High Net-Worth Divorces
If you and your spouse have significant wealth, there are special issues you need to know about as you plan your divorce and negotiate your settlement agreement.
One of the most important issues may be what each of you brought to the marriage. In many cases, you may want to discuss the possibility of a prenuptial agreement.
If your spouse already owned a business or real estate, you want to be sure you reach a settlement that is fair to both of you. If you are not the owner of the business, during the course of your marriage, you probably helped your spouse run the business or perhaps you worked and paid taxes on it. In other situations, maybe you managed the household and raised children so that your spouse could concentrate on the business. In either case, courts and experts agree that you have helped to build equity in your marriage and in that partnership, even if you did not earn a wage doing it.
The best way to assure an equitable share of the marital assets in a high net-worth divorce, in addition to hiring an attorney experienced in high net-worth divorce, is to insist upon hiring an appraiser and forensic accountant.
A forensic accountant is usually a Certified Public Accountant with a background in tracking hidden assets. Often times, these forensic accountants look at all the financial records to find assets or debts that one partner may be hiding from the other.
Dividing Real Estate
As with all the other assets you may have accumulated in your marriage, real estate should be listed on your financial statement. It’s important that you hire your own appraiser who will answer only to you. You need to value each piece of real estate. Most likely, you and your spouse will both hire appraisers. The result will likely be a value for each asset is that is somewhere between the amounts named by each appraiser. While this may seem like a duplication of effort and a wasted expense, the practice actually has merit, especially in divorce cases involving large sums of money. Always remember that appraisers can be influenced directly or indirectly by what they are told by the person who hires them. That is why you want to have your own independent appraiser. This person will have your best interests in mind and will not be influenced by your spouse.
Businesses
No matter who actually owns the business, it is in your best interest to have the business evaluated by a professional business evaluator. Let this person sort through all the documents in a business to find out what the business is worth. A valuation will also include a figure for intangibles, like goodwill, which is an important component of a successful business.
The goal is to look at any business asset established during a marriage. If the business was started prior to the marriage, the valuation involves seeing what the business was worth prior to the marriage, what it is worth now, and determining the difference.
Child Support and Alimony
These issues are often reported when television and movie personalities divorce. Wealthy individuals who divorce face the issue of working out how much above the minimum child support they will provide for the children. One spouse generally has more financial power and can wield that power in ways that are destructive and controlling to the other.
Assuming both parties are represented by competent counsel, the issues are the same as for any other divorcing couple, like doing what is in the best interests of the children, which can mean maintaining the lifestyle to which the family is accustomed or deciding to provide a more modest financial arrangement. Naturally, the issue of alimony is tied to the support of the children as the spouse who maintains the family home.
Handling Joint Accounts
Savings and checking accounts, credit cards, equity credit lines, safe deposit boxes, investment and similar type holdings and property ownership are some of the issues that must be resolved before your divorce can be granted.
As for joint savings and checking accounts, those are easy: at some point, they should be liquidated and some portion divided. At the time of separation, you should open a new account in your name only. Unfortunately, the closing of accounts is not always so clear-cut. You never know if recent deposits or checks have cleared the bank, you don’t know if one spouse has taken money out of the account and already deposit those moneys into some new account, and until you address this issue you’ll never know if any division will be fair and equitable.
As for credit cards, the best way to handle those is to write the creditors and notify them of the impending divorce. Request that the account be closed and the cards cancelled. Ask them to provide you with a current statement of the account and make them aware that you do not intend to be held liable for any and all debt accumulated after the date of the written letter. It is wise to send these certified to retain proof of receipt by the creditor.
One joint account that is overlooked is the equity credit line. This is an open-ended loan granted by a bank with your real estate (usually the marital home) used as the security. The lender places a lien against your home which is recorded on the title. This can force the sale of your home in order to recoup money if you ever default on your loan. Our attorneys suggest you contact a Title Insurance company to have a search done on your property and receive a complete list of liens against your property. Whatever accounts are left open leave you exposed to the possibility of losing your home or incurring more debt.
While safe deposit boxes are not assets, they can be inventoried and emptied readily. Whoever gets there first has the opportunity to possess the contents. The bank doesn’t check with the courts to see who is getting divorced. If a box is cleaned out, there is very little chance that the contents can be recovered. At the very least, make an inventory of the box and take pictures of the inventory. If you are in jeopardy of your spouse taking assets, Attorney Irwin M. Pollack suggests you ask your attorney to obtain a restraining order preventing your spouse from access to the box.
The Marital Home
In most cases, the marital home is the family’s most valuable asset. Upon a divorce, there are three choices that a divorcing couple can choose to equitably distribute the family home. The easiest option is to sell the home and to split the proceeds. In many cases, the home has too much equity and it is impossible for one spouse to buy out the other.
The easiest way to accomplish this is to refinance the home. At closing, the selling spouse will receive their share of the equity of the marital home. Moreover, the selling spouse will have their name taken off of the mortgage at the time of the refinancing.
