Filing for divorce can be a complicated process on its own, yet for high net worth individuals with a significant number of financial assets, the separation process takes on additional complexities. Divorce can be very challenging not only emotionally, but also legally when it comes to the division of marital assets. Understanding the different elements that are part of high-asset divorce are critical while also ensuring you have a knowledgeable legal and financial team on your side before beginning the divorce process.
What Is A High-Asset Divorce?
A high-asset divorce involves the legal separation of a couple with significant wealth or a large number of high-value assets. The types of assets that are typically involved include:
- Closely-held businesses
- Stock options
- Trust funds
- High-value retirement plans
- High-value primary home and vacation residences
- Other real estate investments
- Investments in closely held enterprises
High-asset divorces differ from traditional divorces since they involve high-value assets and often require an extensive division of assets process with a skilled team of attorneys, appraisers, forensic investigators, and specialized financial advisors. A high-asset divorce requires the valuation of assets by experienced professionals in order for the division of marital assets. High-asset divorces are also unique in that oftentimes one spouse is higher earning and more financially independent than the other spouse. In these cases, spousal support payments from the higher earning spouse to the lower earning spouse are typically involved in the divorce settlement.
Community Assets vs Separate Assets
Understanding the difference between community assets and separate assets is an element that is particularly important in high-asset divorces. Community assets, or also known as marital assets, include assets and property acquired during the time of the marriage. On the other hand, separate assets include any individual property owned by each spouse before marriage, which can include inheritances, gifts to an individual spouse, or property acquired under one spouse’s name.
Community assets are able to be divided in a divorce depending on the laws in your state. For community property states, any and all property acquired during a marriage is jointly owned by both spouses and is divided equally in a divorce. In other states, marital property is divided equitably between both spouses. In states with equitable distribution, the court decides an equitable and fair division of assets which is not necessarily a 50/50 split. In some cases, the court may award each spouse with a percentage of the total value of marital assets in which each spouse receives property that adds up to the value of that assigned percentage.
Property Division May Be Complex
Organizing and listing all assets, both community and separate assets, is an important step to take in the beginning of the property division process. In a high-asset divorce, the division of a closely-held business can be one of the most complicated types of assets involved. Divorces involving the division of high-value businesses require a team of experts for accurate business valuation for the purposes of dividing the assets. Similarly, for couples who have invested in high-value real estate, valuation appraisers are often needed to determine the worth of estates.
In high-asset divorce cases, the likelihood of a contested divorce is higher than in a traditional divorce. For high net-worth individuals, the assets that are being contested may have a higher value than the cost of legal representation. Because of this, there is a much greater opportunity to contest marital assets. The co-mingling of separate and community property is another element of high-asset divorces which create a complex property division process. In certain cases, the court may determine separate property to be divided between spouses as it considered partly marital property.
Tax Implications In A High-Asset Divorce
For certain high-value assets, some may have higher tax implications than others. When filing for divorce, it is important to consider the tax consequences and weigh the advantages and disadvantages of taxes on assets that are being divided. Capital gains taxes can become a complicated element in the division of assets if one spouse decides to sell stocks or real estate. Capital gains taxes can have implications on the valuation of assets, such as when the sale of an asset results in a change in value from when it was acquired to when it was liquidated. Working with an experienced high-asset divorce lawyer can help you reach a settlement agreement which avoids paying more in taxes.
Getting Help From An Experienced Divorce Attorney
Given the complexities of high-asset divorce, it is highly recommended to work with an experienced high-asset divorce attorney. Every divorce case is extremely unique and requires legal expertise and professional financial advice in order to protect your best interests. The Temecula divorce attorneys at Wilkinson & Finkbeiner understand how to approach the most common issues in contested divorce involving high-value assets. Getting help from an experienced attorney can benefit you by having legal support throughout the divorce and ensuring an efficient settlement process.