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Think of your favorite celebrity, a business mogul, or someone with high financial standing in society. Now think of such an individual going through a divorce. That is what is considered a high net-worth divorce.
This type of divorce involves individuals with substantial assets, financial portfolios, and complex financial structures. As a result, it is often characterized by more complicated financial issues, such as the division of assets, properties, pensions, business interests, and investments.
Additionally, high-net-worth individuals may have unique concerns such as privacy, reputation, and tax implications, making the divorce process more complicated and time-consuming. Because of the complexity of the financial and legal issues involved, high-net-worth divorces typically require a specialized approach. To put it into perspective, they may involve multiple experts, including financial advisors, accountants, tax specialists, and experienced family law attorneys.
Let’s take a quick look at some of the most important things you should know about this kind of divorce.
Things To Know About a High Net Worth Divorce in Maryland
How Property Division Works
Let’s start with the topic of property division. This is usually one of the most contentious topics in a divorce, regardless of the couple’s net worth. Maryland is an equitable distribution state, meaning the marital property is divided fairly, but not necessarily equally, between the spouses in a divorce. This can be particularly complicated in a high net-worth divorce, as there may be many assets to be divided.
How Assets Are Evaluated in a High Net Worth Divorce
The process of valuation of assets is also more complex in a high net-worth divorce. This is because the parties involved must accurately value all assets to ensure they are all accounted for and divided fairly. Again, this may require the use of experts, such as business valuators or real estate appraisers.
On the contrary, in a typical divorce where the parties involved do not necessarily have many assets or a high net worth, all they need to do is create a financial statement disclosing what they own or owe. Depending on the estate’s size, most couples can complete the financial statement with the help of an attorney.
Assets In Retirement Accounts Are Even More Complex to Distribute
In a high net-worth divorce, the retirement accounts of the parties involved, such as 401(k)s and pensions, can be some of the largest assets. As a result, they are usually among the most complex to evaluate and distribute.
In Maryland, these accounts are typically divided through a Qualified Domestic Relations Order (QDRO, pronounced as ‘quad row’), a court order that allocates a portion of the account to an alternate payee. The alternate payee could be the spouse, former spouse, or even child of the owner of the retirement accounts.
More Assets, More Tax implications
A standard divorce can have significant tax implications, but it is even more challenging for high-net-worth individuals. Therefore, it is important to consider the tax implications of each asset and how it will be divided in the divorce.
Take, for example, a situation where one party receives a significant amount of money as a settlement from the divorce. Depending on the tax category, they may end up owing more taxes than they would before receiving the settlement. The money could also change their tax liabilities due to the newly-acquired wealth status.
Privacy Might Be an Issue
High net-worth individuals may have privacy concerns that must be addressed during a divorce. This may include concerns about sensitive financial information becoming public or protecting the reputation of the individual or their business. As a result, the parties involved may be required to sign certain agreements as part of the negotiations. Keep in mind that breaching the terms of such agreements could lead to renewed battles in or out of court.
Legal Representation Is Almost a Basic Need
High-net-worth individuals need to have experienced legal representation to ensure that their interests are protected and that the divorce process runs smoothly. A qualified divorce attorney can help with negotiations, preparing and filing court documents, and representing the individual in court, if necessary.
Choosing Between Mediation or Litigation
In Maryland, high-net-worth divorce cases can be resolved through either mediation or litigation. Mediation is a less adversarial process that involves a neutral third-party mediator. On the other hand, litigation involves a court trial. The right approach for each case will depend on the specific circumstances of the divorce.
The 50/50 Ratio Is A Myth
One of the most common myths about the divorce process in Maryland is that the court will split the marital property equally between the spouses. Here is what you need to know.
Maryland is an ‘equitable distribution state when it comes to property division during a divorce. This means that state laws assume that both spouses are entitled to an equal share of their marital property.
But here is the catch; state laws also do not require courts to slip marital property equally. Rather, they allow the courts to divide the property in a manner considered ‘fair,’ not necessarily ‘equal.’ Therefore, even in a high net-worth divorce, there is a possibility that one party may not be satisfied with the court’s decision, but laws must be followed.
The bottom line is that high net-worth divorce processes usually pose newer and more complex challenges for those involved. Given its complex nature, it is always advisable to consult an experienced family law attorney familiar with Maryland laws regarding this matter.
This decision could be the difference between getting what you are entitled to or risking your financial future but not claiming or protecting what is rightfully yours. At Divorce With a Plan, we know there is so much at stake in these kinds of cases. For this reason, we create customized plans for each situation, ensuring that our client’s rights are respected and protected throughout the high net-worth divorce process.
If you would like to speak with an attorney familiar with your case, contact us today to schedule a consultation.
