No matter your circumstances, divorce is difficult. But when you and your spouse have a high net worth, your divorce process might look different from other divorces.
Whether you’re a business owner, a high-income earner, or possess high-value assets, there are many factors to consider before establishing the right New Jersey divorce strategy for you.
Treating your divorce like everyone else’s can pose a severe risk to your finances, livelihood, and future. It’s essential to work with attorneys to preserve your wealth while preparing for the next stage of your life.
Our high net worth divorce attorneys at Stark & Stark are experienced in family law matters and protecting the interests of high net worth individuals during a divorce. Moreover, our high net worth attorney group has access to a wide range of legal resources to help you pursue the strategy that’s right for your personal, financial, and professional needs.
Contact us today to speak with an experienced high net worth divorce attorney.
What is a “High Net Worth Divorce”?
Couples often wonder if the term “high net worth” applies to their divorce situation. It may, or it may not.
There’s no one definition for what constitutes a high net worth divorce. Still, it typically involves an estate worth over one million dollars in liquid assets or cases in which one spouse owns or has an ownership interest in a business. These assets can include property, business shares, overseas assets, and more.
Not surprisingly, the higher the net worth, the greater the potential for complexity in the divorce.
Why Are High Net Worth Divorces Different?
Although the result is the same as any other divorce, the process of a high net worth divorce is different.
To start, the treatment of assets—identifying, valuing, and assuring equitable distribution as per New Jersey law—has a higher degree of complexity in a high net worth divorce than in a typical divorce. Because of this, high net worth divorces typically take longer, involve more professionals, and may involve a greater number of disputes.
When High Net Worth Divorces Aren’t Different
If you or your spouse came into your marriage with previously established wealth, your divorce process might not impact your assets significantly. As a general guideline, assets brought into a marriage—not those acquired during a marriage—aren’t subject to New Jersey divorce laws on equitable distribution. Before the divorce process begins, both parties should be prepared to demonstrate which assets are “separate property.”
Individuals who have built their wealth during the course of their marriage, however, face different circumstances. These individuals should seek legal counsel from an attorney with experience navigating high net worth divorces to mitigate risk and position themselves for fair asset distribution.
Our high net worth divorce attorneys can help you understand how your different assets will impact your divorce by reviewing documents like:
- Prenuptial agreements
- Real estate holdings
- Business records
- Shareholder agreements
- Retirement and investment assets
- And more
Contact us today to speak with an experienced attorney.
Concerns in a High Net Worth Divorce
While New Jersey has specific laws about how child support should be handled, high net worth cases are often handled differently than lower-income divorce cases. A separate analysis is done if the two parents’ combined net income is higher than $187,000 per year.
In these cases, courts address what is required to meet the specific needs of the children. Courts may consider the following:
- Private educational tuition
- Cost of hobbies, sports, or other recreational activities
- Nannies, tutors, and other childcare expenses
Couples should be aware that—high net worth or not—child support and custody can’t be determined via a prenuptial agreement in New Jersey. Instead, these matters have to be addressed during the divorce process.
Division of Property and Assets
Property is one of the most significant issues in a high net worth divorce. Not only are property values higher, but spouses may also possess multiple domestic or international properties, including second homes, vacation homes, and commercial properties.
In New Jersey divorces, property can be categorized as either “marital” or “exempt” property.
- Marital property is all assets and debts acquired during the marriage by either party
- Exempt property is all property acquired or purchased by one spouse before the marriage OR acquired by inheritance, a gift during the marriage, or is otherwise addressed in a prenuptial agreement.
Much of marital property tends to be divided easily during divorce, but separate properties can be more complex. If the other spouse contributed time or finances towards the separate property’s upkeep, it might require more investigation during the divorce process. Similarly, if the owner of separate property used it to the benefit of the family, the non-owner spouse may have an equitable interest.
Dividing other assets can also be tricky. In high net worth divorces, it’s common for parties to have diverse marital estates that might include:
- Real estate holdings
- Business interests
- Retirement accounts
- International assets
- And more
Assessing all of these assets makes the equitable distribution of assets challenging, and the problem is compounded if one spouse hides assets. This can happen in several ways, such as hiding assets in off-shore bank accounts, transferring assets to a family member, or moving funds to other concealed accounts. To uncover these funds, forensic accounting may be necessary during the divorce.
When both parties in a divorce have sizable incomes of their own, alimony isn’t generally a concern. However, if one spouse has depended on the other’s income, the lower-earning party might ask for alimony.