The third option is to maintain the status quo. This means that the marital home is neither sold nor refinanced. In this scenario, one spouse will move out of the marital home, and wait for a period of years before the house is sold. This type of option is usually advisable if there are children, and if they are in high school. Divorce is particularly hard on children. Many divorcing couples don’t want to upset the children further by forcing them to leave their school. This option should only be explored if the children are in the later stages of their high school years as it might be too difficult for one spouse to wait for their equity while the other spouse stays in the home.
Overall, it is not a good idea to retain co-ownership of a marital home after a divorce. The liens filed against the spouse who moves out will still attach to the spouse who continues to live in the marital home. This can create a difficult situation. Liens prevent a person from being able to refinance their mortgage. Liens ruin your credit. Liens can create massive aggravation. At the very least monitor the status of your title. Make it an expressed part of your divorce agreement: if the mortgage isn’t being paid or you ascertain your former spouse is experiencing any type of financial trouble, make sure there is a contingency before it’s too late.
What to Do About Hidden Assets
Your spouse may try to undervalue or disguise marital assets in a variety of ways and you may have difficulty locating some items or getting the proof to show they exist. In such instances, it may be helpful to enlist the assistance of a forensic accountant or formal discovery procedures.
Some ways in which assets and income can pass “under the radar” are listed below:
-
Collusion with an employer to delay bonuses, stock options, or raises until after the divorce. You might find this information by asking your attorney to depose the opposing party’s boss or payroll supervisor, or by requesting documents via subpoena from the company. Or, you may need that forensic accountant to uncover it.
-
Salary paid to a nonexistent employee. It is not uncommon for such checks to be voided after the divorce. Again, while a deposition of the boss or payroll supervisor may be helpful, it is advisable to retain a forensic accountant.
-
Money paid from the business to someone close – such as a father, mother, girlfriend or boyfriend – for services never rendered. In such cases, the money is returned to the party after the divorce is final.
-
A delay in signing long-term business contracts until after the divorce. Although this may appear to be smart planning, the intent is to lower the value of the business. As such, this practice is considered hiding assets and income.
-
Assets such as antiques, artwork, hobby equipment, gun collections and tools are often overlooked or undervalued. A party may have lush furnishings, paintings, or collector-level carpets at their place of business; and income that is unreported on tax returns and financial statements.
-
Expenses paid for a girlfriend or boyfriend, such as gifts, travel, rent or tuition for college or special classes.
The Truth About Divorce Finances
Managing the finances of divorce is like a giant jigsaw puzzle, as you put each of the pieces together, step-by-step. Call it what you will, but the intricacies of divorce finances require a real focus.
Forget the Small Stuff
Judges have little patience for low-value goods – pots and pans, or anything under a certain amount. Judges get angry if lawyers or clients fight excessively about these things. Fussing about these things can be regarded as a smoke-screen to distract from important issues. Obfuscation wastes time and makes judges angry. A judge will, if the parties are completely unable to agree, sometimes order the goods sold or just split up arbitrarily.
In Divorce, Everything Takes Longer and Costs More
One of the universal misconceptions about divorce is the idea that it will be over quickly and then all the parties can get on with their lives as though nothing happened. In fact, your divorce can cost more money and take a longer time to settle than you ever imagined. For many couples, the whole process usually takes a full year – even uncontested simple divorces. The cost can range from two or three thousand dollars to hundreds of thousands!
To fully understand the costly nature of divorce, you must recognize the high price of splitting one economic unit in half. On the surface, an equitable division would seem to mean each person walks away with half of what was shared by two, and is therefore left with enough to support one.
But in the mathematics of divorce, the equation does not work that way. Spouses have unequal salaries and earning potential. Many people live beyond their means. When it comes time to divide one household into two, there is rarely enough money to go around. That holds true as much for young married couples with little property as it does for wealthy couples with assets accumulated over many years. When a catastrophic event such as divorce hits, the fragile economic base for these couples is torn apart much as an earthquake loosens a house from its foundation, leaving everything in disarray.
Recognizing that everything takes longer and costs more can help you through those moments when you are suddenly faced with an unexpected debt or an unwanted delay in your divorce.
If you are contemplating divorce or are currently involved in the process, undoubtedly you fear failure and the unknown. You are not alone. If you don’t know where to start or what to do, contact us. We defend our clients’ rights, and we can point you in the right direction, too.
Divorce is a difficult, uncertain event with far-reaching, long-lasting effects. We understand and extend to clients personal attention, an appointment when you need one, and access to a network of professionals.
Our lawyers are compassionate and uncompromising when it comes to protecting your rights. We will work hard with your best interests in mind, take the time to listen, and stand by you throughout your divorce.
Our practice includes advice and representation in divorce matters involving paternity, restraining orders, custody and parenting plans, support and alimony, property division, separation agreements, business valuations, tax issues, divorce estate planning, prenuptial agreements, adoption, guardianships, same-sex divorce issues, Complaints for Modification and contempt and matters relating to The Department of Social Services (DSS) and The Department of Revenue (DOR). Call us, toll-free, at (800) 910-DIVORCE or contact us for a no-obligation consultation.
|