A Detailed Guide To High-Net-Worth Divorce
In the realm of matrimonial law, there is a cliché that “it always comes down to money.” Unfortunately, because there is more money involved in high-net-worth divorces, there will likely be more issues and certainly more complexity. Your high-net-worth divorce will most likely be complicated and taxing, both emotionally and financially.
As you start your journey through a high-net-worth divorce, it’s critical to understand that your divorce will be different than others you have heard about, largely because of the many variables that will be involved.
The following guide to high-net-worth divorces is provided by family law attorney Kamelia “Mia” Poppe, Esq. This guide will help you understand what to expect when assets in your divorce are substantial.
What Does It Mean For A Divorce To Be Of High Net Worth?
The term “high net worth” is an identification used in the financial services industry for a person or family with assets over a specified threshold. Although this number can change depending on the organization you are working with, you are generally considered high net worth if you have over 1 million dollars in liquid assets.
Liquid assets are defined as “cash on hand” or any other assets that can be converted into cash quickly.
New York City And High-Net-Worth Divorces
High-net-worth divorces are common in New York City with its high cost of living. Here are some elements to expect in your high-net-worth divorce:
- Client-Law Firm Relationships – Expect a higher level of attorney access and overall service from firms that cater to high-net-worth individuals. Normally, you will have direct access to your lawyer providing representation and will have a dedicated team of law professionals working on your case.
- The Courts – Courts may move more slower than normal in high-net-worth divorce cases. This is because there are so many moving parts to your divorce, from asset valuation to spousal support and taxes.
- Cost – The cost of a high-net-worth divorce is high because of the amount of time it takes for the case to conclude. Attorney Kamelia “Mia” Poppe, Esq., frequently suggests settling high-net-worth divorces out of court in the interest of saving your hard-earned money and not spending your child’s college tuition on divorce proceedings.
- Forensic Accountants – For the courts to be able to distribute marital assets fairly, values must be placed on every single identified asset. Valuation experts value businesses, real and personal property, art and jewelry. Asset division is one of the most in-depth, complicated, and contentious parts of a high-net-worth divorce.
- International Implications – The web of moving parts in a high-net-worth divorce can be further complicated when there are assets that are subject to the laws of other countries. International laws can also play a role in child custody and spousal support.
- Tax Issues – Tax implications play a large role in determining your final outcomes including spousal report, asset distribution, and who is able to claim a child as a dependent on their tax returns.
- Publicity – Many high-net-worth individuals have a public presence, and oftentimes in divorce, there is unwanted publicity that must be handled appropriately by your representation.
- Spousal Support – Often, there is some element of spousal support, where one spouse must continue to provide income to the nonwage-earning or lower wage-earning spouse. This is meant to limit the unfair economic effects of divorce. Spousal support payments can be quite high in high-net-worth divorce cases. Whether you are on the receiving end or the paying end of alimony, this is an area in which your representing lawyer’s skills really shine and are so important for your future.
Primary Goals In High-Net-Worth Divorces
Several key goals of high-net-worth divorces are:
- The Children’s Well-Being – Clients of Poppe & Associates are encouraged to put the health and well-being (physical, mental, and emotional) of their children in front of any other priority. No outcome is favorable if your children are hurt or disadvantaged by the ruling or process.
- Distribution of Assets – Determining how assets will be distributed is one of the most contentious parts of high-net-worth divorce. Equitable distribution is the goal of the courts, but the intricacies in determining what assets are allocated to whom are extremely complicated. For example, you most likely do not want to be left only with assets such as a beach house that will require large out-of-pocket expenses like taxes, insurance and maintenance. This is an illiquid asset. You’ll require some amount of cash and liquid assets.
- Spousal Support – Spousal support or maintenance is often paid to the nonbreadwinning spouse to help them maintain their lifestyle and to give them time to develop job skills that would allow them to support themselves. This is a complicated and partially subjective process, as there are no laws to dictate court decisions.
These are generally the primary goals of any high-net-worth divorce. Your perspective will depend on whether you have been the breadwinning or the non-breadwinning spouse. Many variables determine what objectives you find negotiable and what you aren’t willing to budge on. High-net-worth is a fluid and changing process that necessitates legal expertise in working towards your primary goals.
The Players Involved In High-Net-Worth Divorce
In high-net-worth divorce, there is a litany of players involved, depending on the complexity of your divorce. Much is at stake. You must be meticulous in every step of the process. People weighing in on your divorce may include any combination of the following:
- The judge
- Your divorce attorney
- The opposing attorney
- An attorney for your child
- Forensic accountants
- Business appraisers
- Real estate appraisers
It’s critical to understand that each person has their own priority, and at any given time, their priorities are likely to be working against yours in some way.
How Much Does A High-Net-Worth Divorce Cost?
The cost of a high-net-worth divorce, like most things, depends on many variables. There is the actual monetary cost of the divorce proceedings, the cost to your net worth after the divorce is completed, and also the emotional cost.
The Monetary Cost Of A High-Net-Worth Divorce
The monetary cost of your divorce will depend on its complexity. The more complex the divorce (think spousal support, asset valuation, custody and taxes), the more it’s going to cost, because the more professionals will need to be involved, and the more time those individuals will need to spend on your case. Paying for their services can be anywhere between $50,000 to $150,000.
