New Jersey doesn’t have a specific number to label a divorce high net worth; however, most consider those with assets worth $1 million or more to have a high net worth. As with any other divorce, a high net worth divorce can easily settle, or it could spend months or longer in court. Even if you and your spouse agree on everything, you should obtain expert legal guidance for divorce to ensure the Marital Settlement Agreement is fair.
Assets in a High Net-Worth Situation
It’s not the type of assets you have that make you worth more – it’s the value of the assets. You could have one or more of the following that add up to over $1 million:
- Equity compensation
- Professional practices
- Stock options
- IRAs, pensions, profit sharing, and other retirement assets
- Homes, rentals, vacation properties and commercial real estate
- Cars, trucks, boats, jewelry, artwork, and other valuable personal property
Other assets count toward the overall value of assets, but the above are the most common assets with higher values.
High Net-Worth Divorce: Is it Really Different?
As far as the law is concerned, a high net-worth divorce is the same as any other divorce. The difference is the separate financial status of each spouse; you have more at stake from a financial perspective, and your financial situation is often more complex.
Some examples of factors that make high net-worth divorces different include:
- One spouse doesn’t work or does but earns much less than the other.
- The amount of money you have in liquid assets and those that are hard or impossible to liquidate.
- The couple owns a business or several rentals.
Handling Assets in a High Net-Worth Divorce
Assets can pose problems, even if you don’t divide them. If they are marital assets, they need to be valued properly. You can’t hire anyone to value a business – you need a firm that specializes in valuing businesses.
If you have one rental, your divorce attorney may be able to help value the business, but if you have several rentals or you own a large apartment complex, you need a professional to do the valuation.
Other issues that might come up in a high net-worth divorce include:
- Hiding Assets: A spouse could hide assets by transferring them out of his or her name or hiding the asset in a business.
- Ownership: Businesses may be subject to ownership agreements with co-owners. The agreement could stipulate what happens to the asset in the event of a divorce.
- Comingled Income: Your comingle income with a business or on a non-marital asset. Paying personal expenses through the business is one way. If you have a non-marital asset and use marital funds for maintenance and/or upkeep of the asset, it becomes commingled.
- Income: Some types of income must be calculated, such as long-term incentive compensation, restricted stock options, commissions, and grants.
- Retirement Plans: If you contribute to a retirement plan during the marriage, it is usually considered marital property – at least for the duration of the marriage. Accounts such as IRAs, 401(k)s, pensions, deferred compensation benefits, and other retirement accounts must be calculated to determine the marital portion.
- Other Income: Termination benefits, signing bonuses, and compensation, including bonuses awarded over several years or when an event triggers disbursement, must also be calculated if they were earned during the marriage.
In many cases, we must retain forensic accountants and business valuation experts to value these types of assets. If your case goes to trial, they may have to testify during the trial.
Key Factors that Affect Property Distribution in High Net-Worth Divorce Cases
Several factors affect property distribution in Hackensack, NJ, including equitable distribution, asset valuation, prenuptial agreements, mid-marriage agreements, and tax considerations.
New Jersey does not split assets down the middle, which would be equal distribution. Instead, it uses equitable distribution to achieve a fair distribution of assets. Equitable distribution takes certain factors into account, including:
- The income of each spouse.
- Non-marital assets such as those owned prior to the marriage and not comingled, inheritances, and some personal injury case awards.
- Spousal support in any of its forms.
- Hidden assets.
Taking the above into consideration, one spouse may get a higher percentage of the assets than another.
It is imperative to properly value assets so you do not give up more than required during a divorce. To do that, we may have to retain accountants, forensic accountants, business valuation firms, and other professionals to audit and value assets.
Tax and Fee Considerations
Distributing marital property can significantly change your tax liability by putting you into a higher or lower tax bracket. When structuring property distribution, we take your tax liability and penalties and fees you may be charged into consideration before we make any recommendations.
Retirement accounts often come with penalties if you cash them out early. In some cases, the court can enter a Qualified Domestic Relations Order (QDRO) if you have to transfer part or all of a retirement plan to your spouse.
Prenuptial and Mid-Marriage Agreements
If you signed an enforceable prenuptial or mid-marriage agreement with your fiance or spouse, you and your spouse must abide by the agreement. Either agreement is a good way to avoid equitable distribution and secure your wealth.
However, depending on when you signed the agreement, it may not cover all of your assets. In some cases, your spouse may try to get the agreement rescinded. Our experienced high-net-worth divorce attorneys can handle actions when a spouse tries to dispute the agreement.
The Ultimate Goal: Protecting What Matters
Neither spouse hardly ever gets everything he or she wants in a divorce. You must compromise on property division, timesharing for children, and other factors. You’ll have to make some difficult decisions as to what matters the most when it comes to financial factors, such as who gets the marital home and whether you should split the business income or avoid distributing retirement accounts.
You may have a valuable collection you do not want to split up or keep a boat that your spouse may never use, but you use all the time.
In other cases, the value of an asset could significantly increase while the value of a potential trade could stay the same or decrease. We can help you create a strategy that best protects the assets you keep and ensure that if there are trades, they are fair. For example, if your spouse wants to keep the marital home and give you a vacation home, we’ll look at future property valuation to determine if the trade is fair. The vacation property may not increase in value as much or as quickly as the marital home – that would be an unfair trade.
If you were served divorce papers or are planning on divorcing and you have a high net worth, contact a Hackensack high-net-worth divorce attorney to help protect your interests.