlaw.com for more information.
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