Key takeaways
- High-net-worth divorces are complicated by nature and may require extra time, planning and negotiation.
- Common issues in these divorces may include prenuptial agreements, complex asset division, hidden assets and spousal support.
- A high-net-worth divorce follows the same legal principles as any other divorce.
Six common issues in a high-net-worth divorce
High-net-worth divorces bring many of the same emotional and personal struggles as other divorces, but they’re typically more legally complicated. For example, they may involve complex asset division, hidden assets and significant spousal support. Many people in this situation wonder, How do I protect myself financially in a divorce?
While you may not need legal assistance in some less-complicated divorces, an attorney—particularly a high-asset divorce attorney—is often essential in a high-net-worth divorce.
Below, we explore six common issues in high-net-worth divorces. We also detail how the right experienced attorney may be a valuable asset in these cases.
1. Prenuptial agreements
A prenuptial agreement (or “prenup”) is a contract you sign before you get married laying out terms related to the marriage. These legal documents often cover property division upon divorce and frequently include provisions related to spousal support.
So what happens if you sign a prenup and get divorced? It depends on your prenup and situation.
If both spouses still agree to the terms, enforcement may be simple. However, circumstances—and people—change. You or your spouse may be able to get out of a prenup if it:
- Is unconscionable where it’s so unfair that it’s unjust to enforce
- Is the result of unequal bargaining power (for example, where one spouse had an attorney and the other didn’t)
- No longer makes sense in the circumstances
- Is difficult or impossible to interpret
If your spouse tries to hold you to the prenup, you may have to present your case before a judge. Based on the evidence you offer about the circumstances surrounding the prenuptial agreement, the judge will decide whether it’s enforceable.
2. Hidden assets
It’s not uncommon for high-net-worth individuals to have several financial accounts at multiple institutions, sometimes outside the United States. When you divorce, you must disclose all your assets.
Failure to disclose may subject you to penalties. If your spouse discovers you hid assets years after your divorce, they may reopen your long-settled proceedings to get a slice of what you kept hidden.
3. Dividing complex assets
When you have a high net worth, your assets are rarely (if ever) all in one place. Your assets may be:
- Tangible
- Intangible
- Easy to measure
- Difficult to measure
Dividing these assets, equally or not, often takes a lot of groundwork.
Separate vs marital assets
Sorting through separate and marital assets is often more complicated than it may sound. Which assets are considered marital assets may be muddied because of questions surrounding the end of a marriage.
When you divorce, you divide marital assets. Generally, the property you receive or earn after the marriage begins, like your salary and real estate, is considered marital property.
Nonmarital property is separate property. This may include:
- Property you owned prior to entering the marriage
- Inheritances
- Gifts only to you
- Personal injury lawsuit proceeds
- Property you and your spouse agree to treat as separate—if you actually treat it as separate
Separate property also includes assets you obtained after you concluded you needed to divorce but before you finished the paperwork. Spouses may disagree on when the marriage officially moved toward divorce, creating potential disputes over what property is marital and what is separate.
Additionally, when separate assets gain value, the other spouse may be entitled to a portion of the increased value if they contributed to the increase. For example, if one spouse enters the marriage owning a fixer-upper that the couple doesn’t live in, that house would be separate property. If the other spouse remodels part of the house, they have increased its value. They’re entitled to a share of the property based on their work, even though the property is otherwise separate.
Other assets may have lost value, or you may have traded one for another, or made any number of shifts to what you and your spouse own. Tracing back your assets and liabilities takes time and focused effort. You may need to review records from financial institutions, businesses or old tax returns to determine whether certain property qualifies as separate or not.
Pro tip: Some people hire an accountant if their records are too dense to work through in a reasonable time.
Valuation
Before you divide your assets, you need to know their worth. Valuing intangible assets may require specialized knowledge and consultation with one or more experts. For example, you may need to hire one expert to determine the value of your home and a different expert to determine the value of a piece of artwork.
Your spouse may choose to hire their own experts as well. Those experts may disagree, further complicating the situation.
Business interests and intellectual property
Dividing a business in a divorce often brings questions. Putting an objective value on business assets and intellectual property is tricky. Plus, businesses often have different subjective values. Negotiating a fair division may involve spousal maintenance, trading larger assets for smaller assets or arranging for a buyout over time as you free up additional assets.
Additionally, many businesses have established goodwill in the local community or beyond. You may also have unique property, like charitable trusts or other legacy-related assets. If one spouse keeps those assets, you may need to assess the value of the related goodwill and address it in your property division.
Multi-jurisdiction asset ownership
High-net-worth individuals also frequently own properties in several jurisdictions. If the law in the property’s jurisdiction differs from those in the divorce jurisdiction, you’ll need to determine which law applies and then apply it.
4. Taxes
A high-net-worth divorce may impact your taxes in the short and long run.
As part of your divorce, you’ll likely need to sell some assets to get tangible funds to divide. The sale of assets may result in a large capital gains tax bill.
It’s also common to divide retirement accounts in a divorce. Doing so may have tax implications and affect the treatment of benefits when they’re received.
5. Spousal support
Spousal support, especially long-term alimony, is less common than it used to be. However, in a high-net-worth divorce, spousal support often plays a key role in negotiations, allowing one spouse to retain certain assets while the other pays over time.
Pro tip: Spousal support may be voluntarily offered, even when a court would unlikely order any. Offering spousal support means providing guaranteed payments to the other spouse. These payments resemble retirement benefits, so spousal support sometimes proves a key factor in negotiations over splitting retirement benefits.
6. Privacy
High-net-worth individuals often spend time in the public eye, creating an extra factor to consider in a divorce. You may want to address early on how you’ll handle publicity and the level of privacy you expect to retain. Everyone has heard about certain high-net-worth divorce settlements, so decide whether to use non-disclosure agreements, release information publicly or strike a different balance.
How a high-asset divorce attorney may help
High-net-worth divorces come with many complications that the average divorce doesn’t. So many people in these situations choose to work with a high-asset divorce attorney.
A high-asset divorce has knowledge and experience to help anticipate problems that commonly arise in high-net-worth divorces. Because they regularly deal with clients like you, a high-asset divorce attorney may know better negotiation tactics and understand the give-and-take in such divorces. They can help you identify legal issues, advise you on how to proceed and present your case in court.
