High-Asset Divorces: Ins and Outs

High-asset divorces are often financially complicated due to the complexity and composition of the assets, like business ownership, executive pay, multiple properties, offshore investments, trustsA legal document that functions as an instruction manual to how you want your money managed and spent in your later years as well as how your assets should be distributed after your death. Assets placed in a trust are generally safe from creditors and can be sold by the trustee in short order, avoiding the lengthy and costly probate process. and more.

Longtime marriages also add to the complexity, since you’ve had years to acquire more assets and debts.

As financial planners, we believe planning and preparation are two critical approaches needed to help you move smoothly through your divorce proceedings. Some of the most important planning steps are outlined below.

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High-Net-Worth Couples Seeking Divorce

To safeguard your financial future and begin unravelling yourself from your spouse, the first step is to collect detailed information regarding the ownership, value and whereabouts of all assets and financial accounts.

It’s also important to distinguish between assets acquired before the marriage versus during the marriage.

Co-Mingled Assets and Premarital Property

As you compile your information and contemplate splitting assets, note co-mingled assets; and premarital property you added value to during the marriage.

In most states, assets acquired before the marriage are not part of the divorce, however, this isn’t always the case if the assets have been co-mingled during the marriage. For example, a premarital bank account with a spouse added later.

Also make note of premarital assets you helped increase the value of during your marriage. For example, perhaps your spouse owned a business before your marriage, but during the marriage you helped promote the business and, thus, increased its value.

Some states may allow you to receive a percentage of these assets.

Tip: For divorce-related tax and Social Security tips, read Divorce Checklist & Financial Solutions for High-Net-Worth Marriages.

Community Property vs. Equitable Distribution

Where you live plays a key role in determining how your assets are split.

In community property states, including Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin, assets acquired during the marriage are split 50-50.

Other states use an equitable distribution approach, meaning more assets could be considered marital property, but the split isn’t always 50-50.

According to Cornell Law School, “Some factors a court may consider include the duration of the marriage, the value of the marital property, each spouse’s contribution to the marital property, the spouses’ respective sources of income or earning capacities and the economic circumstances of each spouse upon the division of property.”

High-Asset Divorces Are Often Costly and Lengthy

High-asset divorces take longer and are more expensive, since both spouses will likely hire independent experts, e.g., appraisers, tax specialists, etc.

In reality, high-net-worth couples can experience timely divorce proceedings if they’re working together to move the process along, e.g., minimizing silly motions, like who gets the kids on Valentine’s Day or stockpiling cash.

Remember, each time a judge intervenes, i.e., tells you how they’ll likely rule on your request, divorce proceedings are delayed and attorneys’ fees continue.

Tip: For more divorce financial tips, read our post: Dealing With Divorce—Taking the First Financial Steps

High-Asset Divorces Usually Require Independent Valuations

For some assets, you may need to hire property and business valuation experts.

The following chart breaks down asset types and the professional titlesA document demonstrating legal ownership of property or assets. of individuals providing valuations.

Certified Divorce Financial Analyst® Practitioner (CDFA®)

We recommend divorcing high-net-worth couples consult with a Certified Divorce Financial Analyst® practitioner (CDFA®).

This practitioner is trained to help you value and divide your property, including retirement assets, pensions, executive bonuses, etc.; and help you determine spousal and child support.

A CDFA® practitioner also helps you navigate challenging divorce tax complications and can provide expert witness testimony.

Next Steps

A key step to help your divorce go smoothly is to consult with a high-asset divorce attorney. We’ve worked with many over the years and are happy to provide an introduction. Just ask.

Also, it’s critical to update your estate planning documents, especially your Medical Power of Attorney.

If you’re contemplating or in the throes of a high-net-worth divorce and need help navigating the financial complexities, contact Adviser Investments anytime for assistance. We pride ourselves on being The Planner You Can Talk To.