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Going through a divorce can be a stressful and emotional process. It can be even more overwhelming if substantial assets were acquired during the course of your marriage. Although the legal proceedings are the same, a high net worth divorce can be much more complicated than a typical divorce, due to the complexity of the financial issues involved. While child support and spousal support matters must be resolved — and property must be divided — before the court will grant a divorce, it’s essential to understand how net worth can impact the outcome of your case.
A high net worth divorce typically involves a significant amount of property that has been acquired by one or both spouses. In these cases, the assets may amount to one million dollars or more. Often, high net worth divorces can be lengthy and contentious — not only do assets need to be identified and properly valued, but sometimes they may also need to be investigated and uncovered.
Importantly, it's not just the amount of wealth that can make a high net worth divorce complicated. Since the assets in a high network case can include stocks, real estate holdings, or other assets that may appreciate or depreciate, it’s not always easy to value them. It's usually necessary to retain a valuation expert or appraiser to determine precisely how much each asset is worth. The services of a forensic accountant may also be required to locate hidden bank accounts or assets.
The most contentious issues in a high net worth divorce commonly concern the division of property and assets. California is a community property state, which means that all property acquired during the marriage is divided equally (50/50) between the spouses. Although it may seem that this should make a divorce straightforward, there can be a considerable amount of conflict surrounding which assets constitute community property.
Critically, in a high net worth case, the sources of income used to purchase property during the marriage may be varied — and more challenging to trace. For instance, it's not uncommon for income derived from investments or family businesses to be used to acquire property.
High asset divorces can require division of valuables and property such as:
A business might also be characterized as community property subject to division in a divorce if it was formed during the marriage. It’s important to be aware that even if a company was created by one of the spouses prior to the marriage, it may be at issue during the divorce proceedings if marital funds were used to contribute to its growth or operations.
Additionally, issues often arise in high net worth cases regarding commingled assets. When separate property and community property has been mixed together, it can make it harder to determine how the property should be categorized — and whether it should be subject to division.
Since child support and spousal support determinations take into consideration the income of each spouse, net worth will have a direct impact on the outcome of these matters.
Child support in California is paid until a child is 18 — or 19, if the child is still attending high school. The amount is generally based on a calculation that factors in the number of children, how much time the children spend with each parent, and parental income. However, the court may deviate from the statutory formula in a case where the parent ordered to pay support has "extraordinary high income and the amount determined under the formula would exceed the needs of the children." Since the California Family Code does not specify the criteria for qualifying as an "extraordinarily high earner," it is within the court's discretion to decide.
Nevertheless, a court will consider the lifestyle that the children were accustomed to during the marriage. For example, if the children attended private school, participated in certain recreational activities, or have special needs, a judge would issue a child support order that allowed them to continue the same standard of living. There is no capped amount of child support in California.
Similarly, a court may award spousal support to the financially dependent spouse to allow them to maintain the same lifestyle they had during the marriage. Spousal support can be temporary and last for the duration of the divorce proceedings. It can also be permanent and ordered to be paid on an ongoing basis after the divorce has been finalized.
If you sense that divorce may be imminent, it's best to plan as early as possible if there are substantial assets involved. While entering into a pre-nuptial agreement before you get married can be beneficial to protect your assets in the event of divorce, you can still safeguard your property rights with a post-nuptial agreement. A post-nup is similar to a pre-nup, except it can be entered into at any time during the marriage. Both pren-ups and post-nups can decide many of the financial issues that must be resolved during divorce proceedings in advance — and help to avoid drawn out litigation.
There’s a lot at stake if you’re facing a high net worth divorce. It's crucial to have the guidance of a knowledgeable divorce attorney who can help ensure your rights — and assets — are protected. The Law Offices of Rick D. Banks has over 20 years of experience representing clients throughout Fresno and the surrounding area in high net worth divorce cases and family law matters. To schedule a no obligation consultation, call (559)222-4891.