A normal middle-class divorce is challenging enough. When a couple has millions of dollars in the bank and a lot of assets, splitting it is hardly ever easy.
Ideally, a couple worth millions or billions would have a prenuptial agreement in place to determine how assets should be split in a divorce. However, sometimes wealth is acquired during the marriage, and not all couples think about postnuptial agreements.
Like most states, Colorado is an equitable distribution state, so in a divorce, assets are split as fairly as possible. Still, things can get messy when trying to figure out how to split vacation homes, cars, stocks, businesses, and retirement accounts.
Your best bet is to understand what is at stake and do some planning. That way, you can be better prepared as you go through the process. Here are some ways in which high-asset divorces are different and what mistakes you need to avoid.
How High-Asset Divorces Are Different
Not all divorces are alike. Here is what you can expect with a high-asset divorce:
- Use of experts. Experts will likely be needed to appraise assets and come up with accurate valuations. In some cases, forensic accountants may be needed to look at previous transactions, especially if there is suspicion of hidden assets.
- Tax concerns. Everyone has to pay taxes, but wealthy couples will need to have more awareness of tax consequences. This is especially true because homes and other high-value assets are often sold and transferred, which can trigger tax payments.
- Child support. Yes, all parents have to have child support in a divorce, but with a high-asset divorce, the amount is typically much greater. While Colorado has child support guidelines, these are not meant for millionaires. When a couple has a lot of money and assets, the judge has more discretion to order higher amounts of child support. It’s not uncommon for high-asset parents to pay tens of thousands of dollars a month in child support to pay for private school, tutoring, lessons, and other expensive activities.
- Property. Is it separate or marital property? Sometimes separate property, such as inheritances, can become commingled. If the money is used for marital expenses, then it becomes marital property. People need to be aware of this.
Common Mistakes
In a high-asset divorce, there is a lot at stake. One wrong move can cost a person hundreds of thousands or even millions of dollars. Here are some mistakes you should avoid:
- Not setting clear goals. What do you want out of the divorce? What is most important to you? Is it the children, assets, or lifestyle? Have set goals to guide you. Take a good look at what you can compromise on and what you can’t.
- Not knowing what assets you have. In cases where one partner is the high earner and the other stays at home or earns much less money, it’s common for one party to be unaware of their financial situation. If you do not have a good understanding of your assets and debts, it’s easier for your spouse to hide assets and take advantage of you. You should be aware of bank accounts, retirement accounts, real estate, and debts. Knowledge is power.
- Letting emotions rule. Divorce is probably the most emotional process a person can go through. However, you cannot let your emotions cloud your judgment. Do not make rash decisions without being rational. Do not be in a hurry. Think things through and get help from a lawyer.
- Not planning for the future. In a divorce, you may only be thinking about what you want right now. However, many people fail to plan for life after divorce, and this is where they fail. You need to think about the cost of living, rebuilding credit, taxes, and retirement planning. If you are older, you have less time to work and earn money, so the situation is even more dire. Get a plan in place now.
Contact Us Today
It is always good to have a lot of money and assets, but having so much wealth could come back to bite you in a divorce. It can certainly make the process a lot more complicated.
The team at Tanis McGonegal has the skills and experience necessary to help you protect your assets or property in divorce. We can assist you with your goals. Schedule a consultation with our office today by filling out the online form or calling (303) 465-4605.
https://www.ohio-family-law.com/2023/05/preparing-for-a-high-asset-divorce/
https://www.justia.com/family/divorce/special-circumstances-in-divorce/high-asset-divorce/
