Divorce can be complicated regardless of income or assets. However, couples with a high net worth often face many challenges that can considerably extend the process. Investopedia defines a high net worth individual as a person with liquid assets of more than one million dollars.
Although high net worth divorces involve many of the same components as regular divorces, such as child custody, child support, alimony and property division, the amount of money involved in these transactions is considerably higher than the norm. To ensure fair payment arrangements and equal distribution of marital assets, most high-net-worth spouses seek legal representation.
Property Division In High Net Worth Divorces
One of the biggest changes that divorcing couples will encounter when one or both individuals have a high net worth relates to the division of marital property. Some of the most common assets owned by high-net-worth couples include real estate holdings, investments, small businesses, brokerage accounts, pensions, retirement savings or tangible assets like jewelry or artwork.
How property is divided in a high-net-worth divorce will depend on various factors, such as if the property was acquired before or during the marriage. In the majority of cases, property that one spouse acquired before the marriage remains the sole property of that spouse. If a spouse receives an inheritance or gift from a third-party during the marriage, those assets generally belong to that spouse alone.
The court will also consider if there was a prenuptial agreement before the marriage. A prenup typically lists all assets and property owned by each person, as well as any debts. The document specifies what each partner’s property rights will be after the marriage to allow each person to walk away with the money or assets that they came into the marriage with or to allow a high-net-worth spouse to retain their income. In some cases, a prenuptial agreement will dictate whether a spouse is entitled to alimony.
Maryland is not a community property state but rather has an equitable distribution statute. This means that while the court will attempt to divide property fairly between spouses, it might not be an equal split. Instead, the court will consider what each spouse wants and what makes the most sense. For example, one spouse may want to stay in the home with the kids, while others may want a certain vehicle or a vacation home.
There is no exact formula for making monetary awards or dividing property but the court will consider what each spouse contributed, economic circumstances, the length of the marriage, how assets were acquired and similar aspects.
Any nonmarital property, which includes property owned by either party before the marriage, generally belongs to the original owner and cannot usually be collected by the other spouse.
Child Support In High Net Worth Divorces
If a divorcing couple has children together, one spouse may take on the role of the custodial parent and may be entitled to child support. The standard child support formula used in many states may not apply in a high net worth divorce. Maryland follows an “income shares model” that determines the amount of money that parents spent on their children when they were still living together. This amount is then divided between the parents based on their earnings.
Many factors are considered when determining child support, such as child care expenses, medical expenses, health insurance coverage, travel expenses and educational expenses. Maryland guidelines for calculating child support are based on each parent’s adjusted actual income or imputed incomes. Both incomes are then combined and plugged into a guidelines chart to determine the family’s basic child support obligation. However, if the combined amount is higher than $15,000 per month, the guidelines formula is not used. Instead, the court determines an amount of child support based on the unique needs of the children involved.
Speak With A High Net Worth Divorce Attorney
High net worth divorce cases can be highly complex and require careful review and the representation of an experienced high net worth divorce attorney. A divorce attorney can assist divorcing couples with all aspects of the process, such as child custody, child support, property division, forensic accounting, business valuations, alimony, property and investment. A legal professional can also provide insight into other areas of divorce that may have been overlooked, such as the tax implications of changing a filing status, the liquidation of valuable assets, an arrangement of who claims child tax credits and the division of retirement accounts.
High net worth divorces can be costly, time-consuming and a highly emotional time for both parties. Reach out to us online or over the phone at (410) 792-2300 to schedule a consultation with an experienced high net worth divorce attorney at Milstein Siegel and learn more about how divorce impacts spouses with a high net worth or schedule a consultation.