Divorce can be a stressful experience. The more money at stake, the more stressful it gets. In high net worth divorce situations, couples are much more likely to take legal action to ensure the best award possible from a judge in court. We advise anyone considering divorce to consult a divorce lawyer immediately to make the process as smooth as possible.
Even in the most amicable cases, divorces between high net worth couples are frequently plagued with disputes and legal proceedings. Wealthy individuals tend to own more property and different types of assets that are harder to manage during a divorce. Here are just a few of the ways divorce changes when dealing with wealthier individuals.
7 Ways Divorce Changes in a High Net Worth Divorce
1. Discovery and Valuation Takes Longer
The most complex portion of any divorce is the discovery and valuation process. Divorce proceedings must pass through this phase in order to determine how much to award to each of the two parties. Even in an amicable divorce where both parties have already agreed upon an equitable distribution, this process must be carried out meticulously. Failure to disclose the entirety of your assets could lead to disputes after the divorce or civil liabilities.
Consider how each of these phases becomes more complicated when your combined net worth is greater.
Naturally, the more wealth you own, the more there will be to discover. Discovery means disclosing all of your assets, for instance bank accounts or properties held in common. However, there are assets that may not have documents. For example, high-value luxury items like a watch or jewels need to be declared as well. Both parties will need to provide written sworn statements to acknowledge the existence of these items.
Wealthy couples often have assets located in other states or even in other countries. Business assets are likewise difficult to discover. These potential complications make the discovery process take longer to resolve.
It takes time to review each of the items found in the discovery process in order to assess their actual value correctly. Just as a homeowner’s insurance adjuster would have an easier time assessing the damage to a small home compared to a mansion, your high net worth divorce requires extra effort to quantify. Furthermore, high-value assets tend to be harder to assess in the first place. How does one place a monetary value on a painting or a rare antique?
Experts may need to be called in to assess the value of niche items. This slows down the valuation process. Due to the subjective nature of certain possessions, your partner may present a different valuation to challenge yours. This is where having a divorce lawyer becomes essential.
2. Expect to Pay More
All of the extra work in each phase means extra expense for you. While filing for divorce is a flat expense paid to your local government, you will need to spend more money to get through the process. Accountants and lawyers will need to review your assets for discovery, and the more you have the longer it’ll take them. Similarly, bringing in experts to assess the value of properties or other assets will likewise require increased spending.
While we know that’s not the news you want to hear, it helps to see it as an investment. Putting more money into divorce proceedings results in a better division of wealth in the end, and it helps to prevent tensions from flaring up in the future. Peace of mind is priceless.
3. Alimony and Child Support
Determining how much your spouse is entitled to receive in alimony and child support costs is much more difficult when your income is not fixed to a salary, as is often the case with high net worth individuals. If you expect to be the one making payments, you’ll need to present a case that shows what amount is reasonable and sustainable.
Conversely, if you’re looking to maximize the payments you receive, if any, you’ll need to justify these by considering your current standard of living and your projected income going forward. One of the main qualifiers for spousal maintenance in the state of Texas is the length of the marriage: Ten years is the minimum to receive an award, save for other specific cases like family violence or mental disability.
4. Divorce Could Trigger Taxes
Lower-income couples rarely have to split significant non-liquid assets, but that may very well be your case in a high net worth divorce. For instance, if your retirement savings has become quite large, dividing it up could require you to sell off some of your holdings. Similarly, if you have an appreciable amount of stocks or bonds, you may have to liquidate some of these assets in order to balance the scales.
Sales of these assets could result in unexpected capital gains tax. Likewise, the sale of second properties could be problematic if you’ve deferred taxes using a 1031 Exchange. A litany of issues can arise when deals that you expected to last for years require closing on short notice.
5. Debt May Need to be Refinanced or Restructured
Although most people would assume that wealthy couples have little to no debt due to their financial status, high-wealth couples know the exact opposite is often true. Debt empowers businesses and personal investments alike, meaning that you will likely need to address debts held jointly. While the simplest approach is to pay these off and move on, doing so can be difficult when you are still determining what belongs to each individual.
Other debts cannot be paid off so easily, meaning that you may have to restructure debt to divide it between both parties. Alternatively, if it remains in one individual’s name, a portion of the debt may need to be paid by the other partner. Managing debt during a divorce is complex and requires careful review.
6. Prenuptial Agreements Are Often Challenged
Prenuptial agreements are far from ironclad, and they can legally be challenged in the state of Texas. There are several grounds upon which you can challenge a prenuptial agreement. If challenging the agreement could result in a better award from the judge, it’s likely to happen.
One of the most common arguments used to break these legal contracts is to claim that the challenging party was forced to sign or was pressured into accepting the agreement. This violates the voluntary nature of such agreements and can lead to its dismissal. If the agreement was considered unconscionable, as is the case when assets were not entirely disclosed prior to signing, it can also be nullified. You’ll want to build your case carefully.
7. Hiring a Divorce Lawyer Becomes More Important
As you can see, divorces quickly become more complex when more is at stake. While we all wish for a peaceful and smooth divorce, the fact is that many times it does not go so easily. The best way to make sure you have a fair and effective divorce is to hire a qualified divorce lawyer.
Call Skillern Firm in Houston, TX to schedule an appointment. We can help you prepare for your divorce or guide you through one that’s already in process. Our staff has years of experience in family law and knows what to watch out for, especially in high-stakes situations.