The Net Worth Cost Of A High-Net-Worth Divorce
The cost of divorce on your net worth will be higher than the actual cost of the divorce. In many cases, you’ll be splitting the value of your assets in half. This is the true cost of your divorce. Barring any nuptial agreement, you’ll be leaving with much less than what you had while married.
The Emotional Cost Of A High-Net-Worth Divorce
Finally, the emotional cost of divorce for both spouses is always high. Ceasing a relationship is never easy and becomes harder and harder with every added variable. Frequently, there is publicity involved in high-net-worth divorces, which only exacerbates the emotional costs.
Should You Settle Your High-Net-Worth Divorce?
Yes. A divorce process geared toward settlement instead of litigation is our recommended approach. It can cut the cost of your divorce in half, and will leave you, your spouse and your children happier and in better shape overall.
Assets In High-Net-Worth Divorces
In divorce, any assets owned by the married couple both liquid and illiquid are subject to the divorce proceedings. Common assets include the following:
- Real estate – Your home and other real properties must be divided.
- Stocks and bonds – Often, high-net-worth individuals have substantial investments in the form of stocks and bonds.
- Money – Savings accounts and other liquid accounts are in this bucket.
- Retirement accounts – IRAs typically store high amounts of money, as they are almost always maxed out in high-net-worth relationships.
- Business(es) – If you own interest in a business, there is value to assign to this asset and it must be considered.
- Jewelry – Except for family heirlooms, jewelry acquired in your relationship must be accounted for.
- Tax refunds – Money due back to you from tax filings must be included in your inventory of assets.
- Vehicles – Most high-net-worth individuals have substantial money in their vehicles.
- Insurance policies – Some insurance policies have a cash value.
- Household goods – These are the assets residing within your home – anything from furniture to electronics and tools in the garage.
- Debt repayment – Many high-net-worth individuals take out loans. The repayment value on these loans is considered an asset, though it is a negative one.
- Cryptocurrency – High-net-worth individuals often invest in cutting-edge technologies and opportunities. Cryptocurrencies and similar assets are also divisible in a divorce.
Ask For The Firm’s High-Net-Worth Divorce Inventory Tool
When you contact Poppe & Associates, request the firm’s comprehensive worksheet to use to take inventory of your assets. A quality inventory will help your attorney ensure that your divorce is as equitable as possible.
Assigning Valuations To Assets
The way value is assigned to your assets is not really any different in high asset divorces as opposed to other divorces. The main differentiator comes in the amount of assets and the professionals involved in determining the value of those assets. Aside from the sheer quantity of assets, you’ll likely be leveraging professionals including appraisers, accountants and investment advisors.
Assigning value to your assets is one of the most contentious and complicated parts of your divorce. Many times, it can be seen as objective, for example when dealing with real estate. Other assets such as business interests are harder to place values on. Assigning valuations to your assets will take time, but it is necessary and worth the investment.
What If My Spouse Hides Assets In Our Divorce?
Partners often attempt to hide assets during the divorce process. This tactic becomes more common the more assets exist in a marriage. However, these assets can and will be uncovered, with time.
Hidden assets are discovered through discovery interrogatories, and through documents provided by financial institutions. Forensic accountants will meticulously scrape your financials to find any discrepancies or signs of hidden assets. We then follow those leads where they take us.
The Impact Of Prenuptial Agreements On Your Divorce
Prenuptial agreements are common in most divorces. The importance of a prenup increases as assets increase. Individuals want to protect their assets, and there’s no way to argue with the fact that 50% of marriages end in divorce. But, know this, all pre- and postnuptial agreements are different and are enforceable to different degrees.
New York has strict laws about the parameters and economic impact prenuptial and postnuptial agreements in case of a divorce.
If you signed a prenuptial agreement at the bequest of your spouse, you should always contact an attorney to help you evaluate its validity and navigate your divorce.
The High-Net-Worth Divorce Process
The official process of a divorce is really no different from any other divorce. You’ll file or be served a petition, attend a temporary hearing, and then either settle or go to trial.
The main characteristics of a high asset divorce are only discernible between the lines. The hard-fought negotiations, meetings with professionals such as your accountants, and any publicity are par for the course. This “between the lines” process is what can truly make a high-net-worth divorce hard and time-consuming. It’s the reason you must hire an experienced attorney.
Finding The Right Legal Representation For Your High-Net-Worth Divorce
Like most professionals, not all legal professionals are created equal. This can show up in their experience and in their intrinsic qualities. No matter what your position is in your high-net-worth divorce, you must have legal representation by a lawyer with experience with this specific type of divorce. There is no substitute for this experience.
Outside of experience, your divorce attorney should have the following qualities:
- Able to compromise
- Big-picture focused
When interviewing your high-net-worth divorce attorney, take your time. We can’t stress the fact that you must be able to trust this person entirely. Your lawyer will be the one who will have your back and act in your best interest during your divorce. Use our 7 Step Guide to Vetting Your Family Law Attorney to get started, and then make a choice based on your own list of qualifications.
When It’s Your Time To Take Action: Do It
All divorces are hard, but high-net-worth divorces are extremely taxing. If you are in the midst of or are just starting a divorce and you and your spouse have a large asset portfolio, contact the experienced professionals at Poppe & Associates for a consultation.