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The High Stakes of High Net Worth Divorces

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Divorce is difficult and painful even when it’s relatively straightforward. But high net worth divorces have added layers of complexity that can make them exceptionally lengthy and contentious.

A high net worth divorce generally refers to any divorce in which at least one party has assets of more than two million dollars. However, in California, home to affluent people across numerous industries, these splits often involve much higher figures, diverse assets, and income streams not reflected in a simple W2 form and bank statement.

Though the proceedings are essentially the same as a “regular” divorce, in a high net worth divorce, the process of appraising and dividing property to achieve equitable distribution and calculating spousal and child support can be much thornier. Reaching a custody agreement can also present unique challenges.

Division of Assets

California is a community property state, which means that, in general, all assets acquired during a marriage are considered shared and will be divided 50/50 in a divorce. Even a business might be considered community property if it was founded during the marriage or before tying the knot but grown or supported with joint marital funds.

One or both partners may have separate assets that they brought to the marriage, which will remain in possession of the original owner. However, there is often significant commingled property—initially individual assets mixed in with the marital property. For example, an inheritance was deposited into a joint bank account. It could be an investment or financial account, such as a retirement fund, including contributions made before and during the marriage. Or, as often happens in second or later-in-life marriages, if one spouse sells a house they owned before the marriage, those funds remain separate unless they were used to purchase shared marital property such as a new home. It can be incredibly complex to untangle commingled property and determine how it should be classified and what should be subject to division in a high-assets situation.

It’s critical to have accurate appraisals of all assets. In high net worth cases, some may require specific financial expertise for valuation, especially those that appreciate and depreciate (such as stocks) or are intangible (such as intellectual property). It’s not unusual for spouses to have conflicting ideas about the value of such assets.

Assets and community property that will be considered include:

  • Stocks
  • Real estate — family home(s), vacation homes, investment properties, international properties, etc.
  • Family-owned businesses
  • Pensions and retirement accounts
  • Insurance
  • Art / antiques / collectibles / furniture
  • Jewelry
  • Boats / cars / planes
  • Debts — IRS, credit card, etc.

Plan to work with an attorney experienced in high net worth cases. You will likely need a financial team as well. You may require an accountant, tax professional, corporate lawyer, real estate professional, or estate planning attorney, depending on your circumstances. The law requires full financial disclosure, but in some cases, a forensic accountant is needed to investigate and uncover hidden assets or to trace moved funds.

Support and Custody

When determining spousal and child support in a typical divorce, the court will use the California Family Code to weigh several factors and may also use a guideline calculator (software). In high net worth cases, there are additional factors. The court may mainly consider the couple’s lifestyle before the divorce and what it will take to maintain it, especially for the children, significantly impacting how support is awarded.

High net worth divorces can also present unique challenges when sorting through custody issues, such as when the parents travel extensively or live and work in multiple locations. It’s important to know that it’s nearly always in everyone’s best interest for the divorcing couple to work together to come to a custody and visitation agreement—and prioritize a swift and smooth resolution of this highly emotional issue—rather than drag it out and let the court decide.

If you’re going through a high net worth divorce, the family law experts at SFLG can help you navigate the unique and complex issues involved in your case. We are trial lawyers who litigate high-conflict, high-stakes cases. It’s critical to work with a firm that knows how to apply the law and the facts in your favor, whether in the courtroom or at the negotiating table.

by Debra Schoenberg

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