The divorce process can be long, complicated, and expensive for any couple. However, cases can become especially complex when a couple has a high net worth, including situations where one or both spouses have a high income, where they own valuable assets, or where either spouse has significant family wealth. If you are currently going through a divorce or are considering ending your marriage, and you need to address issues related to large assets or significant income earned by either spouse, there are some things you need to keep in mind. By taking the right approach during your divorce, you can protect your financial interests, minimize complications and expenses, and come out the other side of your case prepared to meet your needs in the future.
The team at [[title]] has extensive experience representing clients in multiple types of divorce cases, including those involving couples with a high net worth. We understand the unique considerations and challenges that affect couples in these situations, and we have the knowledge and experience needed to help you handle financial issues effectively. Our goal is to help you achieve the best possible outcome, whether that means negotiating a divorce agreement that takes your unique circumstances into account, working with forensic accountants to value assets and determine appropriate distributions, or representing you in litigation if necessary.
Preparing for a High Net Worth Divorce
In many cases, a high net worth divorce will take longer than the average divorce case. Gaining a full understanding of the assets you own and other aspects of your financial situation can take time, and making decisions on how to address issues related to property, income, and finances can often be a complex process. These divorce cases are also often more expensive than average, since you may need to work with accountants, appraisers, or other financial experts during the divorce process.
Fortunately, with the proper preparation, you may be able to complete the divorce process more quickly and efficiently. Here are some steps that you can take to help ensure a smooth divorce process:
Understand your financial situation – This includes looking closely at all of your assets and liabilities, as well as all sources of income for both you and your spouse. Taking the time to gain a clear understanding of your current financial picture will make it easier for you to make informed decisions about how to divide assets and address other financial concerns.
Explore divorce options – There may be different approaches that would work best for you based on your finances and other factors that affect you and your spouse. Our divorce lawyers can help you understand what options are available, including whether mediation or collaborative law may be good solutions for working together with your spouse to reach agreements about legal and financial issues.
Protect your interests – By gathering documentation of the assets you own and other financial issues that may affect you during your divorce, you can make sure these matters will be addressed correctly. Obtaining records of financial assets, appraisals of valuable property, and documentation such as bank statements and tax returns can help you understand the full value of the marital estate, and it may also prevent the possibility of your spouse attempting to conceal assets from you. You can also document your expenses to demonstrate your ongoing needs and ensure that you will have the financial resources to maintain your lifestyle following your divorce.
Review marital agreements – If you have a prenuptial or postnuptial agreement, you need to carefully review the terms of the agreement to determine how it will affect your divorce. An agreement may detail whether assets are considered marital property that is co-owned by both spouses or separate property solely owned by either you or your spouse, and it may detail how different types of property will be divided between the two of you. By understanding the decisions made in a prenup or postnup, you can make sure an agreement will be applied correctly during the divorce process.
Complex Property Division Considerations in a High Asset Divorce
After gaining a full understanding of the assets you own, you will need to determine how these assets will be divided between you and your spouse, and this is often one of the biggest challenges in a high net worth divorce. You may need to address some complex financial considerations as you address assets such as:
Family businesses and professional practices – If you or your spouse own a business, you may need to make difficult decisions about how to divide this valuable asset. In many cases, a family business represents a significant investment of money, time, and “sweat equity,” and a person who has built a successful business that they rely on to earn an income will be looking to protect their investment. If you or your spouse are a business owner, or if you have worked together to build a successful business or professional practice, you will need to determine how to handle ownership of the business going forward. A business valuation is usually the first step that will need to be taken, and it will ensure that you have a full understanding of the present and future value of business assets. During the divorce process, you and your spouse will need to determine whether one of you will own a business going forward, whether you will sell the business and divide the proceeds, or whether you may be able to agree on other arrangements, such as ongoing co-ownership of the business.
Real estate – Property such as homes, vacation properties, commercial properties, and undeveloped land should be appraised to determine the financial value of these assets. Deciding which party will be entitled to keep certain properties may be challenging. You will need to carefully consider factors such as your financial needs, the ability of one or both of you to continue making mortgage payments on a particular property, whether either you or your spouse wish to continue living in your family home with your children, and various other considerations related to valuation, property taxes, and ongoing expenses.
