Without regard to the circumstances, divorce is difficult.
However, divorces involving large marital estates or couples with high net-worth spouses are much more difficult than divorces involving couples with modest asset portfolios.
There is also a great deal more at risk!
Valuing, negotiating, and reaching an agreement on all issues necessary to obtain a high net worth divorce is no easy task. There are many factors to consider, such as a sizable asset pool, non-traditional employee compensation, closely-held businesses, numerous high-value real estate properties, and high living standards.
But depending on the divorce choice you and your spouse select, your readiness to make concessions, and your desire to recognize one other’s contributions to the marriage, it will or won’t be difficult (and expensive) to get a divorce with significant assets.
The main issues of a high-asset divorce are covered in this article.
And things you and your partner can do to protect your financial resources and keep control throughout the course of your divorce.
What Is a Divorce With a High Net Worth?
An official definition of a high-net-worth divorce is lacking. This has traditionally been characterized as a split involving at least $1 million in assets, the same threshold used to designate an investor.
However, the definition has changed recently because a million dollars is no longer what they formerly were. (Given that the average home now sells for around $500,000 and that many retirement accounts contain six-figure sums, even a middle-class family may have at least $1 million in assets to deal with.)
Today, it’s more true to say that a high-net-worth divorce involves assets valued at several million dollars.
How do Divorces Among People with high net worth Differ?
Due to the significant amount of money and property, divorces involving high-net-worth individuals are typically longer and more complicated. Although it’s typical to believe that an individual’s net worth is mostly determined by their income, a variety of other assets should also be taken into account. Other buildings, businesses, investments, intellectual property, inherited property, pricey commodities like cars, boats, planes, retirement accounts, and more are among these assets.
Additionally, you must decide how you will divide your firm if you and your spouse own it together.
High Net Worth Couples’ Concerns About Divorce
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The Rules for Child Support May Not Apply
Judges and attorneys must use standard, mandated statutory rules that are outlined in North Carolina General Statutes Section 50-13.4 for determining child support. Currently, the rules are not strictly observed, as they are in other lower-income circumstances, when parents make more than $300,000 per year or $25,000. Instead, the case should be examined, taking into account the children’s legitimate needs as well as the relative capacity of each parent to maintain them.
The recommendations might help the court decide on a minimum amount of child support. In circumstances of high income, legitimate needs could include:
- tuition for private schools
- costly pastimes, classes, or camp
- the hiring of an au pair or nanny
- College fees
The cost of their college tuition can be another factor that demands special consideration. Children of wealthy parents frequently consider enrolling at private and more expensive schools and institutions. In North Carolina, a judge cannot make a parent pay for college since, traditionally, a parent’s financial responsibility ends when their child becomes 18 or graduates from high school, whichever comes first. Therefore, a thorough separation agreement should cover topics like paying for college tuition, studying abroad, and college visits.
Planning an estate concurrently may be necessary to preserve funds for children. As part of a general settlement in a separation agreement, parents may want to ensure that trust funds are established and funded for their children and grandchildren. Another way parents can financially protect their children is to mandate the purchase and maintenance of life insurance.
To dispel any misconceptions, the “richer” parent is not always granted custody. There is a current trend in some places to move toward joint legal and physical custody for both parents with a really equal 50/50 time split. For scheduling, activity, and school reasons, the divorcing couple will often need to live reasonably close to one another. The parent who will best advance the kid’s welfare will be given child custody, according to the court’s mandatory criterion for what is in the child’s best interest.
What is in the best interest of the child or children is the guiding principle by which the court is always governed. If such equipment is readily available and within the parents’ financial reach, courts are granting electronic visitations to the non-custodial parent. Electronic visitation should be expected and regarded as a standard clause in an agreement in high-income instances.
2. Do pre-nups exist? Is it true?
Is there a pre-nuptial agreement? This is another issue to consider in a high-asset divorce case. When “money marries money” or “one with money marries one with very little,” pre-nuptial agreements are frequently used.
An agreement does not automatically become enforceable just because it exists. The prenuptial agreement needs to be examined. Pre-nuptial agreements are frequently set aside or declared unconstitutional if one party coerced the other into signing it or made it a requirement for marriage.
In an effort to maintain privacy or protect themselves, the partner with the greater wealth might have omitted some assets from the pre-nuptial agreement. There will probably be grounds for the pre-nuptial agreement to be void if a party signed it under duress, through fraud, or for another similarly situated reason.
3. Real Estate and Investing
Analyzing real estate assets is necessary. Richer couples are more likely to own a primary place for their marriage in addition to a mountain getaway, a beach house, or a lake house. It is more complicated than simply agreeing to give one spouse one house and the other spouse the other home. Frequently, the settings are unsuitable for their children’s educational or professional needs.
Couples with more money may also have more personal property invested. There isn’t a lot of argument over knickknacks and kitchenware in most divorce situations. However, wealthy couples might own priceless antiques, luxury watches, jewellery, classic automobiles, horses, yachts, and works of fine art.
It is necessary to hire qualified appraisers to conduct evaluations. Additionally, there probably will be sizable stock and investment portfolios. The parties might have high death benefit insurance policies, IRAs, CDs, and annuities. There will need to be a thorough inventory and evaluation of all assets.
It will be necessary to disclose all assets in full. It will be necessary to evaluate the pension; starting with the current face value is not the right method to divide up future funds.
If an equal division is not equitable, the court will divide the property in an equitable manner. The court will take into account the following elements in accordance with Section 50-20 of the North Carolina General Statutes:
- Income, assets, and debts owed by each party.
