Considerations In A High-Net-Worth Divorce

Divorce is one of the hardest events a person can go through. There are many complicated aspects and considerations when it comes to any divorce, but when the couple is in possession of high-value assets, the questions, decisions, and potential complications become astronomical.

If you are initiating divorce as a high-net-worth couple, there are particular issues that you should take into account. The Grey Legal Group is here to expand on some of the most important considerations for high-net-worth divorces, including prenups, taxes, and more – read on to find out some of the questions you will want to ask in order to protect yourself and your assets.

Considerations In A High-Net-Worth Divorce

What Is A High-Net-Worth Divorce?

High-net-worth divorce is typically defined as a divorce in which at least $1 million worth of assets are at stake, though the value is typically higher than that. While most divorces will usually feature the home and maybe a vehicle as the most valuable and contentious assets, a high-net-worth divorce will feature valuables such as vacation homes, business interests, foreign holdings, stocks, and more.

Because of the breadth of assets and the legal implications that are present in these types of divorces as opposed to others, the complexities can be much more challenging, which means high-net-worth divorces can take longer and be more expensive. When you initiate this type of divorce, there are a few things that you should keep in mind and moves you should make in order to make sure you are covered.

Inventory And Appraise Assets

One of your initial concerns should be to take into account the stakes of the divorce and begin inventory of what assets are on the table and what they are worth. You will want to take into account such aspects as:

  • What assets are or are not community property–that is, which assets did you own prior to your marriage and which did you acquire as a couple. If you owned a property before your marriage, it is yours outright, but if it was acquired after you were married, it is subject to a 50-50 valuation split. The same logic can be applied to debts. There are some exceptions to this rule, however, such as inheritances and gifts, which are usually counted as separate property. Be aware, however, that there are situations in which your separate property can be converted to community property through co-mingling. For example, if you put money you earned before marriage into a joint account, you have converted it into a marital asset.
  • In addition to knowing what property is separate and which is marital, you need to understand the value of your assets. The best way to do this is by having them appraised so that you know exactly how much worth you are dealing with.
  • Does anyone besides you and your spouse have a claim on your assets? When you come from or marry into a wealthy family, you might possess certain valuables to which other family members also have a claim. Business assets, charity assets, art pieces, and homes are all examples of assets that might be co-owned by people outside of your marriage. If this is the case for any of your belongings, you will likely be facing legal complications.
  • Are all assets being valued and represented accurately and fairly? Do you suspect that your spouse might hide assets in order to keep them? If so, you might want to invest in the services of a forensic accountant, who will scrutinize all accounts and transactions in order to determine if any assets are being hidden or misrepresented.

Tax Implications

In addition to the division of the assets, the tax implications of your divorce can be more complex when high-worth assets are being represented. The loss of your tax benefits from filing as a married couple or as head of the household should be taken into account, as well as whether you will still file jointly while you are undergoing your divorce. If you are still married at the end of the tax year, you can still file jointly and reap those benefits.

You will also want to be aware of the tax implications for the division of your property. Though you have the option of freely transferring real estate, for instance, between yourselves as a married couple, doing so after the dissolution of your marriage could cost you a capital gains tax. The same is true for transfers of certain accounts, such as retirement accounts. Recipients of spousal support can also be taxed, which is why it’s essential that you discuss the tax implications of your property and the moves that you intend to make with your legal team.

Prenups

Most high-earning couples devise a prenuptial agreement prior to their marriage. If you and your spouse have already provided for the distribution of your assets using a prenup, there will be fewer complications that may arise. However, if one party of the couple feels that the prenup is unfair, they can challenge it in court on the basis that there were assets unaccounted for, that their value was misrepresented in the pre-nup, that they signed it under duress, and many more such premises.

Lifestyle Maintenance

Especially if you have children, the issue of lifestyle maintenance is bound to come up during your divorce. This is where issues such as child and spousal support payments are likely to make an appearance. The concern with lifestyle maintenance is to enable a smooth transition into the post-divorce chapter of your life. If one of you is more well off than the other or is determined to be a higher potential earner, that person will likely have to pay the other alimony.

Lifestyle maintenance is important especially in divorces that involve children because the principle behind it is to maintain stability and allow you the continuity you and your kids need to adapt to a new way of life.

Keep in mind that if you are paying or receiving a certain threshold of spousal or child support, these can have tax implications, so be sure to speak with your legal team.

The Grey Legal Group Can Help With Divorces In Any Tax Bracket

The Grey Legal Group has substantial experience representing clients in divorces ranging from the quick and cheap to the complicated and high-net-worth variety. If you want to work with a team that will represent you thoroughly and aggressively and look out for all of your legal interests, we can help you meet your divorce goals and move onto the next chapter of your life with what you need to get started. Reach out to schedule a free consultation with a member of our team in order to get started.

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The Grey Legal Group

At The Grey Legal Group, we believe in helping all families with their legal needs so they can be protected on your journey back to a calmer, happier place of stability. Whether it is divorce, child custody, guardianship, domestic violence, or adoption, we have seen it all before and we can help you through it. With the legal knowledge and experience we bring to the table, we will be certain to find the best and most efficient solution to your situation.

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