Divorce proceedings can become contentious even with the best intentions of both parties. But they're even more prone to a roller-coaster ride with high-net-worth individuals. Our divorce lawyers can help protect and preserve your assets.
What Is High-Asset Divorce?
Let's start with the fundamentals and what constitutes a high-net-worth divorce.
Any divorce involving liquid assets (minus liabilities) of over $1,000,000 net value is considered a high-asset divorce. In addition to the higher dollar amounts, these divorces typically include diverse types of assets.
These can include multiple parcels of real estate, business interests, sophisticated investment portfolios, and assets spread across jurisdictions. Valuing these assets requires specialized legal and financial expertise to navigate marital distribution successfully.
In many cases, you'll need the services of a forensic accountant, appraiser(s), and an experienced divorce lawyer.
Our divorce attorneys serve clients in southeastern Pennsylvania, including Bucks, Delaware, Chester, and Montgomery County.
Equitable Distribution of Marital Assets
In Pennsylvania, what's noteworthy is that marital property is subject to equitable distribution. That includes all assets and debts acquired by either spouse during the marriage, regardless of whose name is on the title.
For high-net-worth individuals, this can include a wide range of assets such as:
- Real estate holdings
- Business interests
- Investments and retirement accounts
- Elaborate Trusts
- Intellectual Property
- Luxury items and collections
Title 23 governs equitable distribution in Pennsylvania. The court considers several factors in determining equitable distribution in high-asset divorce cases. Factors in divorce settlements include marriage length, lifestyle during marriage, spousal contributions, and economic situations post-divorce.
A Closer Look at Assets Included in High-Net-Worth Divorces
Understanding the variety and complexity of assets involved is crucial when navigating a high-asset divorce. These assets not only represent significant financial value but also carry with them unique legal, tax, and emotional considerations.
High-net-worth households may often have assets split across numerous jurisdictions. For example, you may have money, land, and investments in different states or countries.
Divorce is jurisdiction-specific, which creates additional concerns. Each state and country potentially adds complexity to the divorce process due to problems when seeking to enforce a Pennsylvania Order.
As a result, high-asset divorces often require the valuation of complex assets. The valuation involves a team of forensic accountants, business valuators, real estate appraisers, and other financial experts. You'll also need appropriate legal representation from an experienced law firm.
Their goal is to assess the value of these assets accurately. Pennsylvania courts will consider these valuations when dividing property.
Here's a deeper dive into the types of assets that often come into play:
Real Estate
Property division is an essential consideration in high-asset divorces. It includes joint and separate property, including residences and businesses.
Primary and Secondary Residences: In addition to the family home, couples may own vacation properties, timeshares, investment real estate, or overseas residences. Current market conditions determine property values, which vary widely by location and type.
Commercial Properties: Ownership interests in commercial real estate add another layer of complexity. Often, they require expert valuation to determine their current worth and income-generating potential.
Business Interests
Your business interests can become part of the asset pool in a divorce.
A business you formed before the marriage may be yours alone if you and your spouse never converted it to marital property. Typically, that includes two caveats.
First, you never used funds for the business, and second, you never included your spouse in business operations. The court will consider the increase in value as marital due to efforts made before separation.
However, courts consider it marital property if you formed the business during your marriage. That applies even if your spouse does not technically own any part of the business.
Investments
Any investments and bank accounts acquired during the marriage are marital property.
The division of stocks and bonds considers their current value and potential gains or losses. It also considers the tax implications of selling assets and the original investment goals.
It doesn't matter if a retirement account is only in your name in Pennsylvania. These assets are subject to equitable distribution. The assets you accrue from your marriage date until the filing of the divorce complaint are subject to division.
Personal Property
High-value personal items can be emotionally significant and challenging to value accurately. Sometimes, they require an appraisal to determine fair market value for these unique items.
Assets extend to high-end automobiles, boats, and other luxury vehicles. Again, an appraisal can determine their current value, considering depreciation and market demand.
International Assets
Assets held in other countries present legal and logistical challenges. They must assess their value according to local market conditions and navigate different legal systems for their division.
Intellectual Property
The value of intellectual property can take time to ascertain. It involves determining current worth and potential future income.
Debts and Liabilities
Couples in a high-asset divorce must also address the division of debts and liabilities. Understanding these debts' origin, purpose, and responsibility is essential for a fair settlement.
The Tax Implications of a High Net-Worth Divorce
Tax considerations are pivotal in high-net-worth couples. The financial stakes are high, and the division of complex assets can lead to substantial tax liabilities.
Here are key tax considerations to keep in mind:
Post-Divorce Alimony: The IRS no longer considers alimony payments to be deductible by the payor. Further, the recipient is not responsible for paying taxes in PA.
Child Support: Child support payments are not taxable to the recipient nor tax-deductible by the payer.
Property: High-asset divorcing couples often liquidate property and assets. That, however, can trigger capital gains tax liability.
Businesses: Under the tax-free transfer rule, you can divide business assets without federal income or gift tax consequences. The partner receiving the assets takes over the existing tax basis for tax gain or loss purposes.
High Asset Divorce Lawyers in Bucks, Delaware, Chester, and Montgomery County, PA
A high-asset divorce layers in complexities well beyond your everyday divorce proceeding. From asset valuations to tax implications, you face numerous challenges.
Our family law firm has the experience to address these complications. Our team of attorneys can address real estate, estates, and business concerns.
If you're facing a high-asset divorce, you'll be in good hands. Our law firm has offices in Doylestown, Norristown, and Wayne, PA.
