When you’ve got a lot of money and you’re going through a high net worth divorce, it’s easy to feel like you’ve got dollar signs flashing on your back. Everyone knows you’ve got a lot of money … which means you can afford to fight AND you’ve got a lot to fight about.
But just because you can afford to fight doesn’t mean that you want to. (… OR that you want to spend your money paying for a fight!)
The truth is, going through a high net worth divorce is different than going through a divorce with less money.
Some issues, of course, will be the same. For example, the emotional pain of divorce hurts just as much if you have $10,000,000 as it does if you only have $10,000.
But other issues are undeniably different.
Before we dive into those differences though, it will be helpful to define exactly what a high net worth divorce is.
What is a High Net Worth Divorce?
While the term “high net worth divorce” obviously refers to the amount of money you have, the question is: “How much money do you have to have to be considered ‘high net worth’”?
Years ago, that figure was around a million dollars. Today, you generally need MORE than a million dollars to be considered as someone with a “high net worth.” As a matter of fact, according to Investopedia, a “high net worth individual” is someone who has more than a million dollars in liquid assets.
Liquid assets are either cash, or investments which can easily and quickly be converted into cash. (Generally speaking, your home isn’t considered to be a liquid asset, no matter how much equity you have in it.)
While you might think that the number of divorces that fall into the category of being a “high net worth divorce” would be small, the truth is that the United States alone had 7.46 million people who qualified as being “high net worth individuals” in 2021.
So the number of high net worth divorces is probably much greater than you think.
What Makes a High Net Worth Divorce Different?
Divorce at every socio-economic level is painful. Yet, having a lot of money causes certain divorce issues to be more important to you, even though it also eliminates certain other issues.
For example, when you have a lot of money you may not have to worry about how you’re going to afford to pay attorney’s fees. You have the money to do that.
At the same time, attorneys know that you have the money to pay them. So their incentive to fight, or to “churn” unnecessary paperwork in your divorce, is substantially higher.
You have a similar problem with lifestyle issues.
Once you’re at a certain income level, you (and your spouse!) become accustomed to living a certain lifestyle. That lifestyle is generally expensive. Maintaining that lifestyle post-divorce after you’ve lost half of your assets and a big portion of your income, can be tricky.
What’s more, in addition to jeopardizing your lifestyle, a divorce can also torpedo your social status.
If you no longer have the money to participate in expensive activities, enjoy expensive restaurants, or dress in designer clothes, your status in your community is likely to suffer. Your “friends” and colleagues may no longer be interested in spending time with you.
What’s worse is that many people will see your financial fall from grace and secretly smile to themselves.
No one feels sorry for a billionaire who may end up as only being a multi-millionaire because of a divorce.
10 Unique Issues in a High Net Worth Divorce
In spite of (and often because of!) the financial resources available to those with a higher net worth, they face issues in their divorce that others might not face.
Here are 12 unique issues that people with liquid assets of over one million dollars might face in their divorce.
1. More Jurisditional Issues
Generally speaking, a divorce has to be filed in the state in which one or both spouses resides. Since most people only have one house, their state of residence is pretty clear.
Wealthier people, however, tend to have multiple houses in a variety of different areas. While there is more to what determines someone’s legal “residence” than the mere fact that they own a house in particular place, the fact that someone with money has more than one home gives them the opportunity to raise a jurisdictional argument that other people simply can’t raise.
The reason that this can be so important is that it allows people with multiple homes to engage in forum shopping.
Forum shopping refers to the practice of pursuing a case in the jurisdiction where the court will be the most likely to favor your position. Since divorce law varies from state to state (AND from country to country), the ability to choose which state (or country) you will file your divorce in can make an enormous difference in how your assets are divided and how child custody and support are handled.
Another jurisdictional challenge that comes up when a couple owns property in multiple places is the fact that assets that are located in a different state or a different country may be harder to find and harder to verify.
A California court does not have to automatically recognize a subpoena issued in Illinois. A subpoena issued in the United States may not be worth the paper it’s printed on in China.
2. More Third-Party Involvement
High net worth individuals are much more likely to be the beneficiaries of generational wealth.
All, or a significant part, of their money may come from their family. That money may be tied up in trusts that have very specific rules about when money can be withdrawn and who is entitled to receive it.