Retirement plans and pensions – Retirement savings and benefits can be extremely valuable assets. If you or your spouse own retirement savings accounts or are eligible for pension benefits, you will need to understand how divorce affects these assets. You may determine that the funds in one or more retirement accounts will be divided between the two of you, or one spouse may be able to receive a portion of the other spouse’s pension benefits. To effectuate the decisions you make in these areas, you will need to use Qualified Domestic Relations Orders (QDROs), which will ensure that you will not be required to pay taxes or penalties. These orders can be complex, and they should be prepared with the assistance of a qualified and experienced attorney.
Financial Support in Cases Involving Large Incomes
If you and your spouse have a high net worth, there may be a significant disparity in the incomes you earn. This may lead one spouse to ask for ongoing financial support from the other party. Spousal support may be appropriate if one spouse relies on the income earned by the other spouse to provide for their family’s needs, if a person will be unable to fully support themselves and maintain their lifestyle following their divorce, or if one spouse has given up the opportunity to earn a sufficient income in order to raise children or support their family by focusing on domestic responsibilities.
Determining an appropriate amount of spousal support can sometimes be difficult in a high net worth divorce. While the Illinois Marriage and Dissolution of Marriage Act includes a formula used to calculate spousal maintenance payments, these guidelines will only be followed in cases where a couple’s combined gross income is less than $500,000 per year. If you and your spouse earn more than this amount, support may be set at an amount that a judge determines is appropriate based on the facts and circumstances of your case. Our attorneys can help you gather the necessary documentation to demonstrate your income and expenses. Whether you will be paying or receiving spousal support, we can work with you to negotiate agreements that will provide for your needs going forward.
High income levels may also complicate decisions about child support. The income earned by both parents will be considered when determining each parent’s financial obligations toward their children. In some cases, establishing an accurate income level for parents can be difficult, especially if a parent is a corporate officer, utilizes deferred compensation benefits, or has an irregular income that includes commissions or bonuses. It is important to gain a full understanding of all sources of income for both parents to ensure that the appropriate child support orders can be established.
As parents, you and your spouse will also need to determine how to divide various child-related expenses, including private school tuition, tutoring, activities, and medical expenses. You may also address how you and your spouse will pay for your children’s college expenses, including how any college savings accounts or other assets may be used to address these needs. With the help of an attorney, you can make sure the financial resources of both parents will be used correctly to provide ongoing support for your children.
Tax Considerations for High Net Worth Couples
In addition to addressing the issues detailed above, you will need to understand how the decisions you make during your divorce will impact the taxes you owe. Failure to fully consider these issues could leave you with a large tax bill in the future, or you could be subject to penalties following a tax audit. Tax-related issues to address during the divorce process may include:
Filing status – You and your spouse will be required to file separate tax returns following your divorce. However, prior to the finalization of your divorce, it may be beneficial to continue to file joint tax returns. By consulting with a financial advisor, you can determine the best approach to take, and you can also reach agreements on how to divide any tax refunds you receive or determine who will be responsible for paying taxes that are owed.
Tax credits and deductions – Following your divorce, only one parent will be able to claim a child as a dependent and receive the associated tax credits. You will need to determine how children may be claimed on taxes, as well as how to divide any other tax credits that may be available.
Capital gains taxes – While you or your spouse will generally not be required to pay taxes when transferring money or assets between the two of you during the divorce process, if you choose to sell certain assets, capital gains taxes may apply. By understanding the tax implications of decisions about asset division, you can avoid unexpected expenses.
Contact Our Elmhurst High Net Worth Divorce Attorneys
No matter how much money you and your spouse have, divorce can be a difficult process. Our attorneys are experienced in helping couples navigate the complex financial issues that often arise during high net worth divorce cases. We understand the importance of reaching agreements that will provide for your needs both now and in the future. With our help, you can make sure that you can complete your divorce as smoothly as possible and that your finances will be taken into account throughout the process. Contact our DuPage County high asset divorce lawyers today at [[phone]] to get the legal help and representation you need.