While no divorcing spouse enjoys the prospect of paying support and dividing property, high net worth individuals are hit especially hard when it comes divorce judgments. Granted, a billionaire may not deserve a whole lot of sympathy, but most high net worth individuals make well under a million dollars. Furthermore, a person's net worth is not necessarily indicative of his or her available funds. To clarify, “net worth” is simply the estimated value of all your assets minus your liabilities. These assets include “liquid assets” such as cash, CDs, stock and bonds, which are properties that can be easily converted to cash without incurring substantial penalties.
This is an important distinction for individuals whose net worth consists largely of non-liquid assets. Businesses and commercial real estate, for example, are non-liquid assets because selling them for at or above their current value could take considerable time depending on market conditions. It may also result in significant tax liabilities that would be unfair to the spouse who is ordered to pay support. Thus, it's not surprising that a good deal of time in high net worth divorces is spent on the valuation of assets. Determining accurate, as well as fair valuations, often require extensive calculations by divorce attorneys, tax experts and forensic accountants.
If this seems like overkill, consider the position of a spouse who is being asked to pay alimony based on a net worth of $5 million. If his net worth is largely based off the value of a business, then it's not as if he has the $5 million in readily available funds. If his wife is awarded a settlement of $2 million, he would need to sell his other assets in order to pay her a lump sum, or negotiate a plan to pay her in installments. Although an installment plan sounds sensible, it could be a struggle to come up with that amount on the months that the business doesn't do so well.
Considerations like these are the reason why many attorneys fight for multi-dimensional valuations that go beyond an individual's net worth. Failing to do so could result in the paying spouse facing financial hardship, perhaps even filing for bankruptcy. Such an outcome would hurt the receiving spouse as well, since the paying spouse will most likely file for an alimony reduction. Even if the request is denied, the back and forth court wrangling would be costly and time consuming for both parties.
No matter how much you're worth, it's essential to work through your divorce with an experienced divorce attorney. Many individuals own complex assets such as retirement accounts, co-owned businesses and real estate holdings. In addition to accurate valuations, an attorney can help you decide what's worth fighting for, and what may be better to concede depending on your current situation, and your long-term needs and goals. For legal advice that addresses your own unique situation, please schedule a free consultation with the attorneys of Villani & DeLuca, P.C.