Divorce is never pleasant, regardless of how much money is involved. Divorce can be even more challenging when significant assets and income are involved.
A high-net-worth-divorce (which is typically defined as a divorce where at least one of the spouses has more than $1 million in assets) can be a complicated process. There are unique challenges and issues that don’t typically arise in a standard divorce. In today’s blog post, our divorce attorney will discuss some of the factors that make high-net-worth divorce more challenging and look at strategies to simplify the process and reduce conflict.
Factors that can make high-net-worth divorce complicated
Asset valuation and division The process of determining who gets what following a separation or divorce is challenging in any divorce case. Property division is even more difficult to navigate when the divorce involves a wide range of substantial assets. High-net-worth divorces typically involve multiple properties, business interests, pensions, stocks and other investments, trust property, international assets, and valuables such as jewelry, vehicles, art, antiques, etc. Specialized legal knowledge is required to ensure a fair marital asset distribution. It will be necessary to identify and obtain the value of all “family property” owned by each spouse individually and jointly, both on the date of marriage and the “valuation date” (the date of trial or the date the spouses enter a separation agreement). Divorcing spouses must also value and divide accrued debt, even if the debt is only in the name of one spouse. Expertise will be needed to decipher financial documents. Corporate financial statements, income tax returns, shareholder agreements, trust deeds, pension statements, and bank records are just some of the documents that may need to be analyzed in a high-net-worth divorce case, all of which adds a level of complexity not present in a standard divorce case.
Hiding assets and withholding documents Full disclosure of all assets and debt is essential in every divorce case. The need for timely, complete disclosure is heightened in high-net worth divorces. As noted, documents produced in a high-net-worth divorce will typically be voluminous and complex. Things get even more complicated when one or both spouses is hiding assets or refusing to disclose financial records. An experienced family lawyer will know the red flags and signs that information is being withheld or assets are being concealed. A skilled family lawyer can work on your behalf to uncover hidden assets and obtain relevant documents, whether by agreement or by court order. It’s only possible to achieve a fair outcome if all assets are “on the table” so to speak.
Support determinations Child support and spousal support can be extremely contentious in high-net-worth divorce cases. It’s relatively easy to determine support when the paying spouse has modest income from one employer, for example. It’s much more difficult to determine the appropriate level of support when the paying spouse has income over $150,000, has income that fluctuates, income from investments, corporate income, etc. Another complicating factor is that the federal child support and spousal support guidelines don’t apply in the same way for high-net-worth divorces. The support guidelines provide consistency and predictability in standard divorce cases, but they do not fully capture the complexities of a high-net-worth divorce. A skilled divorce attorney can review the facts of your case, determine what income should be included in the support determination, and advise you on the appropriate range of support.
Tax Implications There are complex tax issues in high-net-worth divorce cases that don’t typically arise in standard divorce cases. There are many ways to divide assets and structure property settlements. Selling or transferring an asset may trigger capital gains. Dividing a retirement account can have significant tax consequences. It’s important to understand the tax implications of each option and to plan appropriately to protect from excessive or unexpected taxation. It’s also important to understand the tax consequences when it comes to structuring spousal support payments. Lump-sum spousal support is not deductible or taxable as income, but periodic spousal support payments are.
Strategies to simplify issues and reduce conflict
Asset valuation disputes are often the central issue in a high-net-worth divorce. It is often necessary to retain experts (property appraisers, business valuators, accountants, tax professionals, etc.) to determine the true value of assets and how they should be divided to account for tax implications. Involving such experts can provide peace of mind and promotes fairness in the process, especially when the expert is jointly retained (i.e., one that both spouses agree on). Your divorce attorney can spot issues that need expertise and connect you with professionals as needed.
Alternative dispute resolution methods such as mediation and arbitration are great options to explore. Negotiation, mediation and arbitration maximize privacy and confidentiality, while court proceedings are in the public domain.
Another major benefit of mediation is that it allows separating spouses to implement customized, creative solutions to suit their unique situation. Once a written separation agreement is in place, you can apply for an uncontested divorce to officially end the marriage (the process for a contested divorce – which is also known as a “defended divorce” – is more complicated, more expensive, and it typically takes much longer to obtain a divorce order).
Trusted Legal Advice from an Experienced High-Net-Worth Divorce Attorney
British Columbia residents trust Valerie M. Little to provide the support they need when navigating high-net-worth divorce. You can trust Valerie M. Little to provide you with the guidance, legal information, and strategic advice you need, whether you wish to pursue negotiation, litigation or mediation to resolve your divorce case.
Valerie M. Little Law Corporation is a family law firm that is centrally located in New Westminster and serves the surrounding areas of Burnaby, Maple Ridge, Coquitlam, Port Coquitlam, Vancouver, North Vancouver, West Vancouver, Port Moody, Richmond, Surrey, Cloverdale, Delta, and Langley.
Let’s talk today. For more information about Valerie’s services or to schedule your own private, confidential consultation with our high-net-worth divorce attorney, contact us by email or telephone at 604-526-3333. Get the answers you need to move forward with your life.