A high asset or a high net worth divorce refers to an estate that involves significant assets, high income/s, and usually meaningful complexity. While there is no single accepted definition for a high asset divorce, these generally involve liquid assets of over $1 million.

And, a high asset divorce may include substantial assets of all kinds, like retirement accounts, pensions, savings, stock, business ownership, or property. Accounts may have both pre-tax and post-tax components.

  • The estate may have a combination of non-marital and marital interests, and in order to determine the extent of the marital estate, significant legal knowledge and factual work are required to avoid significant financial consequences.

  • The estate may have different parcels of real estate (rental properties, vacation homes, cabin land, etc.) that require appraisals.

  • There may be business interests, in which case a business valuation may be necessary.

  • There may be equities, bonds, options, or even restricted stock units, which may have post-marital/pre-marital components, and require significant legal competence.

  • The estate may have significant value in jewelry or intellectual property.

  • Commonly, one or both of the spouses is high earners, and calculation of income may be complex if there is deferred compensation or employee stock options.

  • If there is a significant disparity in income, and a long-term marriage, spousal maintenance or spousal support may have to be addressed as well. Child support and child custody are involved in the divorce proceedings, too.

Because there’s a lot at stake in a high asset divorce, understanding the many potential errors in the divorce process can be a help. 

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High Asset Divorce Complexities To Plan For

Rather than simply outline a streamlined process, we’ve found it’s often most helpful to recognize the many pitfall potentials in a high asset divorce. All of the following are issues we’ve seen crop up during or after high asset divorces. In fact, we have extensive experience untangling these complexities. If you’re interested in connecting with a team who’s litigated high asset divorce cases in the past, we’d love to chat.

 1. Not Hiring a Lawyer

(“Why should we spend money on attorneys, when we can figure it out ourselves?”)

This may be a mistake on multiple levels. First, it may be in one spouse’s interest to not let the other spouse retain an attorney because they may have had control of the finances or they may be more knowledgeable about the finances. Understanding the full current financial picture transparently is key before making this decision.

Second, several legal principles are applicable in Minnesota divorce cases. For example, the Schmitz formula, Jansen, Salstrom, Karon, etc., and all of these legal concepts are complex and require competence and legal knowledge in order to properly evaluate a case and to arrive at an equitable distribution of these complex assets. In the end, it may be that a good attorney or competent attorneys on both sides would save money for the parties and, most importantly, the result would be just and equitable.

 2. Hiring an Inexperienced Attorney.

(“Why don’t I hire an attorney who is lower-cost and will do exactly what I tell them to?”)

 First, the attorney you hire should know more than you when it comes to all of these complex issues and a division of assets. You should be able to provide information and the lawyer should be able to give you clear and concise directions on how to manage the process and what lies ahead. This requires not only legal knowledge of the concepts behind high net worth divorces, but it also means that the attorney has dealt with these issues on several occasions – and preferably on both sides of the aisle.

Better yet, the attorney that you retain may have appeared before judges at trial or Motion hearings, and can provide the benefit of that experience. Today, fewer family law attorneys than ever have experience in the court room in front of a family law judge.

 3. Assuming that by Hiring an Attorney, There Will be Conflict.

(“If I hire a lawyer, or if my spouse hires a lawyer, it means we’re going to fight.”)

 This is simply not accurate. In fact, the process in a Minnesota divorce case requires that the parties participate in some type of Alternative Dispute Resolution mechanism.

Most of the time, this means Mediation. It can also be a Financial Early Neutral Evaluation. However, the point is that, by hiring competent divorce lawyers, you can drive your case towards a cooperative process, which may result in an out-of-court settlement.

 4. Not Taking into Account Tax Consequences.

(“I’ll just agree to a division of assets, and that should resolve everything.”)

Depending upon the marital assets or separate assets that are awarded to you, the tax implications may be immense.

For example, if you own a business and you intend to sell the business after getting a divorce, and you buy out your spouse, you may have to pay capital gains tax when you sell the business. These capital gains taxes should have been accounted for when you were getting your divorce. If you were awarded an investment property and if you intend to sell it after the divorce, you may have to pay capital gains taxes.