Those trusts are often drawn up with the specific purpose of guarding the family’s wealth and excluding outsiders (i.e. ex-spouses) from draining the family’s trust.
What’s more, because one spouse or the other (or both!) may be receiving money from a trust, the trustee (the person in charge of the trust) is likely to be a very important person in their life. Depending on how the trust is written, the trustee may have the ability to make financial decisions that will dramatically affect a beneficiary’s divorce.
As a practical matter, that means that the trustee is like a “silent party” in the beneficiary’s divorce. When that trustee is also a family member (typically a parent or sibling) that embroils the entire family in a divorce.
Finally, family trusts can make deciding to divorce way more difficult.
If your spouse’s primary source of income and wealth comes from a family trust or inherited funds that s/he has kept separate, then you might not be entitled to receive much in your divorce. While you can potentially get child support or spousal support, there just may not be a lot of marital assets to divide.
In that case, getting a divorce can dramatically change the amount of money you have.
3. More Complicated Assets
The more money you have, the more complicated your investments are likely to be. While that’s not universally true, the higher up the income and asset food chain that you go, the more likely it will be that you will have more to divide than just a couple of 410(k)s and a house.
a. Some of your assets may not be easy to divide
For example, if you have stock options, or restricted stock from the company you work for, you can’t just give half of those assets to your spouse. They have to stay in your name.
b. You or your spouse may own assets that are difficult to value
For example, you may own expensive artwork, wine, or intellectual property. Valuing those assets generally requires an appraisal. It also gives you one more issue to argue about in your divorce.
c. You or your spouse may have money in accounts in other countries
Not only are accounts in different countries difficult to find, but they’re also difficult to get accurate information about. If they are in a country with a different language, that makes getting and understanding information even harder. Finally, valuing and dividing assets in other countries is even more challenging because you have to get valuation experts in those countries to agree to identify what a particular asset is worth.
d. You or your spouse may own interests in investments that are not yet vested
Dividing those assets today, when you won’t even know whether they’ll vest until some time in the future, poses unique challenges. It will also keep you financially tied to your spouse for much longer than you probably want.
e. You and/or your spouse are more likely to own all or a portion of one or more businesses
Before you can divide your interest in those businesses, you’re going to have to value them. If both of you are going to maintain some ownership interest in a business post-divorce, you’ve also got to consider the dilution of voting rights that will happen if you divide your shares of the business. (In the Bezos divorce, Jeff Bezos retained the lion’s share of the couple’s Amazon stock. He also maintained the voting rights for all of that stock, including the shares which became registered in MacKenzie Scott Bezos’ name post-divorce.)
4. More Complicated Tax Issues
Along with more complicated assets come more complicated taxes.
While considering the tax implications in any divorce is important, when the amount of taxes that could potentially be due rises from a few thousand dollars, to several million dollars, the importance of those tax issues rises accordingly.
The exact nature of the tax issues involved in a high net worth divorce will obviously depend on the kinds of assets a couple owns. Because of that, it’s impossible to outline all of the potential tax issues that could arise in any high net worth divorce.
What’s important to note, however, is that there WILL be tax issues involved. Not properly identifying or understanding teh tax ramifications of a particular divorce settlement can cost tens (or hundreds!) of thousands of dollars.
Because of that, retaining a financial adviser (or a team of financial advisers!) as well as a CPA or two will be absolutely critical in a high net worth divorce.
5. Privacy is Even More Important
People love to hear stories about the rich and famous. The more salacious those stories, the more attention they’ll draw.
That’s why high net worth individuals have an even greater need for privacy in their divorce than others do. (That’s especially true if minor children are involved in the divorce.)
High net worth individuals also often need more privacy around their business affairs as well.
That’s because they are more likely to own a large business or have a majority interest in a large business. Splitting that interest can significantly (and negatively!) impact that business. Sometimes, even speculating about the impact a divorce can have on a business can cause that business’ value to erode.
For all of these reasons, when there’s a lot of money at stake, maintaining privacy is a must.
(That’s also why the majority of high net worth divorces are settled out of court – often before the public even knows that the couple is getting divorced. For example, the Bill and Melinda Gates divorce was undoubtedly in negotiations for months – if not years – before the couple announced their split.)
6. Calculating Support Can be Much More Challenging
Every state has a formula for calculating child support. In some states those formulas cap off at a certain income level. That means if you earn more than that amount, there IS NO FORMULA for calculating child support in your case.
