There are many reasons why divorce can be considered complex. Apart from child custody and alimony, the main factor leading to the complexity of divorce is a high-net-worth of marital property.
High-net-worth assets involve real estate, shareholder accounts, retirement funds, privately held businesses, professional practice, trusts, off-shore accounts, hidden assets, stocks and bonds, and various investments. Inherent to any of these assets is their multi-million-dollar value. In most cases, another dimension of complexity is present – prenuptial and post-nuptial agreements dealing with marital property division. Not surprisingly, most affluent couples belong to older generations since it takes time to build significant wealth. They often own large family companies and property overseas.
Only the marital asset net worth determines the complexity of divorce – the property acquired during the marriage that is subject to division in the divorce procedure. The assets spouses acquired before or after the marriage are considered separate property.
To better understand the complexity of marital property division, below is the list of typical assets involved in a high-net-worth divorce.
Many people are surprised to discover that their retirement funds are subject to division during the divorce process. That is especially true in high-net-worth divorces, regardless if there isa defined benefit plan (a pension) or a defined contribution plan. In both cases, retirement funds can be of significant value. Since Illinois is an equitable distribution state, the court divides a retirement plan equitably. However, that does not always mean an equal division. In the case of retirement funds, a spouse can claim that a portion of the fund is non-marital. Raising such claims requires proof in the form of statements from the beginning of the marriage. Corroborating these claims demands help from an experienced complex divorce attorney.
If you and your spouse established bank accounts during the marriage, they are marital property – notwithstanding if you own joint or separate accounts. The judge divides bank account funds following equitable distribution, like any other marital asset. However, a prenuptial agreement can define which funds are considered separate, including bank accounts. Also, if the inheritance or gifts are in an individual account, they are treated as separate property.
The most important part of investments is income, especially in marriages between wealthy spouses. If the investment occurs during the marriage, the equitable distribution rules apply to the division of dividends. Things get more complicated when one of the spouses invests before the marriage, but the income occurs during the marriage. Generally, those incomes are considered marital property. However, if one spouse made an investment before the wedding and held it passively in a separate account, it may be viewed as their property. In any case, you will need an experienced complex divorce attorney working together with a financial expert to divide propertyproperly.
The first step in a complex divorce procedure is determining whether stocks and bonds represent the marital property. If the answer is yes, they are divided fairly between spouses considering various factors. The central part of the process is estimating the value of stocks and bonds, both their current and potential value. In dividing the earnings from stock and bonds, determining the contribution to the investments are vital. Knowing tax implications is equally significant. It is not recommendede to enter into a high-net-worth divorce without an expert appraiser, forensic accountant, and an experienced complex divorce lawyer.
Patents, copyrights, and other intellectual property are often crucial segments of high-net-worth marital assets. Couples who accumulated wealth by investing in various enterprises enjoy significant returns from intellectual property rights (licensing, franchising, etc.). Such incomes are typically one of the most contested issues during complex divorces, requiring the assistance of experienced attorneys and financial professionals.
Hidden assets are almost exclusively typical for complex divorces. Sometimes, one of the spouses may forget to disclose all their property. But in high-networth divorces, spouses often intentionally hide assets from their partner, attempting to avoid equitable distribution. The only way to prevent that is by utilizing financial disclosure mechanisms in litigation or exchanging information in mediation or collaborative law.
The key to successfully navigating complex divorce that involves trust assets is determining its validity. Failing to comply with regulatory requirements regarding property transfer makes trusts invalid. The spouse who moved specific property (usually the most valuable assets) will potentially have to reverse such placement. Sometimes the trust can be valid, but it is created only to make an appearance. Since complex divorces include high-net-worth property, you should always seek help from an attorney with a proven record of success in dealing with these issues.
Wealthy couples often own collections of rare artifacts, art and other collectibels. Those collections are also subject to equitable property division. The pieces acquired during the marriage are considered marital property. In principle, they are equally divided, however any collection needs to be considered and a mutually acceptable division of items must be created..
Real estate is a well-known asset of affluent couples. Sometimes, wealthy spouses own multiple real estate, apart from a family house. During divorce, deciding who owns the family home and other real estate is vital. As with other assets, the judge will rule based on their sense of fairness, applying equitable distribution principles. That includes the scenario in which the spouse who gets the child custody can have the family house. However, in some cases, selling the home and other real estate is the best option, especially in highly contested high-net-worth divorces. Going through a complex divorce procedure involving multi-million-dollar real estate is unimaginable without the assistance of a knowledgeable divorce attorney and real estate experts.
Handling a complex divorce procedure is a challenging task. Division of high-net-worth marital property adds additional weight to the overall complexity of the process. Transparency is the key to successfully dealing with contested financial matters during the divorce process.
To achieve full transparency, you need to use all available instruments, no matter which dispute resolution method you use.
With litigation, the financial discovery tools, such as subpoenas, interrogatories, and statements, will enable you to exchange accurate financial information. That is a prerequisite for a fair division of high-net-worth marital assets. However, using these mechanisms requires the knowledge of a highly professional divorce attorney.
If you select a collaborative law approach, relying on voluntary exchange and free flow of information is crucial. With the help of the right collaborative lawyer, an out-of-court divorce can yield far better results than traditional litigation. During collaborative process each spouse selects a team of collaboratively trained professionals to guide them through the steps of divorce.
Brigitte Schmidt Bell is an Illinois-based, complex divorce specialist with decades of experience handling complex divorce cases. She is also collaboratively trained and specializes in collaborative divorce. If you need a well-versed, experienced, and dedicated collaborative attorney to assist you during all phases of high-net-worth divorce, contact Brigitte Schmidt Bell’s office to discuss how she can help.