Every divorce involves legal and financial issues that must be understood and dealt with. In a high net worth divorce, it can be even more complicated, as these cases often involve numerous complex assets. Such assets may include business interests, real estate, jewelry and artwork, retirement accounts and securities. Special care must be taken when assigning a value to these assets, as well as determining which qualify for division as part of the divorce. Additionally, it is critical to understand the tax implications of dividing these assets. For these reasons and more, it is essential to hire a qualified and knowledgeable divorce lawyer with experience handling high asset divorce cases.
Timing is Critical
In New Jersey, a Family Court judge has the power to divide marital assets in an equitable and fair manner. However, the assets that may fall into this category are only those that were “legally and beneficially acquired” by one or both of the spouses “during the marriage. “
Determining when the marriage ended from a legal standpoint can be challenging. It can be hard to establish when an irreconcilable breakdown of a marriage occurred, but it would not be fair to include property that was acquired after a certain point in the calculation of equitable distribution.
According to the Supreme Court of New Jersey, the period of acquisition for property that is eligible for equitable distribution ends on the date the complaint for divorce is filed. That is why the filing of the complaint is so important, even though the divorce is not yet completed.
Establishing an equitable division of assets begins with a methodical accounting of everything the couple shared. The steps include:
- Identify Assets and Debts: Make a comprehensive list of everything that the couple owns, including the date the asset was acquired.
- Uncover Hidden Assets: Many spouses are not aware of all the assets managed by their partner. However, even if one spouse never knew a certain asset existed, he or she may still be entitled to a portion of it as part of the divorce.
- Classify the Property: Determine whether each asset qualifies as marital property or separate property.
- Consider the Tax Implications: Taxes can have a major impact on an individual’s net worth. It may be necessary to consult a tax professional for advice on how to minimize the effect of taxes.
While mediation can be the easier and less expensive option in most divorce cases, high asset divorces tend to be highly contentious, simply because there is so much as stake. In cases involving considerable assets, as well as businesses or professional degrees that were earned during the course of the marriage, a trial may be necessary to determine how to divide everything between both parties.
Marital property is legally defined as “things of value arising out of the marital relationship.” This is anything of economic value acquired by the efforts of one or both parties during the marital relationship. These may include wedding gifts, bank accounts, gifts among spouses, retirement funds, real property such as art and home furnishings, and much more.
Separate property – which is not subject to equitable distribution – is property that was acquired before the marriage. It may also include inheritances, income from separate property, gifts, and compensation for personal injury.
Separate property typically becomes marital property when it is sold or transferred, when it appreciates in value, or when it is co-mingled with marital property. It can be very confusing, but an experienced divorce attorney can help you to clarify how all of this is quantified.
When a business is a marital asset, and one spouse plans to retain the business, the other spouse is entitled to either a monetary or a property award in exchange for their interest. A forensic accountant can help to determine the value of a business. Factors considered when evaluating the value of a business may include:
- The nature and history of the business
- The tangible assets of the business
- The business’s earning capacity
- The fair market value of the business
Determining the Value of a Professional Practice
If a professional practice is established during the course of a marriage, it may be subject to equitable distribution. A professional practice may be anything from a law practice to a dental practice, or any medical practice. The appreciation of a professional practice will be considered in a divorce, especially if it is due to the spouse’s contribution. A forensic accountant could be helpful in determining value here as well. Satisfaction of this value may be achieved through a lump-sum payment, an offset of the value against a different asset, or installment payments.
A professional practice will be evaluated based on both tangible and intangible assets:
- Tangible assets can include things necessary for the business that have a monetary value, such as office furniture or equipment.
- Intangible assets have no actual dollar value – such as good will.
Value of a Professional License or Degree
The value of a license or degree that was obtained during a marriage may be subject to equitable distribution. This is calculated based on the lifetime earning potential of someone with such a license or degree, versus someone without a license or degree. There may be adjustments for inflation, taxes, and other factors. When there is no history of earnings, earning trends may be used to predict potential earnings.
Pensions and Retirement Benefits
Although disability pensions are considered separate property, other retirement funds may be factored into an equitable distribution settlement. These may include IRAs, annuities, 401 (K) plans, 403 (B) plans, profit sharing pension plans, and more. Providers of retirement funds may include current and former employers, unions, and both spouses. When a spouse has a pension, a QDRO – or a Qualified Domestic Relations Order – may be necessary. A QDRO creates or recognizes the right of a former spouse, child, or other dependent to receive all or a portion of the benefits payable under a retirement plan.
Cherry Hill Divorce Lawyers at the Law Offices of Richard C. Klein, LLC Have the Experience You Need to Handle Your High Net Worth Divorce
The valuation of property during a divorce can be difficult and emotionally draining. Cherry Hill divorce lawyers at the Law Offices of Richard C. Klein, LLC have a complete understanding of your rights, and can protect you in every aspect of divorce. Please call 856-544-9155 for a consultation, or contact us online to learn more about our firm. Our office is located in Marlton, New Jersey, and we represent clients throughout South Jersey, including those in Camden County, Burlington County, and Atlantic County.