High-asset divorces are not solely focused on dividing properties or savings accounts; this area also places a focus on protecting your financial future. The stakes are typically high, and the challenges unique.
A mortgage intertwined with business loans, credit lines blurred between personal and professional use, retirement accounts with varying vesting schedules are just a few examples of the financial puzzles that need solving.
An attorney specializing in high-asset divorces will not only have the experience and skill, but also the established resources for uncovering hidden assets, identifying obscured financial details, and avoiding undue tax burdens.
A reputable attorney will focus on a fair division that lends itself to a more amicable future when possible.
Understanding Marital vs. Non-Marital Debts
The first step in dividing debts during a divorce is determining whether they are marital or non-marital.
Marital Debts
In Maryland, marital debts include those incurred during the marriage, regardless of whose name is on the account. This could include joint credit cards, car loans, or even shared personal loans.
Non-marital Debts
Non-marital debts, on the other hand, are those incurred before the marriage or after separation. These typically remain the responsibility of the individual who incurred them.
For instance, if one spouse had student loans originating prior to the marriage, those would likely stay with that spouse after the divorce.
However, if the couple took out a home equity loan to renovate a shared property, that debt would be considered marital and subject to division. Knowing this distinction is essential for any high-asset divorce.
Equitable Distribution in Maryland
Maryland operates under the principle of equitable distribution, meaning marital assets and debts are divided fairly but not necessarily equally. The court considers several factors to determine what “fair” looks like. These factors include:
- The length of the marriage
- The contributions of each spouse (financial or otherwise)
- Each spouse’s individual financial situation after the divorce
For example, if one spouse earns significantly more than the other, the court may assign a larger portion of the marital debts to that spouse. This approach ensures that neither party is unfairly burdened while also accounting for each person’s ability to pay.
Challenges in High Asset Divorces
High-asset divorces bring more than just big numbers; they bring big decisions. Beyond splitting investments or vacation homes, you may be dealing with debts like sprawling mortgages, personal loans, or even liabilities tied to a family business.
In a situation in which one spouse managed the business finances while the other focused on the household, the question becomes: who takes on the business loan? Getting these answers right is valuable to both parties, and it starts with fully understanding the scope of what is owed.
Another challenge is tracking hidden debts. In some cases, one spouse may have accrued significant debts without the other’s knowledge. Identifying these liabilities requires thorough financial investigation, which is why hiring experts is essential in high-asset cases.
Valuation of Debts
Debt valuation can be accomplished through several methods. Establishing this method is a primary step, setting the stage for all that follows. Valuation also requires more than adding up numbers; it requires understanding the story behind them. Going back to the business loan example, maybe it helped one spouse grow a profitable enterprise, but now both parties are tied to its repayment.
A forensic accountant can investigate the financials, showing what is owed, how the debt is tied to the business, and whether one spouse is more responsible. Without this clarity, you risk leaving money, or liability, on the table.
Fluctuating debt balances add another layer of complexity. Credit card debts, for instance, can change rapidly due to interest or recent transactions. Proper valuation ensures that debts are fairly divided based on their current state, not an outdated snapshot.
The Tax Implications
In the absence of professional guidance, tax implications are commonly overlooked during debt division. Certain transfers of debt between spouses can trigger tax liabilities. For instance, if one spouse takes on a property-related debt while the other keeps the property itself, the transaction could have unexpected tax consequences.
It is essential to consult a tax professional during the divorce process. They can help structure the division of debt to minimize the tax burdens for both parties while ensuring compliance with IRS rules.
Protecting Your Financial Interests
Handling debts in a high-asset divorce requires strategic planning and expert guidance. Here are a few practical steps to protect yourself:
- Create a Detailed Financial Inventory: List all your marital and non-marital debts, along with balances, interest rates, and payment schedules. This creates transparency and avoids surprises during negotiations.
- Hire Financial Experts: Hire financial experts, or attorneys with forensic accountants or financial advisors, to assess debt values and uncover hidden liabilities.
- Work with an Experienced Attorney: A high-asset divorce attorney in Maryland can help you understand your rights, negotiate fair terms, and navigate the complexities of high-asset divorces.
These steps not only protect your financial future but also reduce the stress of the divorce process by ensuring clarity and fairness.
Secure Your Financial Future During High Asset Divorces
The intricacies of debt division in high-asset divorces requires more than just good intentions. Whether you’re untangling shared business loans or determining the fate of property mortgages, expert legal guidance is invaluable.
At Milstein Siegel, PLLC, our attorneys specialize in guiding Maryland clients through the financial labyrinth of high-asset divorces. Our approach goes beyond simple asset division – we’re committed to shaping a stable financial future for you.
Don’t leave your financial destiny to chance. Contact us today to request a consultation. Let’s work together to design a divorce strategy that protects your interests and sets the stage for your next chapter.