Getting a traditional divorce is usually a stressful and emotional process but can often seem overwhelming when significant assets are acquired during your marriage. If you or your spouse own more than $1 million in assets, you are considered in a high net worth divorce.
While the California divorce proceedings remain the same, a high net worth divorce can complicate a divorce based on the crucial financial aspects of divorce, which can be hotly debated.
In every marriage dissolution, issues must be resolved before a family law court will grant a divorce petition, such as child support, spousal support, property, and asset division. You need to know how a high net worth could impact the outcome of your case.
The first step is to know exactly what a high net worth divorce is. Put simply, they involve a significant amount of property and other assets acquired by spouses during their marriage. In many cases, the assets could amount to millions of dollars.
It's not uncommon for high net worth divorces to get ugly fast as both spouses seek what they believe they are entitled to receive. Before the issues can be resolved, assets must be identified and properly valued, but it could involve an investigation to uncover them.
Readers should note that it's not only the high wealth that complicates these types of divorces; it's often an issue of placing the proper amount of value on the asset items. For example, high assets in a divorce can include things that might appreciate or depreciate, such as:
- stocks and bonds,
- real estate properties,
- professional practices.
It's frequently necessary to hire a valuation expert or appraiser to determine how much each asset is worth. Further, you might need the services of a forensic accountant to locate hidden bank accounts or investments. Our California family law lawyers will explain this further below.
How is Property Divided in a High Asset Divorce?
One of the most debated and contested issues in a high net worth divorce is the division of property and assets.
Under California's community property laws, all property and assets acquired during the marriage are split equally, 50/50, between the divorcing spouses.
On the surface, this seems easy, but it often involves a substantial amount of conflict and arguments about which assets fall under the umbrella of community property.
Crucially, in a high net worth divorce case, the precise sources of income used to buy a property during the marriage may be different, making it difficult to track.
Perhaps the income used to acquire a million-dollar property came from investments before marriage or a family business.
Often these couples own multiple properties, have significant stock investments and cryptocurrency, and hold one or more businesses. Many net worth divorces can require dividing numerous valuables and property, such as the following:
- Vacation homes and real estate,
- Boats, airplanes, and expensive cars,
- High-value jewelry, antiques, and artwork,
- Employee stock options,
- Intellectual property,
- Family business,
- International properties,
- Professional practices,
- Retirement benefits and pensions,
- Investment accounts,
A family company could be considered community property if it was created during the marriage. However, it could still be an issue during the divorce proceedings if marital funds were used for daily operations and growth.
There are also issues in high net worth cases related to commingled assets, meaning separate property and community property were mixed. All divorces have the potential to become complex, but when couples can't agree on the terms of their divorce, then the assets will often enter the equitable distribution process.
How Can I Know How Much My Spouse Makes?
Perhaps your spouse will not share information about their total income and might even try to hide it. Maybe your spouse is a significant business partner that makes possibly makes millions of dollars in profit and wants to keep that information confidential.
Perhaps they asked their employer to delay a recurring annual bonus to prevent it from being considered income to determine support obligations. If this accurately describes your situation, there are some steps you can take to uncover assets before your California divorce. The first step is to locate and make copies of:
- Income tax returns,
- Pay stubs,
- Bank account statements,
- Investment account statements, and
- Document the lifestyle you are accustomed to.
Next, you should consult a divorce lawyer and forensic accountant to uncover well-hidden assets, which could be hidden with employers, family members, and close friends.
What About Spousal Support in a High-Value Divorce?
The amount and duration of spousal support, called “alimony,” you will receive is always based on a variety of factors outlined in California Family Code 4320, such as the following:
- The length of the marriage,
- The standard of living during the marriage,
- Both spouse's income and separate property,
- Both spouse's age and health,
- Ability of the supported spouse to find work,
- Contribution of the supported spouse to the education or career of the higher-earning spouse.
A California family law attorney can help you determine the approximate amount of temporary support you can receive and argue for or against long-term spousal support awards by the court.
How Are Retirement Accounts Divided During a High Net Worth Divorce?
Pensions and retirement accounts are divided similarly to a traditional divorce. The court must make a Qualified Domestic Relations Order (QDRO) that lays out how much of the retirement account each spouse will receive and when.
The division of retirement plans can be more complicated depending on whether the pension has been vested and how it was paid. You should consult a Los Angeles high net worth lawyer if you need more information about retirement or investment accounts in a high-asset divorce.
What About a Prenuptial or Postnuptial Agreement?
If you are not yet married but will be soon, you can draft a prenuptial agreement with your future spouse. It outlines what will happen with certain assets in case of a divorce.
You can lay out alimony terms in your prenuptial agreement as well. You could still draft a postnuptial agreement document if you are already married.
Both documents essentially serve the same purpose. If you and your spouse own a family business together, you can draft a shareholder agreement that outlines each spouse's interests in the business company getting divorced.
You have a lot at stake in a high-net-worth divorce, which makes it crucial that you get guidance from a family law lawyer with experience dealing with high assets.
Furman and Zavatsky are Los Angeles divorce lawyers that offer free legal consultations. You can reach us by phone or by using the contact form.