High-asset divorces are sometimes referred to as high-net-worth divorces. These are complicated by wealth, business interests, and complex investment portfolios. For Sacramento and California residents, maintaining financial well-being in a high-asset divorce requires an awareness of the legal system, potential risks, and proactive measures to secure a financially sound future.

What is a high-asset divorce?

A high asset divorce involves significant assets and wealth, which may include assets such as millions of dollars in property, investments, retirement savings, and owning businesses and executive packages. Unlike other divorces, which do not involve the complexities of dividing assets, high asset divorces involve the use of experts to evaluate the true value of the assets. Because of the significant assets involved in high asset divorces, the decision-making process has significant implications for the long-term stability of the individual.

California's community property laws

California is considered a community property state. This means that most property accumulated during the marriage is considered jointly owned between the two spouses. This includes income earned, investments made, and property purchased during the marriage.

In most cases of divorce in California, community property is divided evenly between both parties. Separate property is not divided and remains with the original owner.

For couples with high assets, determining what is separate and what is community property is often one of the most difficult parts of the divorce. Property may have been mixed (or commingled) over the years, making it difficult to know how it should be divided.

Complex asset identification

It is not uncommon for high-net-worth couples to have diverse financial portfolios. These may include multiple real estate holdings, investments, stock options, business holdings, and international assets.

For couples to divide property, it must first be identified and disclosed. There may be instances where one spouse can try to conceal assets or underreport their income. The divorce process tends to involve considerable financial discovery.

Business ownership and valuation

For entrepreneurs and business owners, divorce can create critical issues concerning the future of the business. Businesses that were formed or created during the marriage can be treated as community property and subject to division in divorce proceedings.

It is not easy to determine the value of a business during a divorce. There can be various methods for evaluating the business, such as the market approach, income approach, and asset approach.

Depending on the circumstances of the divorce, the business owner can be required to buy out their spouse's share of the business or settle the issue in another way that is favorable to both parties.

Investment portfolios and retirement accounts

High-asset couples have significant investments, which include stocks, bonds, mutual funds, and retirement plans. These have to be shared and considered, and tax implications have to be taken into account.

For retirement plans, there is a special legal document called a Qualified Domestic Relations Order (QDRO), which has to be executed in order to avoid tax penalties.

Executive compensation and stock options

Executives and professionals can also receive a package of compensation that includes stock options, bonuses, and/or deferred compensation. Stock options earned during the marriage in California are considered community property and are subject to division in a divorce action.

Calculating the value of these assets and dividing them can require a detailed financial analysis.

Spousal support considerations

In high-asset divorce cases, spousal support is an important issue. The length of the marriage, standard of living established during the marriage, and earning capacity of both spouses are all factors considered when deciding spousal support (or alimony).

Due to the high levels of income, spousal support can have considerable financial implications and can last an extended period of time.

Strategies to protect long-term financial stability

The challenges related to high-asset divorces can be daunting. There are, however, several strategies that can help protect your financial future. These include:

• Working with experienced legal and financial professionals - A high-asset divorce involves the collaboration of lawyers, financial advisors, accountants, and business valuers, which helps to properly divide assets. An experienced family lawyer can help adopt a strategy that is best suited to your financial objectives and protect your interests during the legal process.

• Conduct thorough financial discovery - One of the most important processes in a high-asset divorce is to get a complete picture of the marital estate. This is called financial discovery, and it can include reviewing tax returns, bank statements, investment portfolios, and business records. If you suspect your spouse is hiding assets, forensic accountants can trace financial transactions and find any hidden wealth.

• Understand the tax consequences - Asset division is not just concerned with the value of assets, but also with the tax implications. For example, the sale of assets or investments can incur capital gains tax, which can impact the real value of those assets. With proper planning, tax liabilities can be avoided, and both spouses can be satisfied with the settlement.

• Protect business interests - For business owners, the stability of their company is often a significant concern. This can involve negotiating a buyout, offsetting the business value through other assets, or creating a series of structured settlement payments. These options allow for the continuation of the business while also providing for the equitable division of marital assets.

Plan for your post-divorce financial future

A high-asset divorce settlement should not only address present-day financial disputes but also lay the groundwork for future financial stability. This could involve changing estate plans, changing beneficiary designations, and reevaluating investment strategies.

A comprehensive financial plan after a divorce can provide a sense of financial security and independence.

How a Sacramento family law attorney can help

High-asset divorces are complicated and require proper legal guidance and strategy. A well-informed Sacramento family law attorney can help clients overcome complicated property division challenges and achieve favorable outcomes.

From managing complicated asset identification and valuation to settlement negotiations and court proceedings, proper legal guidance can greatly help clients achieve financial security.

Talk to a Sacramento, CA, Family Law Attorney Today

Wagner Family Law represents the interests of Sacramento residents who are going through divorce. Call our office today to schedule an appointment, and we can begin discussing your next moves right away.