High Net Worth Divorce

Complex Financial and High-Net Worth Divorces

Complex financial considerations in divorce arise when the marital estate involves highly compensated individuals with intricate income streams or assets that are difficult to appraise, such as closely held businesses.

Spousal Support Consideration for Highly Compensated Individuals

Highly compensated individuals may receive a split of earnings from salary, bonuses, commissions, or grants of stock.  When considering what is reasonable spousal support a court must balance a spouse’s ability to pay support with the other spouse’s need for support.  When most of a party’s earnings is based on the achievement of certain benchmarks, the performance of the company or a team, the issue becomes how to consider these earnings in a support calculation.

A traditional method is to average the last three to five years of earnings and use the amount to determine a support level.  It may feel fair but if the variable compensation is not received the paying spouse will have a hard time modifying or changing the support order.  

A more appropriate method, which is fair to both parties, is to set a baseline amount of support based on guarantee pay with a cap of the percentage of any bonus, commission or other variable compensation received. 

Complicated Assets

When large or complicated assets are involved, special attention must be taken to ensure assets are property classified and valued.  Misclassifying or overvaluing assets can make a significant difference in the outcome of a divorce settlement. The process includes classifying the property, choosing the correct valuation method, and determining proper ownership interest.

Classification of Property

The asset should be analyzed to determine if it is marital, non-marital subject to division, non-marital and not subject to division, or not subject to division but considered an economic circumstance.   Family trusts is one area that is complex and requires an analysis of the trust and its implications within the separation of assets.

Valuation of the Property

The method employed to value an asset can make a huge difference.  Valuations can include a present value calculation of retirement or investment accounts, appraisals for both commercial or residential real estate and other assets such as artwork, or valuation of a business.  The methods employed for a business valuation can included a cost-valuation, asset-valuation, or market approach.  The results for the value can have a significant variance depending on the method employed. Understanding the various methods is key prior to agreeing to a valuation and/or presenting your valuation to the court.

Ownership Interests

An asset may have a future ownership interest that is not subject to division in a divorce.  It is important that the asset and future ownership interest be properly disclosed because otherwise you may be accused of withholding, hiding, or omitted assets that materially impacted the settlement.

Disclosure Requirements

Colorado has a five year look back period in a divorce.  Meaning that if financial disclosures are withheld from the other party, the court maintains jurisdiction to reallocate the settlement.  This may also include paying a portion of the other party’s attorneys’ fees and costs to relitigate any potential withholding assets.  Especially in a high-asset divorce you only want to litigate the case one time, thus you must ensure that you have provide all necessary and required documents.

What are Complex Assets?

If you or your spouses’ assets involve a mix of marital and non-marital property, inheritance, assets purchased with an inheritance, family trusts, family-owned business, closely held business, substantial real and commercial property, and/or investment accounts, your divorce includes complicated assets.