Show Me the Money

Considerations in High Net Worth Divorce Cases

Jeff Bezos, Tom Brady, and Donald Trump. They all come from very different backgrounds, having accumulated their wealth from a variety of pursuits. However, what do all of them have in common? At some point, they were a party to a high net worth divorce case. While their case issues are as different as the people involved, the following are some general considerations to keep in mind if you are involved in a high-net-worth divorce.

1. Premarital Agreements: It is possible that your wealth, or your spouse’s wealth, existed prior to the marriage. If so, then one of the initial tasks with your attorney should be to determine if there was a premarital agreement entered into prior to marriage. This agreement provides your attorney with a blueprint for how you intended to divide the estate in the event of divorce. While this agreement can be challenged, you should inform your attorney early on whether it exists and its terms. For example, did the agreement proscribe a specific term and amount for alimony, or define how marital property will be divided in the event of divorce? Determining the existence and terms of a premarital agreement is a good starting point if you are involved in a high-net-worth divorce case.
2. Financial Restraining and other Temporary Orders: Your case will almost certainly involve numerous types of financial accounts; i.e., brokerage accounts, retirement and investment accounts, college funds and trusts, etc. Depending on the circumstances, it may be necessary to have the court issue temporary orders regarding the use and temporary award of these accounts pending a final decree. For example, was one of the accounts used for maintaining the marital residences? Was another account associated with the family business from which payroll and other expenses were paid? Is there an account devoted to paying for the children’s higher education? Is there an actively managed brokerage account that requires an order as to who controls investing strategy throughout the case? These accounts, along with multiple properties, vehicles, valuable collections, etc. may all require that temporary orders be entered to maintain the financial status quo until conclusion of your case. The restraining orders will also put your spouse on notice to control any previous spending and only use the accounts for regular everyday expenses.
3. Business Valuations: Your case may involve one or more businesses owned by you or your spouse. If it does, and there is a dispute over its value, then it will likely be necessary to hire an expert to conduct a business valuation. There are numerous types of business valuations; usually the more extensive the valuation conducted the more expensive it is for the parties. This valuation should be conducted by an expert, usually a CPA certified in business valuations, to avoid issues regarding the expert’s qualifications at trial. In some cases, you and your spouse could also agree on one expert to conduct the valuation, stipulate to its outcome, and how to divide its costs. If properly conducted, the court will likely accept an expert’s opinion of the business’s value at trial, and therefore, what interest is to be divided.
4. Tax-Affecting of Assets: While not required by applicable law, depending on the value and types of assets to be divided, it may be prudent to equally distribute not only your marital assets, but their tax consequences as well. For example, a Roth and Traditional IRA have different tax consequences regardless of their balances. Long-term capital gains are taxed at lower rates than short-term capital gains on assets like stocks. If each party was simply assigned balances of these accounts, or any other assets regardless of their tax consequences, then you may walk away with less net assets due to future tax burdens. In the simplest of cases, you can have two equalization payments, one for the cash value assets, and one for the tax-deferred retirement assets. Tax-affecting assets is an important conversation to have with your attorney, but especially in high-net-worth cases.
5. Confidentiality of Client Information: Safeguarding your sensitive information during the course of your case is always of paramount concern for your attorney. In cases involving multi-million-dollar estates, your confidentiality takes on the highest of priorities to protect your financial well-being. Beyond all the measures your attorney takes to protect confidentiality, the duty owed to you follows her wherever she goes. For example, if you have a large estate you may be well-known in the local community and beyond. When going out for drinks with colleagues after a long week your attorney should mentally prepare herself against disclosing not only her representation of you, but also any off-hand comments or remarks that may damage your reputation. Her friends and colleagues may know that she is representing you. They may ask her questions about what it is like to represent a famous, wealthy person, or if all the tabloid stories are true. In such circumstances, your attorney must remember the duty to protect your confidentiality includes protecting your public image as well, which in turn may affect your legal case and financial well-being. The duty of confidentiality also extends to everyone employed at your attorney’s firm. To borrow and revise a well-known phrase about Las Vegas, in these cases especially, what happens in the office stays in the office.

This is an abbreviated list of the many considerations to keep in mind if you are involved in a high-net-worth divorce. For further assistance and advice with this and other issues in your case, please contact the experienced team of family law professionals at Slowiaczek Albers & Whelan PC, LLO to schedule your initial consultation.