In New Jersey, courts determine whether alimony is necessary by looking at the following factors:
- Need and the ability of the spouse to pay
- Length of marriage
- Age and health of both parties
- Standard of living during marriage
- Current and future earning potential for both spouses
- Equitable distribution of marital properties
- History of spousal contributions to the marriage
- Income from investments
- Other factors as necessary
Protecting Your Business During a High Net Worth Divorce
High net worth divorces can impact your business dealings. If you own or operate a business, it’s vital to resolve ownership, equitable distribution of a company, and its value. You’ll need to determine:
- Whether the business is wholly or partially marital property
- An accurate calculation of business income
- What is the value of the business?
To answer these questions, a formal valuation and report may be required to allocate value between parties. Moreover, the business’ income stream may need to be reviewed if there are claims for alimony or child support.
New Jersey High Net Worth Divorce Lawyers
Divorce is difficult, and high net worth divorces can carry particular stress and challenges. By preparing ahead and working with an experienced attorney, you can put yourself in a better financial, emotional, and legal position.
At Stark & Stark, our high net worth divorce attorneys are dedicated to fighting for your interests during divorce. Our high net worth attorney group has access to a wide range of legal resources to help you pursue the strategy that’s right for your personal, financial, and professional needs.
Common Mistakes and Challenges in High Net Worth Divorces
Making the right moves when starting your divorce process is important. Here are some common mistakes we see when new clients come to us.
Hiring the Wrong Attorney
Not all attorneys are the same. There are many family law practitioners out there, but you don’t want just any divorce attorney. To resolve your divorce in a way that preserves your assets, it’s helpful to have an experienced attorney to guide you through negotiations.
Moving Too Quickly to Resolve the Case
Clients in the middle of a divorce often just want to get it done. It’s stressful, emotional, and people often agree to unfavorable terms to bring things to an end. However, this can have significant financial consequences. You may find yourself on the wrong end of an alimony agreement or division of assets because you let your emotions get the better of you.
An experienced attorney can help you manage your divorce’s stress and challenges and map out a path towards the future you want.
Hiding assets is a costly mistake to make. Concealing assets before or during a divorce will appear fraudulent, and you can lose more than your valuable assets—you can lose your credibility, which can potentially cost you a favorable outcome.
High Net Worth Divorce FAQs
Why do I need an attorney if we already have a prenuptial agreement?
Prenuptial agreements help any marriage, but even the best plans and arrangements don’t always reflect reality. High net worth marriages—and divorces—have more complications, and having a skilled attorney interpret and advocate for you is an invaluable asset during your divorce.
I’m worried about my children—I want to protect them from an ugly court battle. What can I do?
During a divorce, children are impacted by what’s going on around them. You’re probably frequently reminding them that your divorce has nothing to do with them—so make sure you are reinforcing that! And remember, courts will take your behavior during this time into consideration when making custody decisions.
You can help them navigate this difficult time by not saying anything negative about your spouse or discussing your frustrations with them. Do your best to maintain schedules and routines in their lives and support their relationship with your spouse and their side of the family.
Will my spouse be required to pay for private school?
In high net worth divorce cases, traditional methods of determining child support and related costs don’t apply. Instead, the courts make decisions based on what they deem in the child’s best interest.
As such, expenses like private school tuition, college contributions, tutors, nannies, au pairs, and other childcare services may be required. Each case will be judged based on the unique circumstances of the family in question.
What happens if a business is involved?
For some high net worth individuals, wealth comes from business ventures. In some cases, the business’s income and assets may not be readily apparent, and personal expenses may be hard to detect if paid through the company.
Similar challenges may come up if an individual is an executive at a large company or corporation. Some executives benefit from different forms of payment, such as stocks, deferred compensation benefits, pensions, bonuses, and more.
To resolve questions about business income and other assets, it may be necessary to investigate. Your attorney may conduct depositions or request records from banks, financial institutions, or friends, family members, colleagues, or any other person who might have information about the assets in the case.
When assets are identified, your attorney can value them. Doing this requires employing appraisers, financial experts, and accountants. They can help articulate the value of the business and any other related financial assets. Once that information is available, the rest of the divorce process can move ahead.
How are our investments divided?
Although high net worth divorces are unique, they still follow New Jersey’s law that assets—including investments—are subject to equitable distribution during a divorce. This means that, once all assets are identified, courts take the fair value and then determine how to split that value between spouses most equitably.
It’s important to remember that assets can either be “separate” or “marital” property—that is, brought into the marriage independently or acquired during the marriage. “Separate” property isn’t subject to division and will stay with the original owner upon divorce.
How does the court handle carry-forward losses and gains?
How the courts treat tax carryovers differs depending on whether they are related to marital assets or individual assets. In some high net worth divorce cases, tax carryovers can be negotiated as part of the divorce settlement. A Stark & Stark high net worth divorce lawyer experienced in handling high net worth divorce cases can offer counsel regarding carryover-related assets and liabilities as well as other tax issues related to a divorce.