Individuals and couples with a high net worth face unique challenges when divorcing. Substantial asset holdings are often more complex than average and may even feature international real estate or offshore accounts. Unlike standard divorce proceedings, high-asset divorces often take longer to resolve due to the complexity of assets involved and the potential for significant financial implications.
High-asset individuals frequently face unique hurdles, such as:
- Complex property division
- Privacy concerns
- Potential for financial disputes
- Tax implications
- Valuation of unique or difficult-to-assess assets
Below, we discuss three significant aspects of divorce that high-net-worth couples should know about before they initiate a divorce.
Understanding Separate vs. Marital Property
In Virginia, property division during a divorce follows the equitable distribution model, which focuses on fair, though not necessarily equal, asset division. Property division settlements can be negotiated directly between parties with the assistance of their lawyers, through third-party mediation, or decided by a judge during litigation.
Before a couple's property is divided, it must first be categorized. Assets are classed as either marital or separate. Marital property includes assets acquired during the marriage, while separate property refers to assets owned individually before the marriage or acquired via inheritance or gift specifically to one spouse.
What About Hybrid Property?
A particularly challenging area is the concept of hybrid or commingled property—assets that have characteristics of both marital and separate property. For instance, if a spouse owned a business before marriage but its value increased during the marriage due to joint efforts, the business might be considered hybrid property, and all or part of it may be subject to division during a divorce. This complexity requires careful evaluation to determine how such assets should be divided.
Tips for preparing for property division when you have significant wealth include:
- Document all your assets thoroughly and carefully
- Keep detailed records, especially if assets are commingled
- Seek the advice of financial advisors and forensic accountants if necessary
- Be proactive about understanding the valuation process for various assets, especially those that may be unique or difficult to appraise
- Obtain appraisals from qualified professionals
- Consult with a tax advisor to get help in understanding the long-term financial impact of property division decisions
Protecting Your Privacy & Confidentiality
High-asset divorces often involve sensitive financial information that can become public through court filings and proceedings. This exposure can be detrimental, potentially affecting personal and professional reputations. Therefore, safeguarding privacy is a top priority.
Legal strategies to ensure confidentiality include opting for mediation or arbitration instead of litigation. These alternative dispute resolution methods offer a more private setting and can prevent sensitive details from becoming public.
Prepare for a Longer-Than-Average Process
High-asset divorces often involve intricate financial issues that require expert analysis. Financial professionals such as forensic accountants and business valuators frequently play critical roles in these cases. Consequently, the divorce process for many high-asset individuals can take longer than usual.
While the average divorce in Virginia is three to six months, a high-asset divorce can take up to a year (or, in some cases, longer).
Issues such as tax obligations, hidden assets, or offshore accounts can significantly complicate divorce proceedings. Addressing these challenges requires strategic planning and professional advice.
If you are facing a high-asset divorce, reach out to our law firm to schedule a consultation with one of our experienced divorce attorneys. We are here to guide you through the divorce process and help you understand how Virginia's divorce laws may impact your case.