Property division is one of the most challenging aspects of divorce, and when the case involves a high net worth, the matter becomes even more difficult. The higher your net worth, the more there is at stake, which makes it important to have an experienced Round Rock divorce attorney on your side.
Asset Division in Texas
Texas is a community property state, but within this categorization, it forges its own way. When a couple is married, all the assets they acquire – regardless of who does the purchasing or whose name the asset is in – is marital property, which must be divided in a manner that is deemed just and right in a divorce.
The only exceptions when it comes to marital property – or property that is owned by both spouses equally – include gifts and inheritances received in one spouse’s name alone. Additionally, the pain and suffering component of a personal injury claim is considered the separate property of the claimant.
A Just and Right Division
In Texas, the just and right division of marital property begins with the presumption of an equal division, but a range of factors can support one spouse receiving more than the other. Concerns like the following are all taken into consideration:
The length of the marriage
Each spouse’s age and overall mental and physical health
Each spouse’s separate property
The size of the marital estate
Whether either spouse engaged in fraud on the community, such as by dissipating marital funds artificially
The matter of fault, which can potentially play a role even in a no-fault divorce
Each spouse’s income and earning power
The tax implications of the proposed division
Separate Property
Texas also addresses the matter of separate property, which refers to those assets that either spouse owned prior to marriage and kept separate during the marriage. Any commingling of marital and separate assets can dim the distinction between them.
Texas courts begin with the presumption that all assets are marital, and if either spouse claims an asset belongs to them alone, the burden of proving its separate nature lies with them.
It should also be noted that if the asset in question increases in value over the course of the marriage, that increased amount is very likely to be treated as a marital asset. In other words, some properties are both marital and separate, which only serves to make things that much more complicated.
High Assets
Even a straightforward divorce that involves a modest estate is likely to encounter some difficulties in relation to property division. As assets increase, however, there is much more room for complications to arise, which can significantly slow down the legal process. It is not unusual for property division to become contentious and to include an emotional component, which can be amplified in a high-asset divorce.
High-net-worth divorces tend to involve properties with high value, which means there are likely to be a series of complicated property division determinations that need to be made, rather than the one or two that most divorcing couples face.
More Room for Financial Funny Business
The greater your assets, the more opportunities there are for value to get lost in the shuffle, which means that you’ll need to remain vigilant in order to protect your financial rights throughout the process.
Further, if your spouse is more involved in the business end of your family’s finances than you are, they’re in a better position to manipulate the numbers to their own advantage. While you may think that your spouse wouldn’t engage in financial trickery, you may be surprised by the lengths some people will go to protect their own bottom line.
Further, that emotional component mentioned earlier can make matters worse. Ultimately, there is a lot on the line, and having a fierce legal advocate on your side from the start is the best path forward.
Valuations
One of the most complicated aspects of property division in a Texas divorce is attaching values to the assets that both spouses agree to. With high-value assets, this often requires forensic accounting, a complex endeavor in its own right.
Often, the best approach is to agree on a valuator together and commit to using their financial analysis of your assets moving forward. Coming to a meeting of the minds on this matter, however, is unlikely to be easy, and some couples going through high-net-worth divorces face battle after battle in the valuation process.
Business Ownership
Nothing complicates a divorce the way that business ownership can, and many high-asset divorces involve businesses. It’s important to note here that – even if the business in question is the separate property of just one of you – any increase in its value over the course of your marriage will very likely be classified as a marital asset.
Additionally, there is a range of common circumstances that can blur the distinction between separate and marital properties.
Primary considerations include all the following:
Determining the degree to which the property is separate, as applicable.
Assigning a value can be exceptionally difficult, given that much of a business’s value comes from running it, and one spouse will likely need to walk away.
Navigating the financial complexities can be quite a journey, even when both spouses are committed to a fair division.
When it comes to business ownership, there is considerable room for the spouse with greater involvement in the business to hide assets, and the fact that they are more involved in the business, to begin with, may bolster their sense of entitlement.
This, however, is not the way the law works, and applying careful financial analysis is always in your best interest.
The matter of how your business’s value will be divided between you is also a serious concern. To begin, you generally can’t split a business in half, and selling your business in response to divorce can lead to serious financial loss.
From here, determinations must be made about how the spouse who is walking away will be compensated. This can mean receiving their share in the form of other assets or having their share bought out directly. Regardless of the path chosen, however, there is a lot to consider, and giving the matter the attention it deserves is paramount.
