In a high-net-worth divorce, protecting your assets requires careful planning, transparency, and the right professional guidance to ensure a fair and secure financial future.
Key Takeaways:
- Keep a detailed record of all assets, including business interests, real estate, and investments, to ensure everything is accounted for during the divorce.
- Hiring financial experts and forensic accountants can be critical to properly value certain complex assets and navigate issues like business division and retirement account distribution.
- High-net-worth individuals can benefit from mediation or collaborative divorce to reach an amicable resolution while maintaining control over the outcome, saving time and money, and minimizing emotional stress.
Divorce is never easy, but for high-net-worth individuals, the complexities are especially intricate. When you have spent decades building a successful career, amassing valuable assets, and perhaps even creating a legacy business, the thought of dividing everything in a divorce can be overwhelming. Navigating this process requires more than just legal knowledge; it requires strategy, foresight, and a clear understanding of the law and the various means available to achieve a positive outcome.
If you are going through a divorce and have significant assets, it is important to be prepared for the challenges ahead. In this blog, we’ll go over the key do's and don’ts for your assets during a high-net-worth divorce.
Understanding Asset Division in New York Divorce
New York follows an equitable distribution model, which means assets in a divorce are divided “fairly” but not necessarily equally. In high-net-worth cases, this frequently means that not only are personal assets such as real estate and financial accounts considered, but also things like business interests, investments, and intellectual property.
The court considers many factors when dividing assets, including the length of the marriage, each spouse's financial contributions, and the standard of living during the marriage. In some cases, the court may consider spousal misconduct - though this is rarely a deciding factor. In order to achieve the best possible outcomes, keep these do’s and don’ts in mind:
Do: Keep a Detailed Record of Your Assets
One of the first steps to take in a divorce involving significant assets is to organize and document your financial situation. This includes everything from real estate holdings and bank accounts to retirement funds, investments, and business interests.
Here are a few tips on how to approach asset documentation:
- List all assets: To the extent you can, make a comprehensive list of everything you own, including items that might not be immediately obvious, like intellectual property, stocks or crypto currency. The more detailed the list, the clearer the picture of your net worth will be.
- Value your assets: High-net-worth individuals often have non-liquid assets like a business, fine art, or real estate. Your lawyer may recommend obtaining a third-party valuation for certain valuable assets, particularly common when dealing with a business or other assets the valuation of which require expertise.
- Keep track of any debt: Don’t forget to document any debts you, your spouse or your business may owe, as these will factor into the asset division process.
The more organized you are, the easier it will be for you and your legal team to present a fair and comprehensive picture of your assets. This will also be helpful in ensuring you do not miss anything that could potentially be divided during your divorce. And of course, if you do not have access to any of this information, we are well-equipped to obtain it on your behalf.
Don’t: Try to Hide Assets
A major mistake high-net-worth individuals can make is attempting to hide assets during a divorce. Whether it’s putting money into a secret bank account, undervaluing property, or transferring assets to a third party, attempting to conceal assets is a dangerous move with often costly outcomes.
If the court finds that you have attempted to hide or grossly undervalue assets, the consequences can be severe. Not only will it damage your credibility in the eyes of the court, but it can also result in severe legal and financial penalties. In extreme cases, the court may award your spouse a larger share of the marital assets as a result of your dishonesty.
Transparency is key in a high-net-worth divorce. The best strategy is to be honest about what you have, even if it feels uncomfortable and goes against what may have worked for you in other arenas. This goes for your spouse, too; if you or your attorney discover that they have attempted to hide assets, you can take legal action to protect your interests.
Do: Hire Professionals to Help You Navigate Complex Assets
High-net-worth divorces often involve complex assets that require specialized knowledge. This could include:
- Business Interests: If you own a business, determining its value and whether it will be considered marital property can be tricky. Along with a skilled lawyer, a business appraiser or financial expert can help establish the value.