That can be both good and bad.
Oftentimes, applying the regular child support formula to an extremely high wage earner would result in a child support payment that would far exceed the amount of money that it actually takes to raise a child. In that case, the child support recipient would be getting a windfall.
On the other hand, not having a formula at all makes coming to an agreement about child support more difficult. Without any concrete legal guidelines, the child support payor almost always wants to pay less than the child support recipient wants to receive.
The same thing is true for the payment of the children’s expenses in addition to child support.
Even in cases where the child support payor agrees to pay 100% of the children’s expenses, the divorcing parents often disagree about what the children’s reasonable expenses should be.
For example, one parent may think that the other parent should pay for private school, expensive extracurricular activities, fancy vacations, and a car. The other parent may think that their child doesn’t need (or shouldn’t be given) so many expensive things without having to work for them.
Calculating spousal support can also be trickier – although that’s not always true.
In the highest of high net worth cases, spousal support may not be an issue. Even if only one spouse has a high income, if the divorcing couple’s assets are enough to provide an income to the lower income-earning or non income-earning spouse post-divorce that allows them to live a lifestyle commensurate with their pre-divorce lifestyle, then there is arguably no need for either spouse to support the other after they divorce.
(The challenge, of course, is to convince the lower income-earning or non-income earning spouse that s/he will be able to maintain a reasonable lifestyle after the divorce even without receiving alimony.)
The more difficult situation arises when a couple has a healthy marital estate, but one that's not big enough to support the non-income-earning spouse after divorce. In that case, alimony will still be an issue.
What makes assessing alimony when one spouse is a high-income earner is that the level of income one spouse makes often makes the amount of alimony s/he will have to pay feel exorbitant.
For example, capping alimony at 40% of the parties' combined net income might seem reasonable when that income is $200,000 per year. (That would give the non-income earner $80,000 per year net of taxes.) But when one spouse earns $2,000,000 per year and the other earns zero, giving the non-income earner $800,000 per year for doing nothing can seem a lot less fair.
7. Getting the Right Lawyer is More Important Than Ever
Having the right divorce lawyer is important no matter what your financial circumstances. But when there’s a lot of money at stake, having the “right lawyer” is doubly important.
Like everyone else, you need a lawyer who specializes in divorce, and has substantial experience in using the specific divorce process that you want to use. You need a lawyer who understands you and communicates well with you. But you also need to find a lawyer who:
The bottom line is that because the financial stakes are higher for you than they are for other people, you need to find a divorce lawyer who has a different level of experience and expertise than your run-of-the-mill divorce lawyer.
8. Arbitration May Be a Better Option for You
Divorce arbitration is a dispute resolution process that uses an independent arbitrator, rather than a judge, to decide some or all of the issues in your divorce case.
Arbitration is different than mediation. In mediation, a neutral mediator facilitates a settlement conversation between you and your spouse. The mediator can help you brainstorm options and negotiate your issues. But, at the end of the mediation, if you don’t agree, you don’t agree.
An arbitrator, on the other hand, has the power to DECIDE your divorce issues for you. That means that your choice of arbitrator is extremely important.
The benefit of hiring an arbitrator in a high-asset divorce case is that you can specifically hire someone who, in addition to being a lawyer, is a CPA or has experience in higher finance. (That’s very different than being randomly assigned to a judge who may or may not completely understand the financial intricacies of your specific situation.)
Arbitration has the added benefit of being completely private. You arbitrate your case outside of the court system and the general public never has access to those proceedings.
One of the drawbacks of arbitration is that you and your spouse have to pay for the arbitrator. You don’t have to pay for a judge.
Yet, if you have enough money to make hiring an arbitrator an attractive alternative, then chances are you also have enough money to making paying that arbitrator a worthwhile investment.
9. Your Divorce is Likely to Take Longer
While having a lot of money doesn’t automatically mean that your divorce must take longer, chances are that it will.
There are several reasons that high net worth divorces tend to take longer than other divorces:
A. You have more information to gather.
Because your financial situation is likely to be more complex, you will probably have more financial information to gather.
You also may have to gather more information about your investments. That’s because your investments are more likely to be diversified and unique. Your lawyer is going to need to understand, not only WHAT investments you have, but how they work, too.
