When couples with a high net worth get divorced, there is more at stake than in lower income cases. Treating a high asset divorce like just another breakup can lead to costly mistakes. But these errors can easily be remedied by working with an attorney experienced in the property issues that arise among more affluent families. Here are five common mistakes, and how to avoid them.
High asset divorces are much more likely to include property without a clear value. This might include:
It can be easy to assume that your wife will keep her own business or that your husband will be awarded all the motorcycles. But that doesn’t mean you should surrender their value.
In Maryland, each spouse is entitled to an “equitable division” of all property earned, accumulated, or acquired during the marriage. This is not necessarily a 50/50 split (though it is often approximately equal). The mistake high asset couples make is substantially over- or under-valuing these high-worth assets. Unless you work with your attorney, appraisers, business valuators, and other experts to set clear values for each asset, you could be leaving hundreds of thousands of dollars on the table.
Another common mistake is trying to protect specific assets by hiding them from your attorney and the court. It is true that some non-marital property is excluded from property division by the court. Still, if you believe specific property belongs solely to you -- say shares in the family business -- it is better to disclose the asset and immediately state the reason it is non-marital property:
It is especially dangerous to hide assets from your divorce attorney. If you hide assets from your lawyer and your spouse discovers them later, the Court may hold it against you, and you could end up being subject to sanctions, which can include an inequitable division of the newly discovery property or assessment of attorney’s fees.
At the same time, couples trying to minimize conflict in their high asset divorce often make the mistake of skipping discovery altogether. You may assume that your spouse is treating you fairly. However, entering agreements before you know what is in your marital estate, and the value of those items, can be short-sighted. It is possible to get the information that you require without formal discovery, but frequently a limited, informal exchange of relevant statements and documents can help everyone feel more comfortable about the terms to be negotiated.
In high asset divorces, it is common for one spouse to be the money manager, or for the question of finances to be delegated to someone else entirely -- like an accountant or financial advisor. This can make it easy to lose track of accounts or their value. It is important to know what you have, and also what you may be giving away, before you enter into an agreement. Settlement agreements are hard to change after they have been signed, so it is crucial that you and your attorney know what assets exist before you go to Court or to mediation.
Another mistake to avoid in divorce is reaching a property settlement without considering the tax and investment implications. In a high asset divorce, it can be tempting to even the scales by transferring retirement accounts or investments. This can be an excellent solution, if both parties have enough liquid assets to move into living independently. However, if a spouse takes disbursement of age-limited assets early it could have substantial tax consequences.
In addition, the investment options available when a nest egg is $100,000 may be very different than when it is worth $10,000. This can affect your ability to rebuild your retirement accounts after divorce. Before agreeing to a property settlement, be sure to discuss the tax and investment implications with your attorney, accountant, and financial advisor, so that you know what the net result will be after the IRS is satisfied.
There is a lot to think about in a high asset divorce. It takes a certain skill set to work with the necessary experts and professionals to create a clear financial picture for you and the courts. Unfortunately, not every family law attorney has experience working with high worth cases. If you don’t work with a high asset divorce attorney, your law firm could overlook key assets or ignore tax consequences leaving you with far less than your equitable share of marital property.
At the Law Office of Shelly M. Ingram, our high asset divorce attorneys know how to handle a portfolio. We understand the issues affluent couples face during divorce. We can assist you to discover, evaluate, and divide your property in a way that is fair, equitable, and anticipates the cost of building a new future. Contact us today to schedule a confidential office consultation.