What is a high-asset divorce?
In the state of California, a high-asset divorce is one in which the value of the marital estate that is being divided is greater than $1,000,000.
However, merely thinking in terms of net worth does not give the full picture. The diversity of the assets that create that high dollar value is what gives a high-asset divorce its complexity. More than likely there will be multiple homes involved, perhaps a vacation home or some rental properties. A large part of the estate value may be tied to the value of a business or some commercial real estate holdings. Even the income streams may be from non-conventional sources, for instance, dividends from investments, copyright, and patent royalties, or corporate stock options. As a couple, they probably have also acquired cars, boats or airplanes, artwork, antiques, or other collectibles, which add their values to the mix. Their retirement accounts are likely well-funded. It is also probable that one or both spouses received an inheritance from their parents, which significantly contributed to their own net worth.
The point is: simple mathematical division will not work in a high-asset divorce.
How is a high-asset divorce different?
In theory, the process involved in a high-asset divorce is no different than any other divorce. All divorces need to go through a period of discovery in which income, assets, and liabilities are classified and cataloged. Then based on that data, the couple either comes to a division agreement between themselves (perhaps with a mediator) or they have it imposed upon them by a family law court.
This process is simple for many divorces, and it can most likely be handled purely by the spouses and their respective attorneys. But as we briefly described above, the complexity of a high-asset divorce requires more than a single attorney to sort out. Therefore, for high-asset divorces, it is advisable, as early as possible, to assemble a team of specialists to ensure that no stone is left unturned.
Coordinating that team should be a divorce lawyer that specializes in high-asset divorces. Their knowledge and experience enable them to more effectively direct the rest of the team. But knowledge and experience should not be the only factor when deciding on an attorney. Some lawyers view high-asset divorces as nothing more than an open wallet. Their methods, often coupled with an overly-aggressive demeanor, are calculated to prolong the process with sometimes needless litigation. The result? More billable hours for them and more stress for you.
When selecting an attorney, be careful to choose one who, while working hard on your behalf, will not turn your divorce into a circus.
Building your team.
As your lawyer processes your case, here are some examples of other specialists to consider necessary to have as a part of the team:
- Asset discovery and valuation.
A certified public accountant is undoubtedly an indispensable member of this team. They know the questions to ask and are aware of all the possibilities of income and assets. In concert with the lead attorney, they can also sort out which assets are “community property” (property that is considered to belong to both spouses equally) or “separate property” (property that is considered to belong to only one spouse). Sometimes that demarcation is not so easy to establish, especially when an inheritance is involved. And many assets have a mixed character, with some portion community and some separate.
Because marital estates are often tied to business assets, your lawyer will likely call in a qualified business appraiser or actuary to establish their value. If there are any real estate holdings, whether residential or commercial, certified appraisals will need to be obtained. Likewise, any antiques, artwork, or other items that add significant value to the estate, will need to be appraised.
Unfortunately, a high-asset divorce also provides ample opportunity for some assets or income streams to be overlooked or intentionally concealed by one of the spouses. Hiding assets is a criminal offense, but it also makes things even more complicated. In that case, a forensic accountant may be necessary to decipher available financial records to see what may be missing.
- Liability discovery, valuation and planning.
In addition to the primary accountant, it is imperative that a tax specialist be consulted while cataloging the estate liabilities. After all, high-asset famlies often are in higher tax brackets, and their complex and often non-conventional income sources carry equally complex tax burdens. This must especially be taken into account during the estate division phase of the divorce. First, timing is everything: assets transferred during the divorce itself will not be taxed, but once the divorce is finalized, those transfers will be taxed – heavily. However, considerations will also need to be given to the way taxes affect assets differently: $100,000 in investments will be taxed differently than $100,000 in real estate. Finally, the division of the estate may result in a change of tax bracket for one or both spouses. This, too, may not result in truly equitable distribution.
- Spousal and child support calculations.
The computer programs that are typically used to determine how much the higher-earning spouse must provide to the lower-earning spouse, and any children involved, simply break down in usefulness as the marital estate value grows. For one thing, there is typically a much higher standard of living that accompanies the estate value, and that quickly becomes a matter of individualized assessment. A common example is that the children in these homes likely attend private schools and are on a trajectory to attend higher-cost universities. An estate planning attorney is likely necessary to ensure that these future needs are taken into account while still minimizing the impact of any changes in lifestyle.
- Trauma management
All divorces are difficult, and every member of the impacted family needs help adjusting to their new life. In a high-asset divorce, the lead attorney may urge that therapists, child psychologists, or other forms of counselors be brought on board as well. Not only can these professionals help navigate the challenges of divorce on personal levels, they can also provide input into particular changes. For example, the disposition of a particular asset may affect one person more acutely than another person. This sort of input can greatly help in the negotiations during the division phase of the divorce.
Finalizing a high-asset divorce.
Many couples who enter into a marriage with significant assets will have an already established prenuptial agreement. These agreements identify their assets and instruct how they are to be divided should a divorce occur. Quite obviously, such prenuptial agreements (or, in some cases, postnuptial agreements as well) not only streamline the accounting aspects of the divorce, but also help maintain a cooperative atmosphere throughout.
However, if you don’t have an agreement like that in place, that is no cause for panic. It is still possible to amicably and fairly divide the marital estate. The best way to do this is to avoid litigation as much as possible. Both parties must be willing to stay at the table and negotiate a settlement between them. A good divorce attorney will gladly facilitate such mediated agreements. And, statistics show that divorced couples are much more likely to be satisfied with a mediated outcome rather than a litigated one.
High-asset divorces are also potentially more high-profile. Mediating a divorce out of court prevents the process from being a matter of public record. However, if talks break down and a court hearing becomes necessary, it is advisable to seek to have the proceeding sealed in order to help protect both the spouses and, especially, the children.
We can help.
At the family law offices of Silva & Associates, we have attorneys with the necessary experience to guide you through your high-asset divorce. We also have all the contacts necessary to build an effective and efficient team. Moreover, while maintaining our unwavering commitment to seek your greatest benefit, we are also committed to ensuring that the process remains amicable and cooperative. We encourage honesty and transparency from all parties. And we aim to negotiate as much as possible out of court. Not only will this keep your stress levels down, it will also more likely lead to a more favorable outcome. Please reach out to us today and let us put our experience to work for you.