A Guide to High Net Worth Divorces in Texas
A high-net-worth divorce involves many complexities. These are often triggered by one spouse having a large sum of money while the other does not. This can lead to a situation where one party has significant assets and income while the other has none. In such cases, the parties must decide how to divide up those assets and what happens to each person’s future earnings. We offer comprehensive advice and guidance throughout the entire process.What is Considered a High Net Worth Divorce?
There is no universal definition of "high net worth." However, it is generally considered descriptive of any marital estate that contains significant cash or near liquid investments (such as stocks, bonds, or investment portfolios), multiple retirement accounts (including 401(k), 403(b), 457, IRA, pension, or federal or military retirements), deferred compensation or bonus structures (including stock options, restricted stock unit, performance shares, or similar advanced profit sharing plans), or significant separate property existing prior to marriage or received during the marriage as a result of a person’s personal injury.How Do High Net Worth Divorces Differ from Traditional Divorces?
High net-worth divorce cases are often complicated because there are multiple parties involved, many of whom hold substantial assets and businesses. In addition, such cases typically involve complex financial arrangements and intermingled personal and business assets. As a result, the process is likely to generate numerous challenges, particularly around asset valuation and distribution.
A systematic approach that correctly identifies and addresses the special issues, as opposed to just addressing the most obvious ones, is essential to ensuring a clean, fair, and equitable final property division. This includes identifying and properly valuing the family home, determining ownership and value of closely held companies, evaluating the value of investment portfolios, and resolving outstanding debts and liabilities.
In addition, certain types of transactions, such as sales of real estate or businesses, require careful consideration of the tax consequences. These include whether the sale is subject to capital gains taxes, how the proceeds will be divided among the spouses, what type of entity will own the business interest, and whether the transaction should be structured as a gift or a taxable event.
The following factors must be considered when preparing a case involving high-net-worth individuals:
- Assets that are part of a joint account or jointly owned property;
- Business interests, including partnerships, LLCs, limited liability corporations, trusts, and S corporations;
- Investments, including mutual funds, stocks, bonds, real estate, and art collections;
Divorce is never easy, especially when it involves money. But there are ways to avoid costly legal fees and lengthy proceedings. If you're thinking about getting divorced, here are some alternatives to traditional litigation:
- Mediation - This form of the settlement requires both parties to meet with a neutral third party who helps negotiate a mutually agreeable solution. Unlike litigation, where the opposing attorney represents each side, mediators do not represent either spouse. They work solely to help the couple reach a fair agreement.
- Negotiated Divorce - Both spouses agree to terms of separation, such as child custody arrangements, alimony payments, and division of property. At the end of negotiations, the parties sign off on the final document and pay a lump sum to cover the cost of the process.
- Collaborative Law - This type of arrangement allows couples to collaborate with a team of lawyers to resolve issues related to finances, children, and other important matters. A team of professionals works together to ensure that the client gets what he or she wants without having to go to court.
- Settlement Agreement - When a couple reaches an amicable agreement regarding their differences, they draft a detailed contract outlining how things will play out over the next few months. Each party signs the document, agreeing to abide by the terms set forth.
- Arbitration - An arbitration hearing is similar to a trial, except that the arbitrator makes the decision rather than a jury. There is no appeal of an arbitration award.
- Private Attorney General - If a partner refuses to comply with the terms of a separation agreement, the other party can file suit against him or her under the Private Attorney General Act. The act gives the aggrieved individual the ability to collect damages for breach of contract.
The first step is to work closely with your family lawyer and/or a forensic accountant. They will help you understand how your finances are being handled and guide you through the process of getting a clear picture of where your money is going. If your spouse refuses to cooperate, it might be necessary to file for divorce.
If you decide to go ahead with the divorce, there are some things you should know about legal proceedings. You must hire a lawyer because the law requires you to do so. In addition, any assets you own jointly, such as real estate, stocks, bonds, etc., will become part of the marital property. This can make divorce very complicated.
You should also consider hiring a forensic accountant to assist you in uncovering hidden income streams. A forensic accountant will review all records, including bank statements, credit card bills, tax returns, brokerage accounts, insurance policies, etc., to determine whether your spouse is hiding money.How is Separate and Community Property Determined in a High Net Worth Divorce?
The easiest way to determine whether an asset belongs to one spouse or both spouses is to ask the owner. This simple question reveals whether the asset is owned exclusively by one party or jointly by both parties. However, there are times when it is difficult to prove ownership. For example, some people keep track of their finances electronically, and others do not. In addition, many financial accounts are held jointly with someone else.
To resolve disputes over ownership of assets, courts look to state law. Some states recognize the concept of separate property, while others consider everything acquired during marriage to be community property. A high-net-worth divorce lawyer can help you understand how your state defines separate versus community property.Work with Our Experienced Texas Divorce Attorney
An experienced divorce attorney in Harris County, Galveston County, Fort Bend County, Montgomery County, Brazoria County, Houston, Sugar Land, Missouri City, and Stafford, Texas at Thornton Esquire Law Group, PLLC, can provide guidance and offer advice throughout the entire process. Contact us today at www.thorntonesquirelawgroup.com for a free consultation.