High Net-Worth Divorce
In many respects, a high net-worth divorce is no different than other divorces involving division and distribution of assets and liabilities.
FIRST IDENTIFY MARITAL ASSETS AND DEBTS
For all equitable distribution matters, the steps are to identify and value marital and non-martial assets and debts, and then to distribute the martial assets and debts to the spouses, with the staring/default point being a 50/50 distribution of net marital assets. There can be complicating issues in valuing assets like businesses or stock options, in determining the marital portion of assets, or marital portion of the increase in value of pre-marital assets, but these are all issues resolvable via careful analysis, and use of appropriate experts.
It is almost always helpful to retain a financial professional to review statements and produce the schedules of assets and debts; to analyze the income and expenses for a business or businesses; and a valuation expert to value a business or other assets.
VALUING BUSINESSES AND OTHER ASSETS
There is more information in the property division section of the website regarding the division and valuing of particular assets, for example pensions and businesses. One issue that arises frequently regarding valuing businesses, in addition to issues in any valuation, is the value of the personal goodwill for a business, which is a non-marital part of the value of the business; and how a “non-compete” clause that would be anticipated in connection with the sale of the business relates to the amount of personal goodwill. There are posts on my blog regarding these issues.
A significant issue in some high asset divorces is the enforceability of a prenuptial agreement. Additional issues can arise if one or both spouses are interested in establishing trusts for the benefit of children or to secure alimony. These latter issues are resolvable via negotiation, and retaining a skilled trusts and estates attorney to provide advice and create the trusts.
Often, some of the high value items in a high net-worth divorce are the attorneys' fee invoices, and fees for dueling forensic accountants and valuation experts. The cost for the discovery process alone – e.g. multiple request for documents, depositions, interrogatories to experts, can be large.
In virtually all cases, I believe using the Collaborative Divorce process, in addition to creating less acrimony, can arrive at an end result with much less expense. In a Collaborative Divorce, you can utilize one neutral forensic accountant to review assets and debts; and an additional valuation expert can be brought in if needed.
One issue that can consume significant resources in a high net worth divorce is arriving at a temporary spousal support amount, if that is a relevant issue in the case – I’ve seen parties dig in on that topic and go to a contested, evidentiary hearing which, including the cost for preparation and attendance by the attorneys and forensic accountants for each spouse at the hearing, can consume more funds than the amount that is contested – i.e. the difference in the amounts proposed or offered by each spouse. The issue of temporary support is usually resolved in a collaborative divorce, and the spouses move on to trying to settle the case.
There are situations where one spouse might seek to hide assets, and believe the potential reward for that is worth the cost of the litigation. In my opinion, a skilled forensic accountant and investigators will find the assets, but there are situations where assets could possibly be beyond recovery, even if awarded to a spouse. Or one spouse might seek to, in a sense, roll the dice, betting on the abilities of his or her attorney, and the possibility of perhaps obtaining more than half of the marital assets, or lower alimony payments, via aggressive negotiation, or prevailing at trial.
The total cost for that type of battle can be hundreds of thousands or in some cases in excess of one million dollars; and whatever cost is attached to obtaining an inequitable result, especially where there are minor children, and the former spouses will continue to need to parent for the benefit of their children I believe Collaborative Divorce is a better approach, but it will not be the option selected by all.
An additional advantage of Collaborative Law for high asset divorces, is that often high net worth accompanies a significant public profile, and collaborative divorces can be handled privately, with no court involvement other than a final hearing at the end of the case ratifying the settlement agreement and granting a divorce; with the settlement agreement remaining confidential, unless required in the future for an enforcement action.
Call me at (954) 636-7498 or use the contact form here on the website, and we can discuss your high net worth divorce.