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The Implications of a High Net Worth Divorce

April 3, 2024

When high net worth couples divorce, they are subject to the same laws that apply to any other couple. However, the nature of their income and assets can add complexity to the case. Diverse compensation structures and difficult-to-value assets require special consideration in deciding how to divide property and calculate support. 

Connecticut Divorce Law 

In Connecticut, all property owned by you and your spouse is subject to equitable distribution in divorce. Courts take several statutory factors into account in determining what is fair or equitable, including the length of the marriage; the causes of dissolution; the ages, health, and occupation of the parties; amount and sources of their income; the employability, liabilities, and needs of the parties; how a particular asset was acquired and each party’s contribution to the assets and other factors. 

Courts utilize a similar, but not identical list of statutory factors in deciding whether to award alimony, how much to award, and for how long it should last. 

High Net Worth Considerations 

Being well-off financially implicates both alimony and equitable distribution. However, the degree to which your net worth affects what support and property you and your spouse receive depends on how wealthy you are and the source of that wealth. 

The Impact on Alimony 

Generally, the higher the net worth of the couple, the less likely it is that a spouse will get alimony. The reasoning is that each side will typically get substantial assets and would not necessarily require alimony in addition to that amount. However, there is no definition of high net worth for alimony purposes. It can mean $15 million, $50 million, $100 million, or even billions.

There is a substantial difference between $15 million and $100 million and nothing in Connecticut law precludes awarding alimony where the couple has a certain amount in assets. 

In every case, the statutory factors will be weighed in determining spousal support. 

Calculating support can also be more complicated for high net worth individuals because they often have difficult-to-value compensation structures, including stock options or restricted stock units, carried interest, and perquisites. These may need to be analyzed by a forensic accountant to determine a spouse’s income for purposes of determining alimony and child support. 

The Impact on Equitable Distribution 

Liquid assets such as bank and brokerage accounts are easy to value and divide in divorce regardless of the amount. However, non-liquid and certain types of assets can be more difficult. For instance, stock options or restricted stock, hedge funds, private equity, alternative investments, closely-held business interests, retirement benefits, artwork, or antiques may require valuation experts. 

Important considerations with these types of assets also include determining if, as, and when a party is entitled to the asset. For example, the right to stock options may not have vested at the time of the divorce but may still be subject to equitable distribution. 

In some cases, it may not be possible to monetize or liquidate an asset at the time of the divorce. As a result, the parties may need to swap another asset for the one that cannot be sold to compensate the non-owner spouse for their half of the asset. For instance, a spouse who owns a family business may give the non-owner spouse other property to make up for not selling the business and giving the non-owner his or her share. 

Finally, high net worth divorce cases also may have tax implications to consider. While a transfer of assets between spouses will not be taxed, certain assets may generate more taxes than others when they are sold. This may leave one spouse with less valuable property than the other. 

Evaluating Your Circumstances 

Being wealthy doesn’t necessarily mean that your divorce will take longer to litigate or settle. However, it is critical to consult an attorney experienced in dealing with these issues who understands what information must be gathered and analyzed to effectively represent you and help achieve a fair result in your divorce. 

If you are considering divorce, contact us for a consultation today.

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