Understanding the Complexities of a High Net Worth Divorce

High Net Worth Divorces in Maine: What to Expect

Any divorce has the potential to be time-consuming, mentally, and emotionally challenging, and costly. Understanding what to expect can make a big difference in how you approach the process.

This is especially true in high net worth divorces, where the financial stakes can be significantly higher for both spouses. Certain complexities that do not generally apply to other divorces may be present, often requiring knowledgeable and dependable legal advice to guide the decision-making process.

Here’s what you need to know.

High net worth divorces involve considerable assets and/or high income from one or both spouses.

Traditionally, if marital property division involves assets valued at a million dollars or more, this is classed as a high net worth divorce. However, this classification has less relevance nowadays with so many millionaires in the U.S. High net worth divorces usually refer to those involving several millions of dollars or more in assets.

Because of the large number and/or high value of assets that must be divided during the property division process, high net worth divorces tend to be more complex from a financial and tax standpoint than standard divorces.

Spousal support matters can also be more complex and divisive if one spouse earns significantly more than the other, or if one parent has acted as the homemaker while the other has pursued a career or business interests.

Unraveling the complexities of these divorces often requires the skills of a professional divorce attorney experienced in such cases.

The lofty values of assets in a divorce can make it “high net worth”, but why is it likely to be more complex and time-consuming than an average divorce?

Here are the main reasons.

One partner claims a greater share

In almost all divorces, spouses want to claim their “fair share” of assets to boost their financial situation as they begin separate lives away from their partners.

In high net worth divorces, the division can greatly impact a spouse’s financial situation. Maine law dictates an equitable distribution of all marital assets, i.e., property acquired during the marriage. If spouses cannot negotiate a fair property division settlement themselves or through their lawyers, a judge may need to decide what a “fair share” looks like for both spouses.

This may be complicated if one spouse is the homemaker, raising the children at home while the other spouse earns a high income, or a spouse sacrifices a career for the benefit of the partner’s career. Spouses, lawyers, or judges must then attempt to place a fair financial value on non-income-earning elements of the marriage. Financial professionals may be required before a fair decision can be made.

The spouses enjoy a high standard of living

The spouses in high net worth divorces often enjoy a high standard of living that they are understandably reluctant to give up.

Adjusting to a new reality, especially if there is only one breadwinner in the family, can be challenging. This often creates extra stresses that add complexity to the divorce process.

Income imbalances with spousal support claims

Income imbalances in high net worth divorces often complicate matters, especially when it comes to calculating spousal support.

During a divorce, the lower-earning spouse may be entitled to temporary or permanent spousal support (“alimony”) to help the transition to a single life. A judge may need to order support unless a provision has been made in a prenuptial or postnuptial agreement or the couple can agree through their lawyers or mediator.

Spousal support decisions for a “homemaker” who separates from a high-earning spouse must factor in the perceived value of non-income-earning activities. The homemaker’s ability to find suitable employment and support themselves should also be considered, as the spouse may have sacrificed a career and lack the required training, professional skills, or experience to re-enter the workforce (more about spousal support claims in high net worth divorces below).

A high proportion of non-liquid assets

It is unusual in a high net worth divorce for a large proportion of the assets to be cash or savings. They are commonly “locked up” in properties, businesses, investments, pensions, retirement funds, etc., which cannot easily be divided.

Complex valuations may be required and “deals” negotiated between the spouses so that a fair division of assets is possible.

Concealment of assets

Full financial disclosure is required before an equitable division of the marital estate is possible. This is a legal obligation of both spouses, so if one spouse attempts to conceal assets from the marriage, he/she can be held in contempt of court.

Such actions increase the likelihood of the divorce becoming more adversarial, ending up in a trial, and requiring the input of forensic financial professionals. This adds complexity, expense, and stress to the process.

Co-mingling of assets

It’s quite natural for a married couple’s assets to become co-mingled in the “marital property” pool. Joint bank accounts, credit cards, etc. are common.

When this happens with multiple high-value assets, unraveling them from separate property, such as inheritance or gifts, and making the necessary calculations, usually requires the skills and experience of financial and/or legal professionals.

Complex tax situations

The tax situation in high net worth divorces can also add complexity that spouses have not bargained for if they have not received reliable advice.

For instance, a married couple may sell assets to liquify them to make the property division process easier but in the process, one of the spouses incurs significant capital gains tax liabilities. An experienced high net worth divorce attorney can advise on the best way to legally limit your tax liabilities during the marital property division process

If there is uncertainty about the ability of spouses to support themselves, alimony can be awarded at any time during the divorce process by a judge.

In most cases, support is ordered after the divorce is finalized, but temporary support may be awarded to ease the transition to single life while the divorce is working its way through the courts.

In high net worth divorces, which are usually more complex and lengthier than standard divorces, temporary spousal support is quite common.

There is no spousal support calculator for divorcing couples in Maine, like there is with child support. Instead, judges consider multiple factors before issuing a spousal support order, the most important of which are:

• The length of the marriage.
• The outcome of the marital property division process.
• The career prospects and employment skills of the spouses.
• The current and future earnings of each spouse.
• The allocation of parental rights and responsibilities, especially if the child’s care needs impact a parent’s ability to work.
• Any physical or mental health concerns with either spouse.

A high net worth divorce lawyer can help assess the need for spousal support and estimate the appropriate amounts.

For legal assistance with any aspect of a divorce in Maine, speak to an experienced family law attorney at The Maine Divorce Group during an initial consultation.