- Retirement Accounts: Retirement funds such as 401(k)s, pensions, and IRAs can be difficult to divide, especially if the accounts have been growing over a long period of time and have been commingled with separate property. You may need a Qualified Domestic Relations Order (QDRO) to properly divide these accounts.
- Investments and Real Estate: High-value properties and investments - such as stocks, bonds, commercial real estate, and other investment properties - can be tricky. It is essential to get proper evaluations and possibly work with a real estate expert to ensure that the value of these assets are properly distributed.
Working with financial professionals, forensic accountants, and - most importantly - a skilled and experienced divorce attorney is not only a smart move, but a necessary one, in a high-net-worth divorce. These professionals can help ensure that all assets are accounted for and that you are not leaving anything behind or getting a bad deal.
Don’t: Ignore Tax Implications
Dividing assets in a high-net-worth divorce isn’t just about figuring out who gets what. You also need to consider the tax implications of asset division.
Certain assets, such as real estate and retirement accounts, can have significant tax consequences when they are valued and/or transferred. For example, if you are awarded a property that has appreciated in value over the years, you may face capital gains taxes when it is sold. Similarly, withdrawing money from a retirement account like an IRA may result in taxes and penalties.
A skilled attorney and financial advisor can help you navigate these complexities and ensure that the tax consequences of your divorce are as minimal as possible. Planning for these taxes can also help you avoid unexpected financial burdens later on.
Do: Consider Mediation or Collaborative Divorce
High-net-worth divorces can often become contentious, especially when significant assets are at stake. However, if both parties are willing to negotiate in good faith, mediation or a collaborative divorce can be an excellent option for those seeking a less adversarial approach, and who want to maintain control over the outcome (as opposed to litigation, in which everything is left up to a judge).
In mediation, both parties work with a neutral third-party mediator to resolve their differences. This can be a quicker and more cost-effective method, and it allows both parties to have more control over the outcome. If your case involves business interests or complicated financial arrangements, a collaborative divorce might be an even better option. In this process, both parties agree to work together with their attorneys and other professionals (such as financial planners) to find mutually acceptable solutions.
While litigation may be necessary in some cases, pursuing a more peaceful resolution can help preserve both your financial and emotional well-being.
Don’t: Let Emotions Dictate Financial Decisions
Divorce is emotional, there is no sugarcoating it. Not only is a most-significant relationship ending, but for high-net-worth individuals who may feel that their financial security is at risk, there can be significant anxiety, fear, hurt and anger. However, letting emotions dictate your decisions could lead to poor financial outcomes and otherwise unnecessary legal fees.
Whether it is fighting to keep an asset you don’t really want, or fighting for more or less support than is otherwise reasonable or likely to happen after a trial, allowing your emotions to dictate the process can have long-lasting negative financial consequences. Instead, focus on your long-term goals, and work with your attorney and financial team to come up with a reasonable strategy for asset division that prioritizes your future.
It is important to stay calm and rational and make practical decisions based on what is best for you and your family, rather than on temporary emotions or frustration.
Protecting Your Financial Future in a High-Net-Worth Divorce: How Joseph Law Group, P.C. Can Make a Difference
Divorce for high-net-worth individuals requires a strategic approach, attention to detail, professional guidance and a proactive skilled team. Protecting your assets is key to moving forward successfully. By being transparent, hiring the right professionals, and carefully considering the tax implications of asset division, you can set yourself up for a secure financial future post-divorce.
If you are facing a high-net-worth divorce in New York, it is essential to have a team on your side who understands the intricacies of complex asset division. Our dedicated team of New York divorce lawyers have over 100 years of collective experience and have handled high-net-worth cases of all ranges of complexity. In fact, we are often the lawyers that other lawyers call to handle their own divorce and family law matters and those of their family, friends and clients. We know how important strategy, skill and knowledge are to achieve the best outcome in cases that involve complex assets and high-net-worths.
Contact us today to schedule a free case evaluation with a member of our team, and let us guide you through the process with strength and skill.
