The division of marital property can be a complicated process in any divorce, but in high net worth divorces asset distribution is often an especially complex undertaking. State laws will provide much of the framework, but in most cases spouses – especially if they go through mediation – will also have the opportunity to have some input into the process and its eventual outcome. The divorce team at King Law Offices has substantial experience in handling high net worth divorce in both North Carolina and South Carolina, and one of our attorneys may be able to advise you on the options available in your situation. Call 888-748-KING to schedule a consultation.
What Is Considered a High Net Worth Divorce?
In relation to divorce, “high net worth” is more a practical term than a legal one. In most states there is no formal, legally defined “breakpoint” that separates divorces into distinct categories based on the total combined net worth of the parties involved. Informally, however, it is very common for attorneys and others who may have professional reasons for dealing with divorce on a regular basis to refer to a divorce as “high net worth” if the spouses’ combined annual income is $1 million or more, particularly if the couple also has a comparable amount in savings, investments, and other assets.
The kinds of assets involved in a particular case, as well as the relative contributions each spouse’s income has made to the household’s annual total over the course of the marriage, can often play a role in determining how simple or complex the division of marital property is likely to be. In high net worth divorces that involve substantial “non-liquid” assets, such as real estate properties or valuable collectibles, it may be necessary to consult valuation experts even to accurately estimate the couple’s total wealth.
State Laws and the Division of Marital Property
Both North Carolina and South Carolina are equitable distribution states, but they frame the principle of equitable division somewhat differently. The North Carolina Judicial Branch explains that courts presiding over divorce cases in this state will presume that an equal division of property is equitable, absent evidence to the contrary. Spouses who wish to request that the court overseeing their divorce proceedings consider ordering unequal asset distribution may make that request in their initial filing, but it may be a good idea to consult with an attorney familiar with North Carolina divorce laws to discuss how the factors courts are instructed to consider under N.C.G.S. § 50-20(c) may apply in your particular case.
The South Carolina Bar Association explains that a broadly similar set of principles relating to the equitable division of marital property apply in this state. However, the factors South Carolina Family Courts consider in determining what “equitable” may look like in a specific instance differ somewhat from those applied in the courts of their neighbor to the north. Disputes over the applicability of some of the factors laid out under S.C. § 20-3-620, particularly in at-fault divorces, can sometimes prove to be contentious. These legal challenges are often amplified in the asset distribution that accompanies a high net worth divorce, so affluent spouses in South Carolina as well may wish to make time in their busy schedules to go over the details of their situation with an experienced divorce lawyer.
We proudly serve Winston-Salem, SC, Rock Hill, SC, Cornelius, NC, Charlotte, NC, Waynesville, NC, and Boone, NC. If you live in either North Carolina or South Carolina, our legal team looks forward to visiting with you and helping you understand your legal rights.
How Does Net Worth Affect Asset Distribution?
State laws regarding the disposition of marital property in a divorce will generally be the same regardless of the total value of the divorcing spouses’ shared wealth. From that perspective, then, net worth does not affect the division of property at all. What tends to complicate asset distribution in wealthy divorces, instead, is the scope and nature of each spouse’s personal property as well as the couple’s shared, or “marital” property. Many high net worth divorces take place between partners with widely different annual incomes based on their paid employment, and in the absence of a marital agreement that lays out a pre-arranged plan for asset distribution in the event of a divorce this disparity can sometimes lead to especially intense disputes over alimony (also sometimes called spousal support or maintenance).
Common Complicating Factors in High Net Worth Divorces
Even though net worth itself may have no impact on asset distribution, there are a number of reasons why it is not unusual for the division of marital property to be especially complicated in high net worth divorces. Some of the most commonly encountered factors in this regard revolve around the way high-value assets, or widely diversified assets, are held and managed.
Marital Agreements
Prenuptial and even postnuptial agreements tend to be more commonly used by wealthy couples than by their less affluent counterparts. When these agreements function as intended, they can greatly simplify the process of dividing marital property in a divorce. Unfortunately, however, when marital agreements are not properly drafted, the legal challenges an unhappy spouse may raise to the legitimacy and enforceability of a document, or to the applicability of some of its terms, can sometimes have the opposite effect, adding yet another complicating factor to an already frustrating situation.
Real Estate Properties
For lower- and middle-income couples fortunate enough to own their own homes, the family residence is likely to be not only the most substantial non-liquid investment the partners share but also the only real estate property they own. While this is of course often true for high net worth households as well, these couples are far more likely to own additional properties: vacation homes, leased units, investment projects under development.
When applicable, both the type and the number of real estate properties in the marital estate can be important in determining a strategy for distributing those assets. Another factor that often arises in these discussions is the question of joint ownership, as it is not at all uncommon for a high net worth couple to own partial interest in a real estate property. The terms of the spouses’ agreement with the other owner or owners may substantially curtail the flexibility with which the spouses’ shares may be disposed, as courts in both North Carolina and South Carolina are typically reluctant to order or approve an arrangement that seems likely to diminish the value of the shares owned by parties not involved in the divorce.
Capital Gains
You may be used to thinking of capital gains in terms of the tax (capital gains tax) applied to them. A capital gain is – in a very simplistic model – the positive difference between the cost of acquiring an asset and its price at the time the investment is “realized,” most often by the asset’s sale or other transfer to another party (a negative difference becomes a capital loss).
One of the most common examples is real estate, especially if the spouses have made substantial improvements to the property since they first acquired it, but the scenario also frequently arises with collectibles, works of art, and other potentially valuable but non-monetary assets. High net worth couples are more likely than those in lower income brackets to have assets that require expert valuation, particularly in large quantities or at high values, and so capital gains calculations in high net worth divorces can be especially challenging.
Marital vs. Separate Property
The distinction between marital property, which is generally subject to asset distribution according to state laws during a divorce, and separate property, which is exempt, applies regardless of the total value of the assets involved. However, making this division and applying it in a way that the judge in a family court will consider equitable can sometimes prove challenging in a high net worth divorce – particularly if one partner brought significantly greater wealth than the other into the marriage at its outset. Often in these cases the originally separate property has since become mingled and therefore may now be – in whole or in part – eligible to be counted as marital property. The factors that can cause an individual spouse’s contributions to become “mingled” and therefore marital property; an experienced divorce attorney with King Law Offices may be able to help you determine whether the principles of mingling are likely to affect asset distribution in your case.
Complexity of Asset Management
The frequent appearance of real estate investment and appreciating personal property already hint at the potential for complex arrangement for asset management in high net worth divorces. Often highly affluent individuals manage their various investments with the assistance of finance professionals.
Even in cases where the division of property is not especially contentious, complex asset management strategies can sometimes complicate the process of disclosure and discovery. In high net worth divorces it is common for this process to require communication with multiple professionals, tasked with the curation of distinct aspects of the couple’s shared wealth, in order to obtain a clear picture of the total involved and the thorough accounting of all assets, in both shared and marital property, at the time of the initial divorce filing.
Speak With an Experienced Divorce Attorney
There are a number of ways in which a couple’s combined net worth can complicate the process of asset distribution. If you are approaching a divorce in which substantial assets are at stake, you may wish to consider taking advantage of the opportunity to speak with a family law attorney in your area who is experienced in handling the complexities a high net worth divorce often entails. Call King Law Offices at 888-748-KING to be connected with a member of our team at our location nearest to you. We proudly serve Winston-Salem, SC, Rock Hill, SC, Cornelius, NC, Charlotte, NC, Waynesville, NC, and Boone, NC.