High Net Worth Divorce

By J. Douglas Barics
New York Divorce Lawyer

High net worth divorce very often present a special set of circumstances that must be taken into account. Very often wealthy individuals have business interests or an interest in assets with someone other than their spouse. This presents a challenge in both valuing the asset and distributing it. Very often, the value has to be offset by some other asset as it makes no sense to give a spouse an interest in a business that he or she has no desire to own.

Many high net worth divorces often involve assets which are located out of state or out of the country. How these assets are handles, including determining if the court has jurisdiction over them poses another challenge that is common in high net worth cases.

Income caps for both child support and maintenance are yet another issue that must be considered. Both have caps on what income is required to be used in determining support, but the numbers are different. Moreover, while courts very often place a cap on income that is significantly higher than the mandatory statutory cap, the issue remains how much higher should the court go. Finding similar cases that involve similar incomes helps provide guidance to the court and also protects the individuals in the event an appeal is necessary in case the court orders a figure that is too low or too high.

Tax aspects cannot be ignored either.

Yet another very common issue that occurs in high net worth divorces is hiding income and assets. Knowing where to look for clues of hidden income and assets helps in finding them and helps keep legal fees more manageable too.

Not every high net worth divorce is complicated though. When people are transparent in disclosing their assets and income and act in good faith, the case does not need to be litigated or drawn out.

Do you need representation in a high net worth divorce or one that involves complex legal questions?

Equitable Distribution in High Net Worth Divorces

What you need to know about high net worth divorces

Successful people often use advanced financial planning to grow their wealth. When they divorce, these assets are subject to equitable distribution. While it is impossible to prevent these assets from being distributed in some fashion, the attorney representing accomplished people with high assets must have a working knowledge of the various methods used to protect and grow wealth.

The best representation in a high net worth divorce is obtaining counsel who can identify methods used by the wealthy. Often, an expert is needed to explain the effects of these financial setups. The danger lies that your spouse, their attorney, or worse, the judge, will not understand them and assume some sort of nefarious intent on something that is fully legal. Below are some examples of issues facing high net worth individuals.

The Crummey Trust

A Crummey Trust is an advanced estate planning trust that can substantially reduce estate taxes. Annual gifts are made through a trust, allowing the benefits of a gift tax exclusion while the trust allows the grantor to retain some degree of control over the assets. The transfer must be irrevocable.

To someone who is unaware of this tax reduction technique, it could be easy to assume the transfers were made to reduce the marital assets held by a spouse as they prepare in advance for a divorce. If the attorney representing a spouse who used the Crummey Trust doesn't recognize it for what it is, the result could be not using an expert to explain the transfers to the Court.

Asset based lending

Asset based lending is an advanced revenue generating mechanism used by the very wealthy, which result in tax free revenue.

Typically, a trust is set up which holds appreciating assets. Loans are secured against these high value assets acting as collateral. As a loan is not considered income, no income tax is paid. The loan is repaid for a short period of time, but as the asset appreciates, it allows the asset to be sold for a profit, repaying the loan. The surplus funds are then rolled into a new appreciating asset, and the process repeats itself.

This technique is common for individuals with highly valued asset which are known to appreciate such as art or real estate.

An expert will almost always be needed to explain how this method words.

Old Financial Records

Very often, high net worth divorces occur after decades of marriage. Due to the time involved, old records can be incomplete or missing. When a separate property credit is at issue, these missing records could easily result in a gross miscarriage of justice if the court misclassifies the separate property as a marital asset.

When this issue is presented, a skilled lawyer will be able to find work arounds to fill in the missing gap, either through discovery, financial analysis, and application of controlling law.

Different Valuation Methods

If an asset is sold, there is no issue as to its value. But short of liquidating every marital asset, the need to value the assets is apparent. Different valuation methods can result in widely different results, making it critical to use the right method for the right asset.

Contact Our Divorce Attorney Today

At the Law Office of J. Douglas Barics, we have the skills and knowledge to handle any high asset divorce, no matter how challenging. With over 25 years of matrimonial experience, we can bring to you the services of a large firm at a fraction of the cost. When you need a skilled divorce lawyer located in Suffolk County, call The Law Office of J. Douglas Barics.

For a free phone case consultation or to schedule an office meeting, call 631-864-2600.