Divorce is never easy, regardless of a couple’s financial situation. It can, however, be significantly more complex for those with substantial investments like businesses and real estate holdings. Couples with intricate assets, which can include multiple properties, trusts, and retirement funds, often require specialized legal expertise to ensure a fair and equitable division of assets.
Cobb Cole’s family law team understands the challenges that come with valuing assets, dealing with business interests, and arranging spousal support and parenting plans in divorces with significant assets. We can guide you through the process of dividing high-value marital assets, preparing for tax implications, navigating child support issues, and more.
What is a High Asset Divorce?
High-net-worth divorces typically involve substantial liquid and non-liquid assets and the significant income of one or both spouses. Dividing and, in some cases, dissolving these assets can have tax implications and result in dramatic lifestyle changes. If one spouse earns more than the other, spousal support or alimony can become a major negotiating factor during the divorce.
Notable challenges in these more complex divorces include:
Determining Marital Assets
Property a couple acquires during the marriage is generally divided through equitable distribution, with the court aiming for a fair asset split. Non-marital assets, such as those owned before marriage or received as gifts or inheritances, generally remain with the original owner. Some assets, known as mixed property, may have both marital and non-marital components and require detailed assessment.
One Spouse Feeling They’re Entitled to More Assets
Sometimes a dispute occurs when one spouse believes they deserve a larger share of the assets because they contributed more significantly to the marriage, such as through a high-earning career. They might view themselves as the primary source of the family’s wealth, particularly when the other spouse took on a non-financial role, such as staying home with children. However, since most assets acquired during the marriage are considered marital property, they are subject to equitable division.
Assets Have Been Co-Mingled
Single people are, as a rule, the sole owners of their assets. Once you marry, the assets accrued during the marriage are typically considered joint property or marital property. Mixing personal assets, such as adding them to a shared account, can convert them into jointly owned assets, making it challenging to separate what was originally one party’s sole share. When one spouse enters the marriage with more wealth, they might feel entitled to a larger share when it ends.
Asset Valuation and Desirability
Asset value and desirability are equally critical in deciding how to divide assets equitably. However, it can be a complex undertaking, especially when there are illiquid assets like real estate, stock options, collectibles, or private businesses. Because these types of assets aren’t easily split, one spouse might need to pay the other to equalize the division.
If a business is involved, it will usually require a valuation, which can further complicate the process. Liabilities tied to some assets can be another challenge. For instance, investment accounts offer growth but also come with tax implications, and real estate generally appreciates yet requires ongoing expenses.
One Spouse Suspects Hidden Assets
Particularly contentious divorces can lead to one or both spouses behaving in less-than-forthright ways. One party might attempt to hide assets from the other spouse so they don’t lose them in the divorce settlement. When this happens, it’s usually necessary to hire a forensic accountant to investigate hidden or undervalued assets so they can be included in the marital estate.
Business Ownership and Control:
If one or both spouses own a business, there are often concerns about business control, as a divorce can affect ownership stakes or the board of directors. One spouse might need to buy out the other’s shares to avoid conflict, an often costly option. Sometimes the business is dissolved. Legal agreements can also be affected, making it vital to plan carefully for the financial and operational future of the business.
Complex Tax Situations
Couples might need to sell assets to create cash for an equitable split, potentially triggering capital gains taxes. Dividing up stock options, financial accounts, and other major assets can lead to additional tax burdens, especially if sold or transferred during the property division process.
Custody Disputes
Child support and custody arrangements can become more complicated if there is a significant difference in a couple’s financial status. One parent might be concerned about retaining custody or facing potentially unfair spousal support.
Pre and Post-nuptial Agreements
These agreements are designed to avoid conflict during a divorce, but one spouse may decide to contest their validity. Defending or challenging a pre-nuptial or post-nuptial agreement adds complexity to a divorce and can drag the process out.
Divorce in Several Jurisdictions
Couples with assets across various states or countries could have their divorce affected by differing legal systems. Most US courts apply the laws of the state where the couple last resided. However, international assets might be subject to the laws of other countries, each of which has unique rules for dividing marital assets and determining inheritance rights.
How to Protect Your Assets Through Divorce
In a perfect world, a divorce nicely balances protecting each spouse’s interests and acknowledging their rights. However, that isn’t always the case, as disputes over assets and differing interpretations of fairness can create significant challenges that require legally sound strategies to safeguard what’s rightfully yours. Prenups and postnups are a good start, as are separate property agreements that define the assets you and your spouse consider separate and not subject to division.
One of the best ways to safeguard your assets through a divorce is with an asset protection trust managed by an independent trustee. Irrevocable domestic asset protection trusts are another option, but it’s sometimes possible for a spouse to target those assets. Offshore trusts protect assets from claims, creditors, lawsuits, and bankruptcies.
Untangling assets during a divorce is a complex process that requires careful consideration and strategic planning. Some steps you can take to help you navigate separation and divorce include:
- Conducting an inventory of all joint and individual assets and liabilities.
- Separating bank accounts and credit cards.
- Breaking up joint debts.
- Assessing joint investments and properties.
- Adjusting insurance policies.
- Updating estate plans, trusts, and wills.
Helping you protect your assets, address financial and custody arrangements, and navigate tax implications are just a few of the ways Cobb Cole can assist you through every step of your divorce, ensuring your interests are safeguarded and you receive a fair division of assets.
We offer personalized solutions tailored to your unique circumstances and provide empathetic and expert counsel through all phases of separation and divorce. We know how emotionally overwhelming a divorce can be, so we also emphasize how important divorce mediation can be when you and your spouse have disagreements. However, if litigation becomes necessary, our Family Law team is fully prepared to represent your interests assertively in court.
Want to learn more about how to protect your rights and interests during a high-value asset divorce? Contact Cobb Cole today to learn more and schedule a confidential consultation.
