Divorce is never easy, but it can be especially complicated for high-net-worth individuals. Property division is an essential part of the typical divorce process, but it must be handled even more precisely in a case with any quantity of high-value assets. When high-net-worth individuals get divorced, many of these cases also involve expensive portfolios of various properties that must be carefully and accurately inventoried and valued in order to ensure that both parties are treated fairly and that all assets are divided equitably. In this blog post, we’ll explore the complexities of property division in high-net-worth divorces.
What Is Considered Marital Property?
When it comes to property division in a divorce, the first step is determining what counts as “marital property” – in other words, what property will be subject to equitable division. In general, marital property refers to assets acquired during a marriage (with some limited exceptions). This includes not only tangible items such as real estate, artwork, jewelry, and vehicles but also intangible assets like investments, retirement funds, stock options, and business interests. Even if one spouse owned an asset prior to marriage or received it as a gift during the marriage, it is possible it might be considered marital property in certain limited situations.
When it comes to determining when non-marital property might be considered marital by the family court, the law often looks at whether the property was acquired before or during marriage and whether contributions from either spouse increased its value. In addition, if both parties used the asset for personal benefit, it may also be considered a marital asset subject to division in a divorce. The court may look at factors such as who was responsible for paying the asset’s costs and maintenance, who received any income generated from it, whether the asset was used on vacations or other family activities, and how long the couple owned it in order to determine if an asset is considered marital property.
Additionally, when one spouse has a separate business interest or holds stock options as part of their job, there is the possibility these may also be considered marital property, especially in situations where the non-owner spouse can document their efforts to support the owner-spouse in their ability to run the business or acquire those stock options. This is why it’s so important for couples who own high-value assets should always work with an experienced legal team, which should include a well-qualified financial expert who can properly handle the valuation of each asset that may be in question.
The Valuation Process
Once a determination has been made as to which assets are likely subject to division, the next step is to determine their value so that they can be divided equitably or according to the laws of your state. This is where the valuation process by a financial expert comes into play. It involves appraising each asset based on its fair market value – what a third party would pay for it on the open market – and calculating how much money each party would receive from its sale or distribution. This value is used to “equalize” the value of assets as they are divided between spouses. Generally speaking, this process involves experienced financial experts, in coordination with your attorney, who both understand how to properly assess a wide range of assets, how to provide an unbiased opinion about their worth, and what the family court will consider “equitable” under the law, especially if the value of a certain asset might vary widely or be affected by who owns it.
Another factor that must be taken into account when dividing assets in a high-net-worth divorce is how any division of property and finances will affect the tax situation of each spouse. Depending on the type of asset being divided (and the amount), there could be significant tax implications for both parties involved in the divorce settlement agreement. For example, if one party receives a large sum of money from investments or other sources of income during this period, they may end up owing more taxes than they anticipated at the end of the year due to capital gains taxes or other tax liabilities associated with their new wealth status. Additionally, some assets may be exempt from taxation, while others could trigger various types of taxes upon their transfer or sale (for instance, real estate transfers). It’s important for both parties involved in the divorce to consult with a qualified tax professional before making any final decisions so that they can make sure they understand all applicable tax laws and regulations before signing any documents related to asset division agreements. In certain situations, it may be necessary to include provisions within the settlement agreement about how the tax consequences will be addressed so that the Court has proof both parties entered into the agreement with full financial disclosure.
Divorce is never simple – particularly for high net-worth individuals who have accumulated significant wealth and assets over time – but understanding property division can help ensure that both parties are treated fairly once everything has been settled between them through private negotiations between their legal teams or through litigation proceedings that are decided by a judge at trial. Knowing which assets count as marital property and correctly assessing their value is essential to ensure an equitable distribution among spouses. Also, consulting with an accountant beforehand can help avoid unpleasant surprises when it comes time to pay taxes on any transferred assets down the line. With proper planning and preparation by all parties involved in a high net-worth divorce settlement agreement, everyone can come away with something that works well for them financially, even after everything has been resolved legally speaking.
If you and your spouse are considering divorce, especially if your marriage might be considered a high-net-worth marriage, don’t make any decisions about how to proceed before talking with a trusted, experienced attorney in your area. Your divorce and any settlements you create on your own will be subject to your state’s divorce laws regardless of your intent. Without discussing your situation with a well-qualified divorce attorney, your agreement may not be what you want or what is beneficial to your future.
If you find yourself facing the prospect of a separation, divorce, alimony, support, or other financial issues, you need the help of an experienced South Carolina family law attorney to guide you through the difficult process. Ben Stevens is a Fellow in the American Academy of Matrimonial Lawyers and is a Board Certified Family Trial Advocate by the National Board of Trial Advocacy. He has the experience to help guide you through the most complicated family law issues. You are invited to contact our office at (864) 598-9172 or SCFamilyLaw@offitkurman.com to schedule an appointment.
Related Articles by Mr. Stevens:
- The Benefits of Hiring a Board-Certified Family Law Attorney
- 3 Ways to Protect Your Assets in Divorce That Your Spouse Doesn’t Want You to Know About
- How Do I Protect My Business Interests During a Divorce?
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