Divorce is always complicated, but when a couple has significant assets, the division of property can be very contentious. Even couples who agree on many of the larger matters in a divorce can still encounter problems when it comes to certain financial issues. Therefore, it is essential to have an attorney who is experienced in high asset divorces on your side to help you navigate this complex area of the law.
If you are involved in a high asset divorce, here are some of the financial issues you should be prepared to discuss with your attorney.
Property Division
Divorcing couples must decide how to divide marital property, a term that encompasses all of the assets and debts that were acquired during the marriage. For couples who have a high net worth and own a significant number of physical properties and financial assets, this can be a daunting task.
Some of the assets that may be involved include:
- Real Estate – Couples in high asset divorces often own expensive marital homes and vacation homes, or other types of properties. Each one must be appraised to determine the value as well as the amount of equity each spouse has in each property. It often becomes necessary to sell some properties during divorce because it can be difficult to divide them equitably.
- Financial Accounts and Other Investments – Couples in high asset divorces often have extensive investment portfolios with bonds, stocks and other financial investments and accounts. It is essential to have a full financial picture of every asset owned by either or both spouses in order to be divided in a manner that financially benefits both parties.
- High-Value Items – High-value items owned by the couple will require an appraisal to determine their full value and ensure a fair and equitable division. These items could include boats, jewelry, artwork, luxury vehicles, collectibles, furniture and designer clothing.
- Executive Compensation – Spouses who work as corporate officers may be receiving several types of benefits in addition to their income, such as profit sharing, deferred compensation, stock options and bonuses. All of these benefits must be considered as part of the property owned by a couple and the income the spouses earn.
Considerations for Entrepreneurs
In cases where one or both spouses own a business, it is essential to address how ownership of their business interests will be addressed in the divorce. For example, if the business was acquired or founded at some point during the marriage, it will likely be marital property that must be divided between the spouses.
In cases where a business was owned by a spouse prior to getting married, some of its assets may still be considered marital property if the company’s value increased during the marriage. Sometimes, a spouse who owns a business may have to reimburse the other spouse for contributions they made to the business.
To determine the actual value of the business and its assets, a business valuation will be carried out. In some cases, one of the spouses could retain full ownership of the business and agree to give the other spouse marital assets that are similar in value. In other cases, the business may be sold and the proceeds divided.
If a business was operated by both spouses and they believe they can continue to work together effectively as business partners post-divorce, it may be possible for them to co-own the business, but they should have a partnership agreement in place defining the roles and responsibilities of each spouse.
Tax Issues
During the divorce process, spouses must decide if they wish to continue filing joint tax returns. In some cases, there may be financial benefits to doing so, but it also makes both spouses liable for interest, penalties and taxes owed should they be audited. Therefore, divorcing spouses should also work closely with an accountant to ensure they fully understand their family’s finances and that their tax information is correct.
They also need to understand the tax consequences of decisions made during their divorce. If, for example, they wish to sell certain property, such as investments or homes, they may have to pay capital gains taxes. They also need to understand deductions and credits claimed by business owners as these impact the amount of income used to calculate awards of spousal and child support.
Financial Support
In some high asset divorces, spousal support may be awarded, particularly if one spouse is earning a much higher income than the other spouse. This will help to ensure both spouses are able to maintain the living standard to which they were accustomed during their marriage.
Child support can also be influenced by high incomes, and divorcing parents will need to determine how to share other child-related expenses such as extracurricular expenses, private school tuition and college savings.
Schedule a Consultation with the High Asset Divorce Attorneys
If you are party to a high asset divorce, you need legal representation that understands the complexities involved in your case. Contact Milstein Siegel to discuss your divorce with our experienced high asset divorce attorneys.