5 Things to Know When Dividing Property in a High Net Worth Divorce

 Posted on November 06, 2017 in Division of Property

When a married couple decides to end their relationship, the process of divorce can often be complicated and difficult. Whether the divorce is contentious or amicable, separating two lives that have been closely linked for years may raise some never before considered questions. When a couple has a high net worth, things become much more complex. As couples work to reach an agreement on how to divide their marital property, they should be aware of the following issues: 

1. Stock options - Even if they do not fully vest until after a divorce is finalized, stock options may be considered marital property and be subject to property division in divorce if they were awarded during the marriage. However, in some cases, other considerations may apply, such as if options were awarded to promote future employment or performance. 

2. Investments and retirement accounts - The marital portion of 401(k) or IRA accounts or pensions may be divided equally between spouses, without incurring income taxes or penalties. In the case of certain pensions and 401(k) accounts, funds are transferred between spouses using a Qualified Domestic Relations Order (QDRO). The QDRO is a separate order, usually entered by the Court following the divorce decree, which directs the plan administrator to transfer marital funds to the IRS-qualified retirement account of the former spouse. On the other hand, Individual Retirement Accounts may be transferred without the entry of a QDRO and in accordance with the terms of the divorce decree.

3. Business valuation - Businesses owned by one or both spouses may be considered marital property if they were established or acquired during the marriage. If one spouse owns a business he/she acquired prior to the marriage, but the other spouse contributed to the business, then the business may be considered marital property and be subject to division. Often times, it is impractical to close the business or sell its assets to divide the proceeds between spouses. Rather, one spouse may desire to own the business and continue to operate it, free and clear of the other spouse. In these cases, a valuation of the business must be performed to determine the fair market value of the business so that some other marital asset of equal or similar value may be awarded to the other spouse.  

4. Real estate - Any real property owned jointly by both spouses is subject to equitable division. If one spouse owned a residence prior to the marriage, but the other spouse contributed to improvements to the home during the marriage, then it may retain its non-marital status. But, the other spouse may be entitled to a reimbursement for his/her contribution to the other spouse’s non-marital estate. 

5. Tax consequences - Spouses should be aware of whether property transferred into their name pursuant to the divorce judgment will be tax-free or subject to regular income taxes or capital gains - and take this into consideration when deciding how to divide property. 

Contact a DuPage County Divorce Lawyer

During a high net worth divorce, it is always a good idea to review your finances with a skilled attorney to be sure you fully understand the implications of the decisions you make as you divide your marital property, assets, and debts. The experienced divorce attorneys at Kathryn L. Harry & Associates, P.C. will work with you to protect your rights and promote your best interests throughout the divorce process. Contact our Oak Brook property division attorneys at 630-472-9700 to schedule a free consultation. 

Sources:

http://www.chicagobusiness.com/section/custom-content-wealth-divorce-roundtable

http://www.chicagobusiness.com/section/custom-content-roundtable-family-law-divorce