5 Common Complications with High Net Worth Divorces [and How to Handle Them]

The good news is that having a high net worth puts you in a much better position than the majority of divorcing couples, giving you more options and financial flexibility. But having more assets doesn’t necessarily make the process easier or less volatile. To prepare for what lies ahead, consider these five common complications of high net worth divorces.

  1. Hidden assets

Some spouses think they can pull a fast one on the court system and transfer their valuable assets to a third party, such as business partner or a child from a former marriage. If you or your spouse is caught making such transfers, those actions will most likely be considered fraudulent. The responsible party will lose credibility in court and face penalties. If you suspect your spouse of hiding assets, gather evidence and discuss the situation with your lawyer immediately. You could subpoena your spouse’s account information or take other actions to identify and stop the fraud.

  1. Inaccurate accounting of assets and liabilities

Even if you have no intention of committing fraud, you could mistakenly misrepresent your assets and liabilities, especially if you have a high net worth and a complex financial situation. One of the first steps in the divorce process involves filling out a financial affidavit and aggregating financial documents required by law. The process can be time-consuming and tedious, but a thorough analysis will ensure that you won’t be taking on liabilities that you don’t rightfully owe or giving up assets unnecessarily.

  1. Failing to consider asset transfer taxes

High net worth individuals often owns businesses or corporations. Transferring assets from a business to an individual can trigger certain tax liabilities. For example, transferring ownership of a company vehicle to either you or your spouse can trigger a taxable gain, which could be based partially on gain from the company’s depreciation deductions. This kind of transfer could also be configured as additional income, which comes with its own set of taxes.

  1. Creating or worsening family business issues

High net worth couples may jointly own a family business. In these cases, both sides will need to valuate their interests. A business appraiser will project a company’s future value using the following criteria:

  • Earning and expense history
  • Earning capacity
  • Net worth and current financial outlook
  • Type of business and economic outlook for the industry
  • Dividend paying capacity
  • Stock prices (if applicable)
  1. Emotional decision-making

Like any divorce, emotions also can run high in a case between two high net worth individuals. Although it may seem cold, you should avoid letting your emotions guide your decisions. For example, a wife feeling guilt over the divorce may waive alimony entitlements, or a husband with substantial pre-marital assets may agree to distribute a portion of these to his wife. Do yourself a favor, and trust the process to decide what’s equitable.

If you’re dealing with a high-net worth divorce or facing possibly complex divorce litigation, you want to trust that your attorneys have courtroom experience, negotiating savvy and great values. Call the DiPietro Family Law Group in Maryland at 301.970.9286 to obtain a favorable legal outcome for you and your family.

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