A divorce is an emotional time and a life-changing event; it’s also a delicate collection of calculations that will impact your ability to maintain your lifestyle and secure the future of your children. You might think it’s just a matter of selling the family house and dividing the money between spouses, but in California, just that could be enough to make tensions run high and calculators start smoking. Understanding what counts as a high-asset divorce and whether your split qualifies can be crucial to ensure you don’t end up with more taxes or debt than money.
Understanding High Asset Divorce
There is no rule set in stone regarding when a divorce qualifies as high-asset. However, a good rule of thumb is that if the combined assets of the spouses amount to at least $1 million, it becomes a high-asset divorce.
It’s hard to say how many divorces in California are considered high-asset since the state doesn’t disclose substantial information about divorce demographics. However, we can say that in California, with a median sale price of $836,110 in 2023, that $1 million rule of thumb is not hard to reach.
In these situations, more experts are required to evaluate each different type of asset, and things like intellectual property come into account, calling for complex calculations. Your primary residence counts, of course, as well as your vacation home, vehicles (cars, boats, and planes), art collection, businesses, patents, stocks, life insurance, pension plans, and more.
Furthermore, in California, you marry under community property laws: you and your spouse each own half of any property and half of any debt acquired after you get married. The state requires that all of that be divided equally during a divorce, which isn’t simple when it comes to your 401k, trade skills, or investments that have yet to come to fruition.
Challenges in High Asset Divorces
How do you divide equally assets like business relationships, trade skills, patents, stocks, and retirement plans? How do you prove some artwork or antiques were solely your purchase, separate from your spouse, and what do you do if you inherited money but added it to a joint account?
That’s where you’ll need different experts, like an appraiser, a valuation expert, a corporate attorney, a tax expert, and even a forensic accountant. An experienced lawyer in high-asset divorce would have a network of experts on hand for you to rely on. You can count on the expertise of the team at Kaspar & Lugay, LLP, to support you in this matter.
Once everything has been valued, it will be time to determine the standard of living (taking into account spousal support and child support if needed) and then to transfer assets. During a divorce, spouses can transfer these tax-free, but once the divorce occurs, you will start paying taxes on these assets, and chances are the rate will be different than when you were married. With tax codes often changing, this might also impact the timing of your divorce to minimize tax liability. After the divorce, each parent will need to file taxes separately, and only one of them can claim the children.
As for child support, the calculations California usually relies on might be complicated by your situation, and you’ll have to take into account specifics like private school tuition or college. Your family lawyer can help you estimate what a judge would mandate.
Protecting Your Assets
Having the right experts evaluate your assets is the first step in protecting them; the second is seeking legal representation. Your family lawyer will advise you on the best strategy to follow, which may include closing all joint accounts, considering mediation rather than a family court for lower cost, and keeping the communication civil and in written form.
Reviewing your premarital agreement (also known as a prenuptial agreement) will be crucial. It might contain details on what constitutes separate property in your marriage, for instance. Their purpose is most often to outline how assets and liabilities should be divided in case of a divorce, so they might be a precious tool here. They might even minimize disputes by making the division clearer and could reduce the legal costs of the procedure.
You might also have signed a post-marital agreement, which is the same type of document but established after you were legally married. In both cases, prenuptial or postnuptial agreement, your spouse might still want to challenge it, which your family lawyer can help you prepare for.
Do not attempt to hide assets, as this can result in criminal charges. Do not gift assets to friends expecting them back after the divorce. A spending spree to make your standard of life look higher might be tempting, but it is also ill-advised. If you suspect your spouse might attempt these, seek the advice of a forensic accountant. The law requires you to be fully honest about all your financials in a divorce, making you and your spouse sign a financial disclosure document.
If you want to keep a vacation residence, you might have to buy it from them or arrange a transfer of property. Depending on your age, California propositions 60 and 90 can apply to you and make property transfers more complex. You will also need to prepare for future taxes and possibly apply for a new loan if there is a mortgage, which alimony can affect.
If you both invested in a business or created it jointly, you might have to prepare to buy your spouse’s shares or liquidate and divide the resulting sum.
Talk to Kaspar & Lugay, LLP, About Your High-Asset Divorce
With the cost of life, housing market, and community property, California generates all sorts of pitfalls during a high-asset divorce. To navigate them and ensure you have a fair and favorable outcome, the expertise and advice of the right professionals are paramount from the beginning.
To talk with one of our attorneys about your complex or high net worth divorce needs, call Kaspar & Lugay, LLP, at 415-650-1322 or send us a message. Our legal support team is available 24 hours a day, seven days a week.
