4 Financial Issues to Address in a High Net Worth Divorce

 Posted on December 22, 2023 in Bankruptcy

A high net worth divorce can be complex and challenging, and couples in these situations may need to address a variety of financial matters. You will need to make sure you make the right decisions to ensure that you will be able to meet your financial needs after your marriage ends. With significant assets and investments at stake, it is crucial to carefully consider all relevant financial factors during the divorce process. With the help of an experienced attorney, you can make sure these concerns will be properly evaluated. As you proceed with a high net worth divorce, you may need to address issues such as:

Property Division

The division of marital property is often one of the most important aspects of a high asset divorce. Illinois law requires an equitable distribution of assets and debts between spouses who are ending their marriage through divorce. When property is distributed equitably, each spouse may receive a fair and just portion of the marital estate, but an exactly equal division is not required.

In order to determine how assets should be divided, it is necessary to identify all marital property. Marital property includes any assets acquired during the marriage, such as real estate properties, investment accounts, retirement funds, businesses, and valuable personal belongings. However, any assets either spouse owned before getting married or any assets excluded from the marital estate by a prenuptial agreement will be considered separate property that will not be divided between the spouses.

An accurate valuation of assets is essential to ensure that property can be divided fairly. Both marital property and separate property should be properly evaluated to ensure that both spouses have a full understanding of each party’s income, assets, and financial resources. It may be necessary to hire professionals such as appraisers or forensic accountants who can determine the value of complex assets like businesses or intellectual property rights.

Spousal Support

In a high asset divorce where there is a large difference between the incomes earned by the spouses, spousal support (which is commonly called alimony) may be a factor to consider. In Illinois, spousal maintenance consists of payments made from one spouse to the other during or after the couple’s divorce, and it is meant to ensure that a lower-earning spouse can maintain the standard of living the couple enjoyed during their marriage.

Eligibility for spousal support is determined based on several factors related to a couple’s marriage and the financial status of the spouses. A court may consider the length of the marriage, the income each spouse currently earns, each party’s income-earning capacity, their age and health, and contributions a spouse has made to their marriage and to the other spouse’s career. If spousal support is awarded to one spouse, specific formulas will be used to determine the amount and duration of the payments. In high net worth divorces, spousal support can be substantial due to the significant financial resources involved.

Business Valuation

If one or both spouses own a business or have an ownership interest in a company, it will be important to determine the value of these assets for property division purposes. Business valuation can involve a variety of complex factors, and the assistance of financial professionals may be necessary.

A professional business valuator will consider various factors, such as cash flow, assets and liabilities, market conditions, industry trends, and goodwill when determining the value of a business. This valuation helps ensure that both parties understand the current value of business interests and the benefits that business ownership may provide in the future. This can ensure that a business can be divided fairly along with other marital assets.

Tax Implications

Divorce often has tax considerations that need to be carefully evaluated. Spouses who earn high incomes or own valuable assets may need to address additional complexities related to taxes during divorce proceedings. Some issues to consider may include:

• Sale of property: Selling certain assets during the divorce process may trigger capital gains taxes. Understanding the potential tax consequences that may affect spouses and the options for claiming tax deductions is crucial when negotiating a property settlement.

• Rollover options: When dividing retirement accounts like 401(k)s or IRAs, taxes and penalties may apply to funds that are withdrawn before the account owner reaches the age when they are eligible to retire. The use of qualified domestic relations orders (QDROs) can ensure that these taxes will not apply when funds are rolled over into another account.

• Tax filing status: Filing taxes jointly or separately may be beneficial for spouses during the divorce process. An accountant or financial professional can ensure that the correct filing status will be used before or after a divorce is completed, and they can also ensure that the correct deductions and credits can be taken.

Contact Our Oakbrook Terrace High Net Worth Divorce Lawyers

Divorce can be emotionally and financially challenging, especially in high net worth cases. It is crucial to have the guidance of an experienced attorney who understands the complexities involved in these cases. If you are going through a high net worth divorce in Illinois, the team at Farooqi & Husain Law Office is here to help. With years of experience handling complex family law cases, our DuPage County high asset divorce attorneys have the knowledge and experience needed to protect your financial interests. Contact us today at 630-909-9114 to schedule a consultation.