- duties left over from prior marriages
- the parties’ ages, marital length, and state of health
- A spouse’s requirement for a home
- anticipated retirement funds
- contributions given to the spouse’s education and career
- Equities’ liquidity
- a challenge in asset valuation
- wasteful behaviour
4. Spousal support and alimony
The topic of spousal support/alimony is the last one. If both parties in a high-income case earn significant amounts of money, alimony may not be a topic that needs to be discussed.
Alimony should be considered when one spouse is a dependent spouse, and the other spouse is the supportive spouse. A dependent spouse is described as “a spouse, whether husband or wife, who truly significantly depends upon the other spouse for his or her maintenance and support or who substantially needs maintenance and support from the other spouse” in North Carolina General Statutes Section 50-16.1A.
“A partner, whether husband or wife, upon whom the other spouse is genuinely largely reliant for maintenance and support or from whom such spouse is substantially in need of maintenance and support” is the definition of a supportive spouse.
An obvious example would be a stay-at-home parent who makes no money while the other parent works as a surgeon and earns over $600,000.
The surgeon is the supportive spouse, and the stay-at-home parent depends on him or her. However, a spouse who is financially reliant can still work. If one spouse earned $750,000 annually, the other spouse would still be regarded as dependent.
The duration of spousal support may be fixed at one time or temporary. For alimony calculations, no set rules or paperwork must be completed, unlike child support.
A party may ask for post-separation assistance or short-term alimony until all of the difficulties between the parties have been fully resolved. When there is a significant disparity between the spouses’ incomes and the cost of living, post-separation support is crucial. The following factors will be taken into account by the court: the parties’ financial needs; their customary standard of living; their current employment income and other regular earnings; their separate and marital debts; and the expenses that are reasonably required to support each party and their respective legal support obligations.
A post-separation support award should be made if the dependent spouse’s resources are insufficient to cover reasonable needs and the supporting spouse has the financial means to make the payment. The judge will take marital wrongdoing into account when deciding whether or not to award post-separation assistance.
Long-term alimony may be a problem in high asset scenarios. The amount, length, and mode of alimony payment will be left up to the court’s discretion. The award’s length may be for a predetermined or indeterminate period of time. The court will take into account all pertinent factors, such as the following when determining the amount, length, and method of alimony payment:
- the marital misconduct of the couples
- earnings and earning capacity
- age and circumstances of the spouses
- physical, mental, and emotional health
- length of the marriage
- the assets brought into it
- and educational backgrounds
- tax repercussions
- the level of living
Divorce has numerous and serious repercussions, particularly when significant assets are involved. Pre-nuptial agreements, equitable distribution, alimony, child support, and custody concerns should all be carefully considered.
How to Handle a high net worth divorce?
One article cannot give you advice on how to manage a divorce, particularly one involving millions of money. But we can offer you some general pointers.
The truth is that all divorces can benefit equally from our finest counsel on high-net-worth divorce. We advise the following if you want to make this procedure go at least a little bit more smoothly:
1. Seek legal advice right away
As soon as you consider seeking a divorce, consult a lawyer. This is a tough matter; even a peaceful divorce will result in challenging legal and financial issues. Find a lawyer who specializes in divorce and money issues and, ideally, one who has connections to reliable accountants. You must be aware of your precise situation and the law’s application. Although doing it yourself might result in a short-term financial savings, it will ultimately cause you a lot more problems.
2. Get a competent attorney, not a combative one
There is a distinction between an aggressive lawyer and a good one. In their advertising, many lawyers enjoy portraying themselves as warriors, pit bulls, or any other metaphor you choose. And there are occasions when you need a person looking for a battle. Not at the time of your divorce. Find a calm, organized, and thinking person. It will save you time (and money) in the long term.
3. Don’t Ignore Your Debt
No matter how much money you have, you should always consider your household’s debt when considering a divorce. Like assets, liabilities (a fancy word for debt) are allocated to married couples.
Remember that you are not responsible for any debt your spouse brought into the marriage, such as student loans. Remember that they do owe some of it if you took out the loans (like credit card debt) while you were still married. Divide debt equally, just like you would assets, and ensure you only take what is fair.
4. Organize Your Future
You don’t merely divide up assets as they are now when you get divorced. You are preparing for your family’s future, finances, and yourself. There are numerous meanings for this. It entails accurately predicting the tax repercussions of dividing your assets. It entails considering your assets’ potential long-term value rather than their current market value.
Making plans for any children you may have or any risks you may want to take in the future is undoubtedly a part of it. Hiring a competent financial counselor is the best method to accomplish this. You need someone encouraging you to consider the long term rather than just the upcoming months.
5. Don’t retaliate against your ex.
This is the one legal error that individuals consistently make. Any type of lawsuit is not the appropriate method for handling a personal issue. Numerous people begin a legal case eager to exact revenge on someone they feel has wronged them. They always find themselves trapped in a protracted, tedious relationship that is essentially done on purpose to prevent emotional closure.
You might feel tempted to use your divorce as a way to get even with your ex. Don’t. No matter how much they deserve it, it will only end up costing you more time, trouble, and money than it is worth.
Final Thoughts
When a couple anticipates getting a divorce, it is necessary to consider how to manage the household money. In a perfect world, spouses would collaborate to decide how to distribute assets after a divorce. However, a mediator or court may intervene to address these concerns if there are disagreements regarding property division or other aspects of divorce.
When going through a high net worth divorce, there are a number of things that people should and should not do. To begin with, never make an effort to conceal any assets or money from the other spouse or the court. This is not only dishonest, but if the assets are later uncovered, it might also affect how the property is divided.
Couples going through a high net worth divorce shouldn’t rush to reach a speedy settlement. Even though a divorce can be an emotionally trying and stressful period, it’s crucial to approach property division rationally to avoid making mistakes that could have both immediate and long-term repercussions.