Issues to Expect in High Asset Divorce

on Feb 6, 2018 in Divorce

Divorce is emotional and difficult.  High asset divorces present unique challenges and added complexity.  Every divorce is unique, however, similar issues often arise in high high asset divorces.

Often, high asset divorces involve real estate investments including multiple homes and vacation properties, stocks, bonds, trusts, pensions, other retirement accounts, businesses, vehicles, and other financial accounts.  Assets acquired during the marriage, except for some inheritances and gifts, are marital assets.  In a divorce, these assets are divided fairly and equitably – a complicated process.  

When considering a divorce, a party with considerable assets must first hire an experienced, qualified family law attorney.  While having considerable assets is a positive, it also means the parties have significant assets at stake during a divorce.

What is a High Asset Divorce?

A high asset or high net worth divorce has typically been defined as a divorce involving assets more than one million dollars.  Often, those divorces involve multiple millions of dollars.  However, the categorization of a divorce as a “high asset divorce” is less important than recognizing that divorces with greater assets present greater issues.

Common Mistakes to Avoid in High Asset Divorce

Rushing the Process

A common mistake in any divorce is agreeing to anything to end a marriage.  Guilt often serves as a motivator in these situations.  In addition, high asset divorces are particularly complicated and time consuming.  This leads to frustration and a desire to “just get this over with.”  Do not give in to this emotion.  Both parties must live with the result.  Making a hurried decision results in a property division one party may regret for the rest of his or her life.   Allow your qualified, experienced family law attorney do his or her job.  This requires time and patience.

Do Not Hide Assets

Dividing assets that you view as yours is frustrating.  Temptations to hide some of those assets arises on occasion.  Do not hide any assets.  Take time to carefully identify all income sources, assets and liabilities.  When a party fails to disclose or hides property, a fair settlement will be impossible, whether by agreement or by a judge.  Further, if a party is discovered hiding assets, the court will issue consequences.  At the very least, the party will lose credibility with the court.  Much more serious consequences may also occur.

Do Not Forget Debts and Liabilities

In a high asset divorce, the focus quickly becomes the positive assets.  However, remember to disclose all liabilities and debts.  Failure to disclose debts is not only fraudulent, it also hurts your case.  For example, failing to disclose a credit card debt may result in a party not receiving a fair and equitable property settlement.  Do not get stuck with a debt you failed to disclose.

Family Business & High Asset Divorce

High asset divorce often includes a business owned by the parties.  Often, it is best for both parties to keep the business running and prosperous during the divorce.  First, ideally, the parties agree on how to continue the business during the divorce.  Complicated divorces take time and the business must operate to maintain the value of the business as a marital asset.

Properly valuing a family business requires a competent, qualified appraiser or business valuation expert.  A qualified, experienced family law attorney hires an evaluator that provides a fair valuation, allowing for a fair and equitable property distribution.

When dividing the value of the family business, parties have three basic options to consider.

Options When Dividing a Business

First, one party retains the business.  This is appropriate when one party has been primarily responsible for operating the business.  It is often the case when one party has special training and abilities, such as a professional practice.  This includes attorneys, dentists,  veterinarians, architects, and accountants, for example.  The other party does not have the skills or licensing to operate the business.  The party not awarded the business receives other assets in compensation.

Second, the parties operate the business jointly after the divorce.  This is appropriate when both parties operate the business during the marriage.  While this makes property division simpler it is only appropriate in certain circumstances.  Can the parties realistically operate the business together?  This option is typically only available as part of a settlement agreement.  Courts do not order the parties to continue to operate a business jointly after a divorce.

Third, the parties sell the business.  The parties agree to this option or courts order it when appropriate and no other option is appropriate.  Be advised, selling the business often results in a reduction of the total value of the marital estate.  This is particularly true in a quick, so-called fire sale of the business.

While difficult and complicated, a fair, accurate valuation of the business is vital.  This is often the most valuable asset in the marital estate.  Under or over valuing the business results in long lasting consequences.

Stocks and Bonds

Valuing stocks, bonds and profit sharing benefits become extremely complicated.  This is particularly true when such property was acquired after the marriage and increased in value during the marriage.  Parties must also carefully consider future profit sharing benefits earned during the marriage and not yet collected, for whatever reason.

Forensic Accountants

Forensic accountants are professional experts in auditing and investigation.  Their training and skills go beyond typical CPAs and assessing income tax returns.  Forensic accountants review years of records to determine appropriate valuations.  When a party suspects the other is hiding the existence or value of assets, a forensic accountant is able to track down and value those assets,

Forensic accountants are costly, but worth the expense.  Remember, you have to live with the property division after the divorce, accuracy and completeness is vital.

If You Are Considering Divorce

If you are considering a divorce, contact the firm of Fait & DiLima.  Our attorneys focus on divorce and family law issues exclusively.  Further, we have experience with high asset divorces.  Our forensic accountants have provided useful information in prior high asset divorce cases.  We look forward to speaking with you about your case.