Divorces involving individuals with a high net worth are often complicated, as they entail various aspects that can be challenging to navigate. This blog post aims to shed light on the complexities of high net worth divorces in New York, covering topics such as businesses owned, retirement accounts, trusts, pensions, inheritance, and child support and maintenance. It is a good primer before speaking with a high net worth divorce lawyer.
Businesses Owned
When a couple has ownership in a business, determining the value of the business and how it should be divided becomes a critical issue in a high net worth divorce. New York follows the equitable distribution model, which means the assets are divided fairly, but not necessarily equally. The first step is to establish whether the business is marital or separate property. If the business was established during the marriage, it is likely considered marital property.
Determining the value of a business can be complex and may require hiring a business valuation expert. Factors that influence the value of a business include goodwill, cash flow, assets, and debts. Once the business’s value is established, the couple can decide whether to sell the business and divide the proceeds, or if one spouse will buy out the other spouse’s share.
Retirement Accounts
Retirement accounts, such as 401(k) plans, IRAs, and pensions, are often significant assets in a high net worth divorce. If these accounts were established or contributed to during the marriage, they are considered marital property and subject to equitable distribution.
Dividing retirement accounts requires a thorough understanding of their tax implications and potential penalties for early withdrawal. A Qualified Domestic Relations Order (QDRO) may be necessary to divide retirement accounts without incurring tax penalties. It’s crucial to work with an experienced attorney and a financial advisor to ensure the proper division of these assets.
Trusts
Trusts can complicate high net worth divorces, as they may be established for various purposes, such as asset protection, estate planning, or tax minimization. Trusts may be revocable or irrevocable, and understanding the nature of the trust is vital to determining its impact on the divorce proceedings.
An experienced attorney can help evaluate the trust’s terms and identify whether the trust assets are subject to equitable distribution. In some cases, the court may consider trust assets as separate property if they were established before the marriage or if they were created as a result of an inheritance or gift.
Pensions
Pensions, like other retirement accounts, can be subject to equitable distribution if they were earned during the marriage. The court may use various methods to divide pension benefits, such as the present value method or the deferred distribution method. The present value method assigns a current value to the pension and divides it accordingly, while the deferred distribution method divides the pension benefits as they are received during retirement.
Inheritance
Inheritance received by one spouse during the marriage is generally considered separate property and not subject to equitable distribution. However, if the inheritance was commingled with marital assets or used to support the marital lifestyle, it might become marital property. It’s essential to keep accurate records of inherited assets and avoid commingling them with marital assets to protect them in a high net worth divorce.
Child Support and Maintenance
Child support and maintenance (also known as alimony) can be more complicated in high net worth divorces due to the lifestyle the family has become accustomed to and the financial resources available to both spouses. The court will consider factors such as the standard of living during the marriage, each spouse’s income and earning capacity, and the needs of the children when determining child support and maintenance awards.
In New York, child support is calculated using the Child Support Standards Act (CSSA) guidelines, which provide a formula based on the combined parental income. However, for high-income
earners, the court may deviate from the CSSA guidelines to ensure that the child support amount is fair and meets the child’s needs. Maintenance awards may also be subject to deviation from the standard formula in high net worth cases, as the court may consider additional factors to reach a fair and equitable amount.
Protecting Your Interests in a High Net Worth Divorce
High net worth divorces require skilled legal representation, as the stakes are higher and the complexities are greater. An experienced attorney will ensure that your assets are accurately identified, valued, and distributed fairly. They will also work diligently to protect your interests and help you navigate the financial and emotional challenges that come with divorce.
In addition to legal representation, it’s crucial to assemble a team of financial professionals, such as forensic accountants, business valuation experts, and financial advisors, to assist in the process. This team will help identify hidden assets, evaluate complex financial instruments, and provide guidance on tax implications and long-term financial planning.
Conclusion
Divorces involving high net worth individuals in New York present unique challenges that require specialized knowledge and experience. By understanding the intricacies of businesses owned, retirement accounts, trusts, pensions, inheritance, and child support and maintenance, you can better prepare for the legal process and safeguard your assets. Don’t hesitate to seek the guidance of a seasoned attorney or a high asset divorce attorney and a team of financial professionals to help you navigate this complex and challenging journey.