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What is a High Net Worth Divorce?

New Jersey law applies to all divorces, so the main issues are the same, no matter how wealthy a couple may be. But there are some critical factors when high-net-worth couples divorce. Financially, of course, there is much more at stake, and the financial picture may be more complex, requiring experts and a sophisticated analysis of the issues.

We are all aware from media reports how entangled divorce proceedings can become when there is high net worth involved. Michael Strahan and his wife married in 1999 and welcomed their twins in 2004 before finalizing their divorce in 2006 – although a financial battle rages on with the couple in court as recently as October 13, 2020

The couple’s battle provides insight into the difficulties which arise in a high net worth divorce. The Court when deciding issues of child support for the couple’s twin daughters, was asked to review the trial judge’s decision of requiring an additional $200,000 in child support over the guideline cut-off.

The Court noted that even with high-income parents, the Court still must determine the needs of a child in a sensible manner consistent with the best interests of the child. They then cautioned about overindulgence stating:

“Judges must be vigilant in providing for ‘needs’ consistent with lifestyle without overindulgence” In Isaacson, we referred to the Kansas “Three Pony Rule,” which states that “no child, no matter how wealthy the parents, needs to be provided [with] more than three ponies.”

What Makes High Net Worth Divorces Different?

Lawyer going over graphs and data on his laptop

All divorce cases involve the same fundamental issues of property division, spousal support, and child support. In New Jersey, property division is defined by equitable distribution laws. This creates additional challenges for high net worth couples. Among them are the following:

  • Prenuptial agreements
  • High-value personal property, including art collections, boats, and jewelry
  • Real estate properties, including commercial real estate, vacation properties, and rental properties
  • Retirement accounts, including 401(k) accounts, traditional and Roth IRAs, and stock options
  • Non-retirement investments, including securities
  • Privately held business ownership and control
  • Complex tax issues

Common Mistakes in High Net Worth Divorces

Concealing assets Concealing assets in divorce happens, but it is never a wise plan. If the fraud comes to light, the final judgment of divorce can be reopened, and lead to significantly costly litigation, even years after the divorce.

In Zuba v. Zuba, five years after the final agreement of the parties, the wife learned from friends of her ex-husband, that he hid concealed assets from her in the divorce. The husband lived with these friends following his divorce and had confided to them his plan. After a falling out, or because of feelings of guilt, these friends advised that the husband disclosed to them that he owned property in Costa Rica and had a bank account in Belize that he did not disclose on the Case Information Statement (CIS) that he filed during his divorce proceedings.

The Appellate Court held that the wife was entitled to discovery to determine the truth of this. That would mean forensic accountants, subpoenas for financial records, and depositions. All are financially costly, and the concealing party will lose their most valuable asset in court: credibility.
The parties should be forthright in revealing their assets. If you believe your former spouse may have concealed assets, we can help.

Making hasty divorce decisions You should not rush into agreeing to conditions for alimony or assets and liabilities division without due care.

Alimony is often a hotly contested issue. Unlike child support, which is typically determined by the New Jersey Child Support Guidelines to calculate the minimum amount of child support one party should pay to the other, there is no such formula to determine alimony. Instead of a formula, alimony is based on 14 statutory factors outlined in N.J.S.A. 2A:34-23(b).

In New Jersey, lifetime alimony has been replaced by 'open durational alimony' which can be terminated due to a parties' retirement at their Social Security Full Retirement Age, which is anywhere from age 65 to 67, depending on when you were born.

However, alimony can be negotiated between the divorcing parties. Great care needs to be taken when agreeing to such a proposal, as the ability to modify the agreement in the future is limited. While alimony and support agreements are always subject to review and modification pursuant to N.J.S.A. 2A:34-23. To obtain a modification, the party requesting it must demonstrate "changed circumstances".

While a Court has the ability to modify a previously agreed upon alimony payment, they are usually inclined to uphold the agreement, even if it is seemingly impossible for the party obligated to pay, to do so.

In Morris v. Morris, the divorcing spouses agreed to an alimony plan where alimony would be payable to the wife irrespective of her remarriage or cohabitation. The alimony was payable monthly based on the annual amount of $ 35,000 for a fixed period after which there was to be a single final alimony payment of $150,000.

At the time of the agreement, the husband had two sources of income: consulting fees and rental payments. The Court noted that the combination of these two sources was “clearly insufficient to pay the agreed-upon alimony.” The wife argued that at the time of the agreement, the parties were obviously looking towards the husband renegotiating with his creditors, effecting a favorable sale of assets, later recouping assets, or at least generating substantial income. That never happened however, and the husband’s financial situation worsened over the ensuing years. The wife argued to the Court that by this agreement, she gave up the potential of being supported in the future as she had been in the past, in exchange for a sure payment of $ 35,000 per year and then a lump sum payment of $150,000 (slightly more than four years' "alimony").

Even after acknowledging that the husband had no current ability to pay what he agreed to, he was bound by the agreement. The Court stated: “Defendant must pay the agreed amount if he has the means to do so, or these unpaid bargained-for payments will accumulate, and he only will make these payments if and when his fortunes change. If [at the end of the agreement] his fortunes have not changed and he owes plaintiff over $ 350,000 plus interest, so be it. Defendant bargained for this result when plaintiff gave up her claim to equitable distribution and substantially higher alimony. There is no great inequity, since each party has the expected benefit and burden of the "contract.”
The takeaway is to not make hasty decisions in these cases. Entering into an agreement without knowing all of the potential consequences can result in years of financial stress and struggle with little or no relief from the court.

Choosing the wrong lawyer In high net worth divorces, where substantial sums of money, business ventures, and other assets are at stake, your divorce lawyer must also guide you through the legal and financial pitfalls of divorce so you can look forward to the next chapter in your life.

Choosing the wrong lawyer In high net worth divorces, where substantial sums of money, business ventures, and other assets are at stake, your divorce lawyer must also guide you through the legal and financial pitfalls of divorce so you can look forward to the next chapter in your life.

Contact a High Net Worth Divorce Lawyer

A man and woman going through a divorce going over documents and graphs

A high net worth divorce can cause stress when it involves complex laws, businesses, multiple real estate properties, high-value properties, and other financial accounts.

When planning for a high net worth divorce, it is in your best interest to consult with an experienced attorney familiar with New Jersey laws. Work with a high net worth divorce lawyer who understands how to handle high asset divorce cases properly and has a successful track record of doing so.

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