When couples who own high-value assets get divorced, the process can involve unique financial considerations. The economic stakes in a high-net-worth divorce can lead to intense litigation, making it critical for spouses to obtain experienced legal counsel. But what is a “high-net-worth” divorce, and how does it differ from a divorce of a couple that does not own substantial assets?
What Is Considered a High-Net-Worth Divorce?
A divorcing couple may have a high-net-worth divorce when they own assets with a combined value of more than $1 million, including both liquid and complex assets:
- Liquid assets may include stocks, bonds, and cryptocurrency holdings.
- Complex assets can consist of vacation homes, stock options, other forms of equity compensation, intellectual property rights, and business ownership interests.
One or both spouses in a high-net-worth divorce may also earn substantial annual income in the high six- to seven-figures or more.
Unique Challenges in High-Net-Worth Divorce Cases
High-net-worth divorces can involve complex challenges that other couples may not face, including:
- Complicated property division – Complex assets can pose unique issues during property division in a divorce, including appraising assets and navigating contractual restrictions on transfers, such as ownership interests in a closely held business.
- Overseas assets – Dividing marital assets owned in other countries can trigger the involvement of foreign laws in a divorce proceeding.
- Hidden assets or income – High-net-worth couples may try to retain a larger share of the marital estate by concealing assets and income through tactics such as offshore trusts, shell companies, fictitious loans, or fraudulent transfers.
- Tax considerations – Dividing or liquidating complex or high-value assets may create tax implications for a divorcing high-net-worth couple. For example, when a couple decides to sell a vacation home and divide the proceeds in a divorce, they may incur capital gains taxes. Dividing retirement accounts or stock options can also have tax consequences unless couples follow specific legal procedures.
Protecting Business Interests and Intellectual Property
When a spouse builds a business or develops intellectual property (IP) during the marriage, those assets can become marital property, subject to division in the event of divorce. However, dividing business ownership interests and intellectual property can involve special considerations, such as:
- Valuations – Spouses who own business interests must obtain a valuation of their business to determine the dollar value of their ownership interest. Couples may enlist expert appraisers to assess a business’s value based on its financial records and market data.
- Restrictions – Dividing ownership interests can become complicated when a business’s governance documents place restrictions on transferring interests. For example, a closely held corporation’s bylaws or shareholders’ agreements may bar owners from transferring their stock to other parties without the consent of the other owners, which can make it impossible for an owner spouse to divide their stock in a divorce.
- Intangibility – Dividing intellectual property can become impractical due to the intangible nature of IP. Instead, couples may have to negotiate or litigate a division of IP by granting both spouses full usage rights, or for commercialized IP, granting a non-owner spouse a share of royalties generated by the intellectual property.
High-Net-Worth Divorce Settlements in Alabama
Alabama’s divorce laws follow the equitable distribution model for property division. Under equitable distribution, an Alabama court will divide a couple’s marital property fairly, although not necessarily in a 50/50 split. Alabama courts consider various factors in determining what constitutes a “fair” property division in a divorce, including:
- The length of the marriage
- The couple’s standard of living
- Each spouse’s contributions to acquiring or maintaining assets, including contributions as a homemaker
- Each spouse’s financial needs and earning capacity
- Each spouse’s age and health
- Tax consequences
Rather than letting a court decide financial issues, couples in a high-asset divorce may opt to negotiate a settlement. That way, they can maintain control over their finances and achieve a resolution that both spouses can live with. However, negotiating high-net-worth divorce settlements may require couples to consider a broad range of financial issues – a process that can be made much simpler and more amicable with the help of a skilled divorce attorney.
Alimony
Spousal support can become a key issue in a high-net-worth divorce when one spouse has earned the family’s primary or sole income. The other spouse may need alimony to maintain their standard of living after divorce or to support themselves as they prepare to reenter the workforce and become financially self-sufficient.
Prenuptial and Postnuptial Agreements
Divorce settlements in high-net-worth cases can also arise from prenuptial/postnuptial agreements. When spouses enter a marriage already owning substantial assets or when they acquire significant assets through business or professional success, they may create a prenuptial or postnuptial agreement to decide financial issues. However, prenuptial/postnuptial agreements can lead to intense litigation when one spouse feels that an agreement treats them unfairly or when they believe they felt coerced or forced into signing.
Role of a High-Net-Worth Divorce Lawyer
A divorce lawyer with extensive experience in high-net-worth divorces can prove critical to protecting your rights and financial interests. A high-net-worth divorce lawyer will:
- Provide substantial insights into the unique challenges of high-net-worth divorces, such as dividing complex assets, appraising high-value property or equity interests, and identifying hidden assets or income
- Have a network of experts they can call on, including forensic accountants, appraisers, tax advisors, and economic analysts
- Help develop tailored litigation strategies should a high-net-worth divorce go to trial on one or more issues, like asset division, alimony, or child support
Facing a High-Net-Worth Divorce? Get Experienced Legal Guidance Today
If you and your spouse own substantial assets, your divorce may involve complex, unique legal considerations. Prompt action can help you protect your financial interests.
Contact Leigh Daniel Family Law today for a confidential consultation to hear more about what to expect in a high-net-worth divorce. With over 30 years of experience, our firm has worked diligently to obtain favorable results for our clients, allowing us to earn the trust and respect of those we have represented. Reach out to learn how we can put our extensive knowledge, skills, and resources to work for you.