When working with a competent and experienced attorney, one of the value propositions is that an issue like this will be identified in advance, and it may be beneficial for you to retain an accountant and/or a financial expert to figure out all of these complications before you reach a final divorce settlement. In other words, you don’t know what you don’t know, but a good family law attorney in Minnesota should.

5. Incorrectly Valuing Your Assets.

(“My wife received an inheritance; it must be hers.”)

Determining the value of an asset during divorce can be a complex endeavor. For example, you or your spouse may have a non-marital claim. However, to truly understand that all aspects have been accounted for, it is important to understand the terms “tracing” and “co-mingling”. Property division is a big deal in a high net worth divorce.

It may also be necessary to work with a financial expert to determine if the appropriate tracing exists during the divorce process, and if it does, to what extent assets are marital property or non-marital. In other words, do not make an assumption based on what happened in the past as to the value of an asset today – you may be wrong. 

Complex financial issues are best handled with fair and experienced help.

6. Not Obtaining Appraisals.

(“An appraisal is going to cost money, and we agree on the value anyway.”)

Depending on who gets the asset, this may prejudice one spouse. When it comes to real estate, a neutral appraisal can take into account any issues with the property and more importantly, can be done in the context of a divorce proceeding. You can also select a date to value the property that makes sense based on your asset division.

 7. Not Obtaining a Business Valuation.

(“It was his business, and he says it’s not worth much – he can have it.”)

Relying on your spouse for what a business is worth, especially if your spouse will keep the business, can be a big mistake.

At a minimum, an experienced attorney can review the business tax returns and can potentially work with a financial expert or business valuation expert to figure out if a comprehensive business valuation would be appropriate or not. Depending on the type of business, this could be a significant asset that needs to be placed on the marital balance sheet. Don’t consider a business separate property without some thought.

8. Not Fully Disclosing all of the Assets.

(“I think he has hidden assets or other accounts, but I’m not going to make a big deal out of it.”)

One of the important reasons an experienced and competent attorney can help you is to assist with the discovery process. This means that your attorney will ask for financial information via either informal or formal discovery. Your attorney should also review all of the financial information provided to ensure that no accounts are missed. For obvious reasons, it is important that all assets are fully disclosed and apportioned. In extreme cases, we have worked with forensic accountants to sniff out to tricky situations and unknown assets. If you suspect your spouse has tried to hide assets, it’s worth a hard look.

9. Not Being Aware of Your Rights.

(“I will be getting a lot of assets; my spouse says I don’t need spousal maintenance.”)

 Understanding whether or not you have a claim for spousal support involves considering a variety of complex Statutory factors. First, there is no mathematical formula for spousal maintenance. Second, all of the factors relative to spousal maintenance must be analyzed carefully both from a factual and legal perspective. If the goal is to reach an out-of-court settlement, it is all the more important to work with an experienced attorney who can carefully prepare, present, and negotiate your spousal maintenance claim. This becomes especially true when one spouse has significant income and earning power after the marriage, and children are involved. Their financial support might be more important than ever.

Learn more about community property, marital property, and what to consider for high net worth spouses here.

 10. Not Drafting the Divorce Decree Carefully.

(“We’ll just go to the Court’s website and use the forms provided.”)

You divorce Decree is one of the most important legal documents that you will ever sign. It not only serves to sever your financial ties with your spouse, it also explains your rights at present and into the future. It may also be used as a baseline for modification of spousal maintenance or to enforce agreements reached if divorce litigation is necessary in the future.

How the divorce Decree is written and the terms that are included are very important to anticipate and prevent issues in the future.

Don’t Go It Alone: Talk To An Experienced High Asset Divorce Attorney in Minneapolis

If you’d like to know more about how the attorneys at Alithis Family Law can assist with your high asset or high net worth divorce, please reach out to our office today at 952-800-2025 or get in touch online for a free family law consultation.

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