Top Challenges in High Net-Worth Divorces
By Gary Graham, Partner at Stern Edlin Graham Family Law
High net-worth divorces bring unique challenges that go beyond the typical emotional difficulties of ending a marriage and the logistics of separating your home. These cases often involve complex financial structures, valuable assets, and heightened stakes that require careful planning and expertise. Here are some of the top challenges in high net-worth divorces and how they can be managed effectively.
- Valuing Business Interests
- Navigating Tax Implications
- Resetting Expectations
- Dividing High-Value or Unusual Assets
Valuing Business Interests
One of the most significant challenges in high net-worth divorces is determining the value of a business. When one spouse owns a business, its valuation can become a contentious issue. Broad disparities between competing expert valuations can make settlement negotiations nearly impossible. If you can’t bridge the gap, litigation may be necessary to resolve the dispute.
One of my cases helped shape the Georgia legal framework for valuing a business in divorce. My client’s expert valued the spouse’s medical practice at $500,000, but the spouse’s expert claimed that it was just a job, and should have no value. After a lengthy trial and appeals, my client prevailed and was awarded “business alimony” as a way to divide that business asset. When faced with significant discrepancies like this situation, Judges tend to be reasonable and look for equitable solutions. To support this process, it is critical to work with credible experts who provide realistic valuations based on accepted methods.
High net-worth divorces are inherently complex and require careful handling of financial, legal, and emotional issues.
Navigating Tax Implications
Tax issues are another major concern in high net-worth divorces. The division of assets often comes with significant tax implications, such as capital gains on investments or penalties for early withdrawal from retirement accounts.
For example, while a retirement account may appear to be worth $500,000, its actual after-tax value could be substantially less. Failing to account for these tax implications can lead to an inequitable settlement.
To manage this challenge, a Certified Public Accountant (CPA) should be part of the divorce team. A CPA can estimate the after-tax value of assets, ensure compliance with tax laws, and help you make informed decisions about property division.
Resetting Expectations
Sometimes, the challenge is more than financial–it’s personal. In high net-worth cases, that wealth is often driven by someone who is very successful in their line of work. Sometimes the individual who has generated such wealth has a mindset that their spouse doesn’t deserve an equitable share. Wealth created during the marriage tends to be a marital asset that needs to be divided, so one or both spouses may need to reset expectations and take a practical approach to reaching an equitable settlement.
Dividing High-Value or Unusual Assets
High net-worth divorces often involve unique assets such as expensive wine collections, fine art, or jewelry. These items must be professionally appraised to determine their value, and disputes can arise over how to divide or sell them.
In one case I handled, the husband owned a collection of 30 classic cars. The couple hired a broker to appraise and sell the cars, with the proceeds divided equally. This process took nearly a year after the divorce was finalized, demonstrating how time-consuming it can be to manage such assets.
For unusual assets that cannot be sold or divided, such as hair plugs (a real case example), it is essential to focus on practical solutions.
Final Word
High net-worth divorces are inherently complex and require careful handling of financial, legal, and emotional issues. Whether it’s valuing a business, navigating tax consequences, or dividing unique assets, having a skilled legal team and trusted financial experts is essential. By approaching these challenges through a practical lens, you can work toward a fair resolution that protects your financial future or be well-prepared to defend your position in court.
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