What Business Owners Must Know About High Net Worth Divorce
Those with substantial holdings or interest in existing businesses, and professionals with thriving careers, stand to lose the most during a divorce where assets are ordinarily divided between the former spouses.
Identifying Marital and Non-marital Assets
High net worth individuals often own small businesses, commercial real estate, stock and real estate portfolios, retirement benefits, executive compensation plans, and other forms of investment income. Under Florida statute, these assets must be disclosed in a financial affidavit upon filing for divorce. Assuming that both spouses openly identify their properties, the next step is to segregate non-marital from marital assets.
The law steps in to define which properties and liabilities are considered marital and non-marital. The general presumption is to consider as marital any asset that is acquired after the marriage. There are certain exceptions such as non-interspousal gifts or inheritance received by one party during the marriage as well as the fruits of non-marital properties during the marriage.
Other properties acquired during the marriage may also be excluded from the marital asset pool if the parties clearly excluded them in an agreement such as a valid prenuptial agreement.
Identifying the pool of marital assets is significant for any high net worth divorce in Florida because this state is an equitable distribution state which generally divides marital properties and obligations equally between the divorcing spouses. The high net worth spouse may lose substantially to the other party if they fail to understand the difference between marital and non-marital assets.
Valuing Marital Assets
Assigning values to assets such as stock portfolios, hedge funds, equity funds, retirement plans, and executive compensation plans can be difficult and is often the center of long divorce proceedings. An experienced divorce attorney, like Gary E. Williams here at The Law Firm For Family Law, has access to business valuation experts whose services are helpful in equitable distribution issues.
When Equitable Is Not Equal
Not all cases may result in a 50/50 distribution of marital assets. Florida statute 61.075 allows a court to consider certain factors that may lead to an order for an unequal distribution. These factors include:
- The duration of the marriage
- The financial circumstances of the parties
- Each party’s contribution to the marriage
- Any interruption in the career or education of one party
- The desirability of retaining any asset intact and free from the other party’s interference, such as a business interest
- The intentional destruction or dissipation of any marital asset within a certain period after filing for divorce, and
- Other relevant factors that the court may consider in bringing about equity and justice between the spouses
In Florida, the issue of alimony is addressed after equitable distribution is finalized. In a high net worth divorce, it is possible for the court to order the higher-earning spouse to provide financial support to the other party after considering relevant factors such as:
- Duration of the marriage
- Standard of living during the marriage
- Each party’s financial resources
- The age, physical and emotional health of the parties
- The requesting party’s educational level, skills, earning capacity, and employability
The court may also consider other factors such as the outcome of the equitable distribution to equalize the financial situation between the parties. Alimony can be permanent or durational, rehabilitative or bridge-the-gap.
In all cases concerning alimony, the award must be supported by competent and substantial evidence. Otherwise, it may be reversed on appeal if the higher court finds that the award does not provide for the needs and necessities of the former spouse, according to the standards existing during the marriage.
Any dissolution of marriage, particularly a high net worth divorce involving a business, will have tax consequences arising from transfers of property in equitable distribution, deductibility of child support payments, and alimony.
Dividing components of an executive compensation plan which can include stock options and other similar benefits can trigger highly complex tax rules. It’s important to have all relevant legal and tax information before considering settlement agreements or risk huge financial losses that may be avoided in a high net worth divorce.
Hiring an Experienced Divorce Attorney
A seasoned divorce attorney with experience in high asset and high net worth divorce cases can analyze all relevant factors and inform you of the legal and financial implications of all aspects in a property division, alimony, and child support payments (if there are children involved). If necessary, your divorce lawyer should also be prepared to fight for your property rights in litigation and secure the services of business valuation experts, accountants, and other professionals who can provide expert testimony in your favor.
In Florida, the Law Firm For Family Law is known for its dedicated founder Gary E. Williams who is one of only 18 Board Certified Experts In Marital and Family Law in Pinellas County and a Board Certified Expert in Trial Advocacy.
We invite you to call us at (727) 531-8737 to learn more about how we can help you.