High-net worth individuals considering divorce must expect an exceedingly challenging process. The divorce becomes more technically complex as the value of held assets increase. And because the stakes are high, the dissolution of the marriage can be more contentious than most, with each spouse seeking to secure what they think they are entitled to.
These are some common issues that crop up in a high-asset Arizona divorce. It is wise to discuss these and other concerns you may have with an experienced divorce attorney.
Distinguishing Separate Property From Community Property
Since Arizona is a “community property state,” most assets and debts accumulated during the marriage are considered community property (also known as marital property). These will be divided equitably between the spouses upon divorce. Common examples of community property are the family home, any real estate bought while married, any enterprise founded during marriage, investments over the course of the marriage, and retirement plans.
Each spouse may also have their own separate property, which are assets or debts incurred before getting married. These may include inheritance, gifts, and proceeds of actual separate property (such as if a person bought a home while single and then sold it while married). Separate property will generally be excluded from property division during the divorce process.
There are many scenarios where the distinction is not as clear. For example, if a person started a business while they were single, that business could be considered their separate property. But if, during marriage, their spouse contributed to the company or helped it grow, this spouse may have an interest in the business. This business interest is called a community lien, and it is one of the most disputed matters in a high-asset divorce.
Differences In Valuation Methods
High-asset individuals will likely consult a valuation expert, but they should also get a persuasive lawyer on their side, as differences in valuation methodologies will inevitably arise during divorce. The other spouse could arrive at appraisal values that are much different from yours, which means you must be prepared to assert your case to the judge.
Consider, for instance, that there are at least three different approaches in valuing a business: asset approach, market approach, and income approach. Choosing the best method should depend on many factors including the type of business (product- or service-based) and whether it has a wide market or is a niche business.
Likewise, appraising one-of-a-kind personal property – such as art, jewelry, antiques, and collectibles – can be difficult because there is some subjective value to them.
Your attorney must be familiar with the varied valuation approaches and effectively argue for the most appropriate method in court.
Tracing Hidden Assets
In our years of experience handling high-stakes divorce, many spouses have prudent concerns that their partner may have been hiding or diverting assets to prevent the court from dividing them or including them in child support considerations. Unfortunately, this is possible through complex schemes of diversion or concealment.
If you suspect that your spouse has hidden assets, talk to a lawyer first. You want to avoid a heated confrontation with your spouse. Instead, enlist an attorney who has the experience and resources to track your partner’s assets.
High-asset individuals are familiar with tax considerations that come with their net worth, but during divorce, more unique questions should be dealt with, such as:
- Should you and your spouse file a separate or joint tax return in the year of the divorce?
- Which spouse has claim to dependent children with regard to tax returns?
- What are the tax consequences of dividing or selling large assets (family home, business, and so on.)?
- What is the capital gain incurred if you sell large assets?
- Will it affect you if your spouse is behind on their taxes?
- Will it affect you if your spouse is under audit?
- What are the tax consequences if you buy out or offset your spouse’s share of community property?
Taxation is a thorny area of the law and its application could be highly specific in your case. Having a lawyer may be indispensable in this area, both for your legal protection and for making the soundest decisions for your financial future.
Though these are common issues in a high-net worth divorce, you may have a particular financial concern not listed above that needs attention. Goldman Law is experienced in this field, and we can provide the case-specific legal service you need in Arizona. Call us today at (602) 698-5520.