Special Considerations for High-Earners Seeking Divorce
Any couple that enters the divorce process must contend with the fact that their marriage is over, and the image they had of the relationship is over. Regardless of the specific circumstances that led to the decision to dissolve the marriage, divorce typically requires the parties to address certain basic issues.
However, some couples present unique circumstances that have a direct and significant effect on the proper approach to divorce itself and the specific issues that are likely to be contentious. Couples with high net worth, especially, fall into the category of individuals who need a specific and personalized strategy to make the divorce process as streamlined and effective as possible.
Couples with considerable wealth have a lot to lose due to the complex and unique financial issues they bring to such cases. If divorce cases of this kind are not properly handled, the need for additional costly litigation is greatly increased. By focusing on the correct issues, however, all areas of disagreement can be satisfactorily settled within the initial divorce petition.
High net worth individuals almost invariably have diverse compensation packages that include a wide variety of benefits and potential income streams. Ensuring that all forms of compensation are identified and addressed for purposes of any ensuing settlement agreement is a crucial aspect of negotiating the best terms possible, and reducing the likelihood of post-divorce judgment litigation.
When assessing career-generated assets, high-earners need to additionally consider the effect of certain employment agreement provisions that impact present, contingent or deferred income, such as:
- Triggers to the vesting of rights to additional compensation;
- Stock sale restrictions; and
- Mandatory retirement ages, if a party is nearing this event.
The tax implications of a divorce should be one of the foremost considerations when contemplating the terms of a property settlement agreement. For example, property that has appreciated in value over the previous tax calendar year may be subject to capital gains taxation, and when such property is transferred, one party, instead of both spouses, would be responsible for covering this obligation.
If both spouses are high-earners or the lesser-earning spouse receives the property in the divorce, this financial hit could be significant. Further, if the parties share children, a discussion on which spouse should receive the exemption for dependents for federal income tax purposes is an issue that must also be negotiated.
Another aspect to the tax consideration question is making sure to change beneficiaries on 401(k)s, life insurance policies, estate planning documents and related assets during the divorce process. This proactive approach is necessary to prevent the party from receiving them in the event of an unexpected death. Illinois law automatically disinherits former spouses from standing wills upon entry of the divorce decree. Yet, if a party dies while the case is still pending, then the provisions in place at the time of death control.
Finally, the most effective way to navigate the divorce process with the minimum amount of delay is to employ the services of financial advisors and other business experts to assess the value of assets and serve as expert witnesses on issues of compensation potential, employee benefits and lifestyle analysis. These consultants are especially important when one spouse works in a closely held business, as valuations of these businesses are rarely easy or straightforward.
Additionally, forensic accountants may be necessary to trace assets for purposes of determining if property is marital or not and whether business deductions are actually covering personal expenses. Keeping clear and concise financial records is the key to efficiently using the services of these professionals, and also serves to reduce the other spouse's ability to claim assets are being hidden.
Consult an Illinois Divorce Attorney
If you are facing divorce and a considerable amount of money is at stake, you need a skilled Barrington family lawyer prepared to aggressively fight for your rights. The Law Office of Nicholas W. Richardson, P.C. knows how to assemble divorce cases for high net worth individuals, and can help you negotiate a fair settlement in mediation, or argue your position in Court. If you need assistance today, contact his office for a free consultation.