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Why You Should Plan Ahead for a High-Asset Divorce
Many considerations factor into divorce, including property division, spousal support, child support, and child custody. Whether you are opting for a collaborative divorce or seeking a court award of property, a high-asset divorce can bring unique challenges and require proactive strategies to ensure the most positive outcome possible.
What Is a High-Asset Divorce?
A divorce is typically seen as a high-asset divorce if the parties have a combined $1 million or more in cash or other liquid assets and/or a lot of other property and assets. For example, if you have $1 million in liquid assets, a primary and secondary home, boats and vehicles, and a fine art collection, your divorce would be a high-asset divorce.
Why Is a High-Asset Divorce Different From a Traditional Divorce?
These types of divorces must adhere to state law, just as any divorce would. However, they tend to cause some concerns and challenges that more traditional divorces don’t, as there are more assets to divide. In some cases, high-asset divorces involve prenuptial agreements or disagreements on how certain assets are divided, especially if someone came into the marriage with substantially more assets than the other person.
What Are Some Common Pitfalls of a High Asset Divorce?
Every divorce case is unique, but some common challenges individuals might face when dealing with a high-asset divorce include:
- Overlooking hidden assets. With numerous assets on the table, it can be easy to lose track of things if you don’t have a plan.
- Valuation issues. Many high-asset divorces involve property like fine art, jewelry, or real estate. Individuals involved may need to agree on valuation before these items can be equitably distributed.
- Tax implications. When you’re dividing high-value assets and large amounts of liquid assets, you must consider the tax implications now and in the future.
- Emotional decision-making. In some cases, you or your spouse may be emotionally tied to certain assets, or you may be angry or upset and find yourself trying to use the property division process as retribution. This can negatively impact the outcome of high-asset divorces.
- Failing to account for long-term needs. If you’re in a rush to finalize a divorce and think you have plenty of assets, you may be more likely to give up assets that could be important to future needs.
- Ignoring potential liabilities. Having many assets doesn’t mean you don’t also have a lot of debt, and it’s important to balance these considerations when dividing your property.
- Fighting over spousal support. If you are the breadwinner or came into the marriage with more assets, you may need to protect your interests against a spouse who is seeking untenable support amounts.
Potential Strategies for Dealing With a High-Asset Divorce
Going into a high-asset divorce with a plan can help you support a better outcome.
Comprehensive Financial Disclosure
Start by committing to full financial disclosure. This does require cooperation between both parties, and if you believe your spouse is not being honest about their assets, you might consider hiring a forensic accounting specialist. This is a professional that uses available financial data to find hidden assets and trace transactions to ensure you have a full picture of assets.
Prioritizing Key Goals
Think about what you really want and need after the divorce and prioritize a few key goals in your property division discussions. For example, ownership of the home may be more important to you than some of the liquid assets, and you might agree to give up a full share in one to get the other.
Considering Mediation
If the divorce is not especially contentious and you believe you can work together with your spouse to divide property in a way that makes you both happy, you might consider going through mediation instead of more expensive court battles.
Understanding How Spousal Support Works
Court-ordered child support often relies on formulas that dictate whether a parent pays support and how much they pay. Spousal support doesn’t work that way; in Michigan, it’s typically decided on a case-by-case basis. Courts factor in considerations such as the needs of each spouse and how much income each person brings to the table. By understanding how spousal support works, you can protect your interests and ensure you aren’t paying out more than you have to.
Planning Proactively for Tax Implications and Long-Term Goals
Think about the long-term financial outcomes of the decisions you are making today. You may want to consult tax, retirement planning, and money management professionals who can help you understand how the financial decisions during your divorce might impact you later. Consider specifically how much you might own in taxes and if you can take steps to offset your tax burden during and after the property distribution process.
Work With Experienced Attorneys
Whether you’re simply looking for good advice about equitable property distribution or you need to protect your interests against a spouse you believe is seeking more than their fair share of marital assets, good divorce attorneys can help. Your legal team stands up for your rights, helps negotiate on your behalf, and ensures you understand the long-term legal implications of your decisions.
If you are dealing with a high-asset divorce and want to ensure your interests are protected, call the team at Bailey & Terranova, P.C., at 517-236-7187 today.
