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What An Experienced Attorney Brings to Your High Net Worth Divorce

Jonathan James | July 20, 2022

High Net Worth Divorces: An Overview

The simplest definition of a high-net-worth divorce is a divorce involving a client who has a considerable amount of wealth amassed – generally speaking; this would be someone with at least $5 million in liquid assets. But that’s not anywhere close to being a complete definition, for high net worth divorces typically involve a broader range of financial and legal considerations.

At Goranson Bain Ausley, we list high net worth divorces as one of our specialties, specifically because of the level of complexity those cases involve. A significant number of our past high net worth clients have had estates well in excess of $5 million, along with one or more of these criteria:

• Being an owner or co-owner of a closely held business
• Being an owner or co-owner of a family business
• Being a benefactor of or an heir to a family trust or inheritance
• Being the owner of the property (or other assets) prior to marriage (called Separate Property in Texas)

When working with a high-net-worth client, one of the first things we do is sit down with them and a financial professional, to go over that client’s complete financial picture. Then, we begin to determine what is community property and what is separate property, and we decide which illiquid assets the client wants to protect most. This is best done before the client initiates a divorce – that way, we can establish the best strategy possible to move forward and give the client’s assets maximum protection.

We then encourage the client and their spouse to learn about the full continuum of divorce processes, including, out of court options such as Collaborative Divorce, commonly referred to as Collaborative Law. Collaborative Divorce offers at least two specific advantages to litigation that benefit high-net-worth clients – more flexibility and creativity in negotiating a financial settlement and the ability to have those negotiations privately and outside of the public record.

If a client isn’t able to enter into a Collaborative Divorce with their spouse, there are still steps to take to protect privacy. First, to the extent allowed by law, court filings should be made either anonymously or confidentially; otherwise, the details of a divorce could be out there for business competitors, nosy neighbors, identity thieves, or anyone else to peruse. Then, of course, if a client can settle out of court and negotiate the terms of the divorce, this is typically preferable to an outcome left to the judge – especially when the client might be found at fault for the divorce, and that factor figures into the court-determined settlement. And if it appears that litigation will be necessary, then detailed case preparation, as well as strategies for the most persuasive presentation of the client’s position, are essential.

All divorces deserve diligent, competent representation for both parties, but in cases involving high net worth clients – where the degree of difficulty can be quite high – a different level of competence is required. 

How to Avoid Making Mistakes in a High Net Worth Divorce

High net worth divorces are often more complicated than standard divorces. When working with high-net-worth clients, we advise them to employ caution and good sense when attending to their finances in the lead-up and during the divorce process. Obviously, it’s prudent to avoid any transfers of funds that would appear sneaky or suspicious. For example, in some cases, a person will want to move assets from a joint account because they are afraid that the spouse will withdraw that money first.

As divorce lawyers looking to protect our clients, we want to be privy to any decision to move assets. Although there may be legitimate reasons to transfer assets to protect them, moving assets should never, ever be done for the purpose of hiding them. Not only is it likely a violation of the Court’s standing orders in a divorce, but you will also ALWAYS be caught. And this action will make the entire divorce much worse by jeopardizing your credibility with the court and severely inhibiting the ability to find common ground in settlement.  

But there are plenty of cases in which people are trying to do the right thing in a divorce, making financial moves that are well-intentioned but might inadvertently complicate a divorce. For instance, taking a separate property asset (inheritance, gift received, or owned prior to marriage) and paying a community liability with it can complicate financial negotiations. A person in a divorce might try to sell a separate property asset to a family member to take it away from the marital estate, but since the money received from the sale could be considered community property under certain circumstances, such a move could backfire and do the opposite of what was intended. And lawyers for both parties in a divorce should be paid from the community estate – even in complex cases that require considerable legal expenses (although the other party might have a right to reimbursement for fees spent protecting or establishing one party’s separate property assets).

There are also tax considerations that lawyers and financial professionals can help couples with high net worth divorces. For example, there are tax considerations regarding certain retirement accounts as well as considerations regarding the gains/losses on stocks and brokerage accounts, and those considerations should be figured into a settlement involving either or both. In addition, in the year that a couple is divorced, the couple needs to determine how to handle the tax payment, and there can be tax advantages to finalizing the divorce either before or after the new year. We frequently deal with all of these issues in high net worth divorces and can gather the financial advice along with our legal advice to help clients make an informed decision.

It’s a challenge to divide a marital estate in a divorce involving high net-worth people, but it can be made more challenging, needlessly, by a few unintended missteps. Therefore, we advise anyone considering a divorce to be prudent in financial matters and to behave as if the divorce will proceed – but more importantly, consult a lawyer competent in handling high net worth divorces as early as possible.

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Jonathan James is a highly skilled litigator and negotiator in high-conflict legal situations and consistently receives praise from his former clients for his integrity, professionalism, and responsiveness. Jonathan is Board-Certified by the Texas Board of Legal Specialization in family law and is a member of the State Bar of Texas. Additionally, he is trained in Collaborative Divorce and has been named a Super Lawyers Rising Star, 2019-2022 and Best Lawyer 2020-2021 by The Best Lawyers in America.  

To learn more about high net worth divorce, please contact Jonathan James at 214-473-9696.

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