If you and your spouse acquired significant assets during your marriage, or one of you came into the marriage with considerable wealth, your divorce may not be as straightforward as you hope. You will need to hire an experienced Texas family law attorney who is capable of preserving your share of the marital assets. Read this article to learn more about what to expect during a high net-worth divorce.
What is considered a high net-worth divorce?
Any Texas divorce involving more than $1 million in liquid assets is typically considered a high net-worth divorce.
Couples with a high net worth often have various assets such as 401(Ks) and other retirement accounts, stocks, bonds, other investments, real estate, inheritances, or business ownership stakes.
How are high net-worth divorces different?
For starters, a high net-worth divorce process may take longer. This kind of divorce is much like breaking up a large corporation. For this reason, your legal costs will likely be higher than that of a more “typical” divorce.
Also, you will likely need to retain the services of experts such as certified public accountants, business valuation experts, financial planners, or investigators. These experts will help put together a complete picture of your marital estate and offer insight into how it should be divided. They may even be able to uncover assets your spouse has hidden from you.
Many high-assets divorces involve a prenuptial agreement. Also known as a “marital property agreement,” a prenup can specify how assets may be divided in the event of divorce.
You or your spouse can challenge the terms of your prenuptial agreement during your divorce proceedings. Successful challenges to prenuptial agreement are rare. In order to challenge, either of you must prove that either you did not voluntarily sign the agreement, or that the agreement was unconscionable at the time you signed it, and one of the following is true:
- You or your spouse were not provided a fair and reasonable disclosure of the property or financial obligations of the other party.
- You or your spouse did not voluntarily and expressly waive, in writing, any right to disclosure of the property or financial obligations of the other party beyond the disclosure provided; and
- You or your spouse did not have, or reasonably could not have had, adequate knowledge of the property or financial obligations of the other party. Tex. Fam. Code § 4.006
Community and Separate Property in a High Net-Worth Divorce
As in all divorces, anything that belonged to you before the marriage will likely be classified as separate property, and vice versa for your spouse. Virtually anything you acquired during the marriage will be listed as community property.
Let’s say you and your spouse jointly own a business together. That would be considered community property. However, the process gets more complicated if either you or your spouse owned the business before you were married. If the value of that business increased during your marriage, then that increase in value would be considered marital property.
In a business valuation, the judge may consider:
- when the business was started
- the role each spouse played in increasing the value of the business
- any financial investments either spouse made in the business
- the amount of time and effort each spouse put in to build the business
- any liabilities associated with the business
- whether the business is a significant income source for one or both spouses
Business Valuation is Not Strictly Monetary
Valuing a business goes beyond looking at profits and losses. The process involves evaluating both tangible and intangible assets of the company. This includes physical assets, like vehicles and equipment, as well as data on historical earnings and performance, future earnings, comparable market transaction data, and goodwill.
Goodwill refers to the value a company gets from its brand, customer base, and reputation:
“Goodwill that exists separate and apart from a professional’s personal skills, ability, and reputation is divisible upon divorce provided the community is entitled to share in the commercial value of that goodwill.” Holland v. Holland, No. C14-92-00873-CV, 1993 Tex. App. LEXIS 2197, at *1 (Tex. App. Aug. 5, 1993)
Consider Collaborative Divorce
If you are involved in a high net-worth divorce, the traditional divorce process may not suit your needs. Instead, you may want to consider going the collaborative divorce route.
The collaborative family law process is built around these three principles:
- no court intervention
- transparency and full disclosure
- interest-based negotiation
Source: COLLABORATIVE FAMILY LAW: A MEANS TO A LESS DESTRUCTIVE DIVORCE, 70 Tex. B. J. 196, 196
As in divorce litigation, you and your spouse must each retain your own collaborative divorce attorney. Due to ethical concerns, the same lawyer cannot represent both of you in a divorce in Texas.
Okay, But How Does Collaborative Divorce Work?
In the collaborative divorce process, all experts are jointly retained by both spouses. This is primarily to reduce cost and to avoid the appearance of bias toward either party. The experts only participate in the process as neutrals and cannot work with either party in any future litigation.
You and your soon-to-be former spouse will meet periodically with your attorneys and the neutrals assigned to your case. These sessions are called joint sessions. You will also have off-line meetings with just the neutrals.
Typically, each case has a Neutral Financial Professional who gathers the information about the community estate, and a Neutral Communication Facilitator who has the dual role of assisting with communication during the process and helps to develop a parenting plan for those parties with children.
High Net-Worth Divorces Need an Experienced Attorney
Many factors play into a high net-worth divorce. You need an attorney who can balance them and effectively advocate for your rights. Your divorce can quickly turn into a disaster if your attorney does not know how to find the right experts or cross-examine the other side. Call 214-884-3775 today to begin your free case assessment.