B. You have more assets that will need to be valued.
Most middle-class divorcing couples have a marital estate that consists of a house, several IRA/401(k) plans, and a couple of cars. The only one of those assets that takes any time to value is their home. Even that can be valued relatively quickly.
Valuing multiple homes, investment properties, one or more businesses, collections of artwork, jewelry and other luxury items, as well as valuing intricate or complicated investments, takes time. What’s more, if your spouse doesn’t agree with the valuations you obtain s/he will then have the right to obtain his/her own valuations of everything. All of that takes time.
C. You have more to fight about.
When you have more to fight about, you tend to fight longer. While that’s not always true, it’s true in a significant percentage of cases.
In higher-end divorces, fighting longer happens for 2 reasons: 1) you and your spouse don’t get along so – like so many other divorcing couples – you fight about everything; and 2) because your lawyers know that you have the money to pay for the fight, they are even less incentivized to get your divorce done quickly.
Finally, if you’re involved in a case that requires forensic accounting, your divorce will likely take substantially longer than an average divorce. That’s because forensic accounting takes an extraordinary amount of time in any case. When your financial picture is complex, that forensic accounting can draw your divorce out for years.
10. You Need a Bigger Team
Because your entire situation is so much more complicated than the average divorce, you will likely need a greater variety of experts to help you resolve all your issues.
Some of the experts you may need on your divorce team, in addition to a good divorce lawyer and a therapist, are:
A. Financial Professionals
Because your financial situation is more complicated, you will need to have a good financial professional by your side who understands the implications of various potential asset divisions and can help you run numbers and evaluate your financial options.
You have more assets that will likely need to be valued. Those valuations are going to need to be done by professionals in various fields, e.g. business valuators, art valuators, property appraisers etc.
C. An Estate Planning Expert
At your level of assets you’ve probably got at least one or more trusts, plus a family trust. Before you can effectively divide your assets you’ve got to take into account the way the division will affect your trusts, and the way the trusts will affect your asset division.
D. A Business or Corporate Attorney
If you own all, or a substantial portion, of one or more businesses your divorce can affect that business. The way you’ve set up your business can also affect the valuation of that business. For both of those reasons, working with a corporate or business attorney will be important in making sure that your business remains viable (and thrives!) after your divorce.
E. Real Estate Professionals
If you own multiple homes or investment properties you’re going to need to value those properties. You may also need to sell one or more of those properties. Having trusted real estate professionals as part of your divorce team will give you the peace of mind of knowing that you will have the expertise to choose what to sell and then actually sell it in a way that will maximize your profit.
F. Sophisticated Lenders/Bankers
As a high net-worth individual you probably don’t just have a lot of assets, You also have a fair amount of debt leveraging those assets. Dividing your assets sustainably in divorce means looking at both the asset and debt side of your financial equation. Having lenders who will work with you to give you the cash flow you need will be critical to making the best divorce decisions.
G. Tax Professionals
At your level of income and assets you can’t afford to disregard the tax consequences of your divorce. What’s more, not all of those tax consequences will be readily apparent at first glance. Having a qualified tax professional who can run numbers for you and calculate how much money will end up in your pocket after your divorce versus how much you will pay in taxes is critical.
H. A Coach or Other Divorce Professional Who Can Help You Become the CEO of Your Own Divorce
Because you need so many more team members in your divorce than what the average person might need, you MUST have someone who is coordinating your team. The order and timing in which you do things matters immensely. What’s more, if any one of your team members drops the ball, the length and expense of your divorce can increase dramatically. Having a good divorce coach can help ensure that all of your team members are moving in the same direction.
Putting All the Pieces Together
Just because you happen to have a lot of money, and a more complicated financial structure than other people, that doesn’t mean you’re doomed to go through an ugly, expensive divorce.
Will your divorce cost more than it would if you only had a house, two cars, and a 401(k) to divide?
But, proportionally speaking, there’s no reason your divorce has to be off-the-charts expensive.
You can still mediate your divorce. (As a matter of fact, you’re going to be much better off if you do!) You can arbitrate your divorce. You can negotiate out of court.
What matters most is that you put in the time, effort, and money it will take to properly prepare for your divorce AND to get the right team in place to help you do that.
With proper preparation, the right team, and the right attitude you can get through even a high net worth divorce with a minimal amount of drama and expense.