For a California divorce to fall under the high net worth category generally means that you and your spouse own over $1 million in assets.
Still, there is no specific amount under any law. It means your divorce has a lot at stake, and you will need to retain an experienced family law attorney who has previously dealt with these types of divorces.
Put simply; you face unique challenges not found in a traditional divorce. While the issues to settle are similar, such as child custody, child support, spousal support, and property division, high net worth spouses often deal with significant arguments over the process of equitable distribution.
Thus, it is crucial to have accurate appraisals and business valuations for all assets and to determine the difference between community property and separate property.
In a high net worth divorce, hidden assets and inaccurate appraisals are the main litigated issues. In high net worth divorces, spouses:
- own multiple properties,
- vacation homes,
- investment properties
- own professional practices,
- own a high-profit business,
- have substantial investments,
- employee stock options,
- own intellectual property,
- boats, planes, and other motor vehicles,
- jewelry and antiques,
- cryptocurrency, and more.
When spouses own a business or professional practice, they will be treated equally. However, forensic accountants, appraisers, and valuation experts have to be used due to the complexity of these assets.
Put simply, high wealth frequently complicates divorces because of placing a proper amount of value on the asset items. Spouses often can't reach an agreement on this critical issue. Our California divorce and family law lawyers will examine this topic in greater detail below.
How Can You Protect Your Assets?
If you are a high-worth individual considering getting married, you should consider drafting a prenuptial agreement with your future spouse.
A “prenup” agreement outlines what happens to certain assets if you ever decide to get divorced. Further, you could also list alimony terms in the prenuptial agreement.
If you are already married, then you can draft a postnuptial agreement. These agreements serve the same purpose as a prenup but are created after marriage.
If you and your spouse own a high-profit business or professional practice together, you can draft a shareholder agreement that will outline the interest of each spouse in case of divorce.
What Happens to Your Business?
In California, companies formed during the marriage are considered community property, also called “marital property.”
When dividing assets, your spouse is entitled to half the business value. The investments from the company can be divided by spouses making a mutual agreement, or the family court judge will decide for them. However, there is much to consider:
- Is the business separate or community property? All marital property is divided equally in a marriage settlement agreement, but not all property falls under “community.” If you owned the company before getting married, then it's considered separate property;
- Did you inherit the family business? If the company was inherited from your parents, you don't have to give up half the value in a divorce. However, if you add your spouse's name, they will be entitled to some assets;
- Determining the value of the business. Any divorce involving a high-profit company means the value must be determined by a neutral third party, which is usually a forensic accountant;
- Did you create the business together? If you and your spouse started the business together, then you will need to decide on who will keep operating the company post-divorce;
- Type of business;
- Future economic forecast;
- Appreciation of the business during the marriage;
- Marital effort towards the business during the marriage.
Your California divorce attorney can provide a realistic analysis of your case and discuss strategies to help you achieve your goals.
What About Child and Spousal Support in High Net Worth Divorces?
It's common knowledge that each spouse's income determines child and spousal support. Thus, high net worth will directly impact the outcome of these critical matters.
Child support in California is paid until they are 18, and the monthly amount is based on a calculation that considers:
- income of the parent;
- the number of children;
- how much time the children spend with each parent.
However, the family court can deviate from the traditional formula in a case where the parent who must pay support has an “extraordinarily high income, and the amount determined under the formula would exceed the needs of the children.”
California Family Code 4057 states the rule for extraordinarily high-income and child support for high-income earners and the ability to deviate from standard guidelines for child support.
Section 4057(a) says, "the amount of child support established by the formula provided in subdivision (a) of Section 4055 is presumed to be the correct amount of child support to be ordered…"
Since the Family Code does not specify the amount that would qualify as an “extraordinarily high earner,” it's within the court's discretion to decide.
Family courts will typically consider the standard of living the children were accustomed to during the marriage. Perhaps the children attended private school or routinely participated in certain recreational activities, such as spending summers at vacation homes.
In that case, the judge could issue a child support order that allowed them to continue the same standard of living. Likewise, a California family court could award spousal support to the financially dependent spouse to allow them to maintain the same standard of living during the marriage.
Spousal support, also called “alimony” can be temporary and last for the duration of the divorce proceedings. It can also be ordered permanently and paid monthly after the divorce is finalized.
Contact Divorce Professionals for Help
In the case of high net worth spouses, divorce and family law issues are notoriously complicated and personal. You must hire a divorce lawyer to handle these sensitive and discreet matters.
You have a lot of stakes and need to act in the best interest of your children. You get help from professionals familiar with the unique challenges of a high-asset divorce. Suppose wasteful dissipation of marital assets has occurred during a divorce. In that case, we can help you.
Furman and Zavatsky are Los Angeles divorce attorneys that offer free legal consultations. We provide family law legal representation across California. You can reach us by phone or by using the contact form.