The High Net Worth Divorce – Five Things to Consider~ 6 min read

1. The Prenuptial Agreement.
   • Before you ever walk down the aisle, consider the benefits of entering into a prenuptial agreement (“prenup”). A prenup is a legal contract defining the rights and obligations of the parties regarding division of assets, liabilities, support and payment of attorney fees in the event you separate, divorce, or even die. An enforceable prenup in Colorado must be in writing, signed by both parties voluntarily and without duress or coercion, include financial transparency regarding the assets, income and debts of both parties, and both parties must have a reasonable amount of time to obtain independent legal representation and have the document reviewed by counsel. (or knowingly waive that right with the agreement clearly stating the rights being waived). Prenup provisions regarding child support, custody and restricting remedies for victims of domestic violence are not enforceable, as are certain agreements on maintenance and attorney fees that are found to be unconscionable based on the circumstances at the time of the divorce. That said, a prenup is a valuable tool for couples where one or both parties have a high net worth, in the case of a second marriage to safeguard non-marital children’s inheritance, or to protect substantial separate property interests.
2. The Collaborative Divorce.
   • High net worth couples may wish to avoid a litigated solution altogether when they consider divorce. This is especially true for people who are in the public eye and don’t wish to have their divorce become fodder for the media. The Collaborative process is private. All of the work to settle the case happens before the case is ever filed with the court. In addition, a Collaborative divorce can be an excellent process for cases where the existence of substantial income or high-value assets raises complex issues that may be difficult for judicial officers to resolve in the limited time they have to hear a regular divorce case. Where the issues are complex, but there are more than enough assets to ensure that everyone’s needs are met, Collaborative Law allows the parties to engage in a process to resolve sensitive matters through an agreed dispute resolution process to settle all issues outside of the courtroom, between the parties, with a team of Collaboratively trained professionals including parenting experts and valuation experts assisting them. Parties involved in the Collaborative divorce process sign a contract stating that they will participate in the process in good faith, provide each other with full disclosure, and agree that if either of them exits the Collaborative process to file the case in court prior to full resolution of all issues, both parties must hire new lawyers and professionals to run the litigated case. This agreement has the effect of encouraging parties to remain in the Collaborative process until full resolution, rather than throwing in the towel and ending up in a messy litigated divorce.
3. The Complex Divorce.
   • High-net worth individuals don’t get that way by spending their money unnecessarily. Yet a complex divorce can be a very expensive process, often made more expensive by failing to engage counsel who understands the issues at hand. The tax consequences of the property division is just one example of an issue that can be overlooked by unsophisticated counsel. For example, allocating income-producing real property to a party who plans to sell the property may make sense in the overall division of assets, but only if depreciation recapture is included in the analysis. Similarly, while parties to a divorce may not wish to share complete information regarding the scope of their assets in the divorce, there are penalties for failing to disclose all material assets and the judge will not look kindly upon you if you hide property from your spouse. On the other hand, if you are the person without knowledge regarding the scope of the assets, it is imperative that you investigate the information provided by your spouse to ensure that you are fully informed regarding the scope of the assets and income at issue. Once you have all the information you need regarding the marital estate and income, you can then work towards an equitable settlement from a place of knowledge, rather than a place of fear.
4. The Cost of Letting Emotions Color Your Judgment.
   • It’s fair to say that almost every client who meets with me is experiencing some form of emotional turmoil. Whether you are the person who is choosing to leave the marriage, or your spouse has cheated on you, or you are the one who controls the money and runs the business, or you are the one who has stayed at home with the children and has no way to support yourself, everyone experiences fear, uncertainty, sadness or anger in divorce. With few exceptions, high-net worth individuals also experience all of those emotions. Sometimes the emotions are heightened by the feeling that there is so much at risk and the divorce may collapse the whole leveraged house of cards. Sometimes those feelings are exacerbated by the unfairness of having worked so hard to build wealth, only to have it all threatened by the breakup of the relationship. Sometimes those feelings involve fear of what the change to the relationship will do to the children.  Whatever your feelings, it is important that you not let your feelings overcome your rational decision-making process. People who make emotional decisions often make financial mistakes. One of the greatest gifts you can give yourself is to invest in a good cognitive therapist who can hear your concerns and assist you in finding a path to rational, rather than emotion-driven, decision-making.
5. Losing Sight of the Forest for the Trees.
   • Divorce is a process. The process rarely goes at the speed the parties prefer. Invariably, one spouse has been thinking about the breakup for a long time and wants it over immediately. The other spouse is often just beginning their journey through the various stages of grief. Either way, for high-net-worth families, the process can take longer because there are often more assets (or more complex assets) to be valued such as business interests, real property, car collections, artwork, and trust interests, just to name a few. It can be very easy during this process to lose sight of your end goal and find yourself fighting a series of legal skirmishes on principal just so you can score a “win.” Not only does this approach end up costing you substantially more in attorney fees without any long-term benefit, it can also undermine your case by making you look unreasonable to the judge, or by eroding your ability to co-parent your children with your spouse. It is a good idea to set out your goals early in the case. If your goals include having a good relationship with your spouse and your children after the divorce is final, a solid parenting schedule, and a fair division of the assets, a strategy of engaging the entire army for every skirmish may work against you achieving your desired outcome. Using the same business mindset that helped you develop your wealth, with an eye towards achieving your end goals, can provide a better and less expensive outcome. 

The attorneys at Wells Family Law, PC, are available to answer your questions about high-asset divorces. Contact us at (303) 309-1077 to meet with one of our attorneys to discuss this, or other, family law matters.

Our office is located at 1660 Lincoln Street, Suite 1525, Denver, CO 80264