Tax Consequences
Before accepting a proposed property division in a Texas divorce, it’s important to carefully consider the tax implications involved. When it’s a high-net-worth divorce, you can take a serious hit in terms of taxes, which makes proceeding with utmost caution in your best financial interest.
A prime example when it comes to relevant tax consequences is retirement accounts, which generally require a qualified domestic relations order (QDRO) to split them between the spouses. This is a legal directive that instructs the retirement plan administrator about how the account should be divided when the time comes.
The QDRO must adhere to the retirement plan and the federal government’s rules and regulations, and its implementation allows the couple to bypass the fines and penalties associated with early withdrawal.
The fact that a divorce involves high assets, however, often means that there are enough assets available to simply buy out the other spouse’s financial interest in the retirement account directly.
The Matter of Alimony
In Texas, alimony is called spousal maintenance, and it is reserved for cases in which the divorce leaves one spouse unable to meet their own reasonable needs – in the context of the standard of living achieved during the marriage – while the other spouse has the means to help.
In a high-net-worth divorce, there is greater potential that alimony will apply, and this is a divorce term that is closely associated with divorce drama.
High asset divorces often leave one spouse with considerably more assets than the other, and the greater this disparity, the more likely alimony becomes. Texas implements an alimony cap, and the duration of alimony tends to directly correlate with the length of the marriage. Generally, the marriage must have lasted at least 10 years for alimony to apply.
The Matter of Child Support
Child support can also be directly affected by high assets in the sense that there are more resources to consider. While Texas does implement a child support cap of $9,200 per month, which is updated every six years, higher child support can be ordered if there is a compelling reason for doing so.
For example, when there is a vast difference in the spouses’ standards of living, the court may order child support that exceeds the set limit.
Generally, the parent with higher earnings has the child support obligation – even when parenting time is shared equally. The child support obligation is calculated according to the following guidelines:
The parent who earns more pays 20 percent of their net income for one child.
The parent who earns more pays 25 percent of their net income for two children.
The parent who earns more pays 30 percent of their net income for three children.
The parent who earns more pays 35 percent of their net income for four children.
The parent who earns more pays 40 percent of their net income for five children.
The parent who earns more pays at least 40 percent of their net income for six or more children.
Net income here refers to the parent’s gross income after specific deductions have been made.
The Matter of Privacy
When it comes to high-net-worth divorce, there is often a greater interest in maintaining privacy. When a divorce goes to trial, the court records become a matter of public interest, and the public can have considerable interest in cases involving considerable wealth.
This is why many couples facing high-net-worth divorce seek a more private option, such as mediation or collaborative divorce.
Mediation
At mediation, each spouse – and their respective divorce lawyers – meets with a professional mediator who serves as a neutral third party. The mediator’s task is to pave the way for compromises that advance the case. Your trusted divorce attorney is there to help ensure that your rights will be upheld and to help you make the right choices for you.
It’s important to point out that mediation is only legally binding when both of you are willing to sign off on the terms negotiated. If this doesn’t happen, your case will likely proceed to court.
A final concern is that while mediation helps many couples keep their cases out of court, it can be just another delaying tactic if your spouse isn’t invested in the process.
If your soon-to-be ex is more interested in wearing you down than in genuine compromise, mediation is unlikely to be productive. The fact that high assets are involved can enhance the concern.
Collaborative Divorce
The collaborative divorce process takes a real commitment from both sides. It involves heading into negotiations very well prepared to hammer out terms between yourselves, with the skilled legal guidance of your respective divorce lawyers.
A collaborative divorce is legally binding, and while you can drop out of the process, doing so requires you to start over, which includes hiring a new divorce attorney.
In other words, you shouldn’t proceed with a collaborative divorce unless you are ready to engage in productive negotiations and you are convinced that your divorcing spouse is ready to do the same.
An Experienced Round Rock Divorce Lawyer Can Help
Brett Pritchard at The Law Office of Brett H. Pritchard is a capable Round Rock divorce attorney who is well prepared to implement the full force of his impressive experience in pursuit of a fair division of marital property in your high-net-worth case.
The higher the assets involved, the more there is to protect, so please don’t delay contacting us online or calling us at (254) 781-4222 to schedule a free consultation and learn more about what we can do to help you today.