Why High Asset Divorces Are More Complicated
Divorcing is never easy, but it can be particularly difficult for couples with significant assets to come to a resolution. In high asset divorces, property division can be quite complex and often deals with a wide range of non-traditional assets, such as retirement accounts, closely held businesses, and significant real estate holdings. Additionally, many high net worth divorce cases involve prenuptial and postnuptial agreements, trust accounts, and other legal documents that dictate how the couple's estate is handled. During the divorce proceedings, all of these must be examined to differentiate marital property and separate property.
What Is Marital Property?
Tennessee is an equitable distribution state. This means that when a couple divorces, the court has the right to equally divide the marital property between the divorcing parties regardless of marital fault. According to Tennessee Code, marital property is all "real and personal property, tangible and intangible," acquired during the marriage.
Determining marital property can be confusing because it can include property acquired before the marriage took place. This is counterintuitive to many people. Suppose you owned property, then got married, and that property increased in value over the course of the marriage. The amount it increased in value may be considered marital property if your spouse substantially contributed to the upkeep or preservation of that property.
With high-asset divorces, determining marital property can be incredibly complicated, especially if the individuals came into the marriage with significant holdings.
Other property that may complicate a high-asset divorce case includes:
- Investment property
- Stocks and investment accounts
- Trust funds
- Vacation homes
When coming to a divorce settlement, the goal is to ensure a fair and equitable division of assets. With so many moving parts, this can be incredibly difficult for high net worth couples. Additionally, when assets blur the line between joint financial assets and personal possessions, such as art, real estate, and jewelry, figuring out how to adequately account for and distribute those assets during divorce proceedings can feel impossible.
Family Businesses & High Asset Divorces
Perhaps one of the most difficult marital assets to deal with during a divorce is a family business. Owning a business can be incredibly rewarding, but it can also make a divorce even more complicated. This is especially the case if the company was started together by the couple or was founded after the couple was married. Even if only one person ran the business, it might still be considered marital property under some circumstances.
When determining what to do with a business asset, the following must be considered:
- When the business was founded or purchased
- Who participated in running the business, directly and indirectly
- The nature of each person's contribution to the business
- The current value of the business
- The value of other assets held by the couple
Rarely is selling the business and dividing the profit the best or most attractive option for people. Additionally, if you want to keep the company in the family, you will need to come up with a solution that is deemed fair and equitable to both parties.
Preparing for a High Asset Divorce
No matter where you are in the divorce process, it is never too late to start thinking proactively. One of the most important things you can do in preparation is to collect and safely store all your financial records. You will also want to collect any pertinent legal documents and your tax records. The more information you have the better prepared you will be.
Common documents that are pertinent to your divorce include:
- Bank account records
- Credit card statements
- Estate planning documents, such as wills and trusts
- Prenuptial and postnuptial agreements
- Proof of current income
- Retirement account records
- Tax records
- Title documents for any property you own
For a more comprehensive list, read our blog, "Documents You Should Gather Before Your Divorce."
The Issue of Hidden Assets
A significant concern many clients have is that their former spouse is hiding assets from them to keep them out of the divorce proceedings. This is often a problem when there is a large disparity between the two individuals' income or when one spouse controls all the finances, leaving the other spouse in the dark. It is not unheard of for hidden bank accounts, real estate holdings, or other assets to come to light after a thorough investigation.
When going through a high-asset divorce, you must work with an attorney with the bandwidth to complete a full investigation and uncover all marital assets. If you suspect your spouse is hiding assets, collect as much evidence as possible. This will help your lawyer discover the hidden assets when they perform their investigation.
At Casey, Simmons & Bryant, PLLC, we have experience handling high net worth divorce cases, and we are qualified to handle even the most complicated situations.