Navigating High Net Worth Divorce in Maryland

Even the most straightforward and amicable divorce isn’t easy for the people going through it. When there are complicating factors, as there are with most divorces, divorce becomes even more challenging. Couples going through a high net worth divorce, also called a “high asset divorce,” often face significant challenges due to the size of their marital estate.

What is a High Net Worth Divorce?

There is no specific dollar figure that defines a divorce as being “high net worth.” Some sources suggest that a high-asset divorce is one where the marital estate is valued at over a million dollars, not including the primary marital residence. Of course, some marital estates include assets in the tens of millions of dollars, or even hundreds of millions. In general, these marriages include one or many of the following:

• Large investment portfolios
• Significant retirement accounts, both employer-sponsored and otherwise
• Multiple real estate holdings, including not only a primary residence but second residences, vacation homes, rental and investment properties
• Multiple luxury vehicles
• High income, including six- or seven-figure salaries as well as income from investments, stock dividends, and other sources
• Domestic and offshore asset protection trusts
• Executive compensation, including deferred compensation and stock options
• Ownership of business interests, including closely held businesses
• Use of advanced tax planning strategies and complex financial structures
• Unique assets, such as art collections, with challenging valuation issues

The complexity and uniqueness of many of these assets, and often, their far-flung locations, can make identifying all marital assets and arriving at an accurate valuation especially challenging.

Fundamentals of Maryland Property Division in Divorce

Maryland is an “equitable distribution” state, which means that courts don’t necessarily divide property exactly equally between the couple. Instead, they divide property in a way that is fair and equitable under the circumstances—in practice, usually pretty close to equal.

But what is property, exactly? Not everything a couple owns is subject to division in divorce. Generally, only marital property is divided in a Maryland divorce, and generally, marital property consists of assets that were acquired during the marriage, with some exceptions.

For a couple to reach a property settlement, they need to agree first on what property needs to be divided, and then on what that property is worth, before attempting to divide it in a way that feels fair to them. That can be a herculean task in high net worth marriages, in which some assets are difficult to value, and there are tax implications for retaining or surrendering certain property.

If the couple cannot negotiate a settlement, their divorce will go to trial, and the court must determine what is included in the marital estate and the value of those assets. Especially when the estate includes complex assets like a business, it may be necessary to retain valuation experts to appraise the asset and testify at trial.

It’s not uncommon for couples to have “dueling experts” whose appraisal of a business or other asset can vary wildly. It is critical to work with an expert whose credentials and integrity are beyond reproach, so that their findings and testimony will be credible and carry weight at trial. An experienced family law litigator with experience in these complex cases will have access to the most respected experts.

Other Common Issues in a High Net Worth Divorce

High net worth complicates multiple aspects of a Maryland divorce—not only equitable distribution, but alimony and child support. Child support in Maryland is determined by child support guidelines; however, when the parents’ combined gross income exceeds $30,000 per month, the court has discretion to set a support amount based on the children’s needs—about which parents often vehemently disagree.

For alimony (also referred to as spousal support or spousal maintenance), there is no guideline formula, but one of the considerations is the standard of living established during the marriage. Especially where there is a significant disparity between the income levels of the spouses, the process of arriving at an appropriate payment amount and duration can be contentious.

Often, individuals who have a high net worth (or a large income disparity) when entering into a marriage sign a prenuptial agreement before getting married, or a postnup afterward. These agreements may provide clarity about what property is and is not subject to division in divorce, and other important financial issues. When one spouse tries to enforce the prenuptial agreement against the other, the second spouse may claim that they were coerced into signing it or that the agreement is otherwise unfair. If the agreement was poorly drafted, there may also be questions about its interpretation.

Hidden assets and income can also be an issue in a high-asset divorce. Of course, someone doesn’t need to be wealthy in order to try to conceal assets and income from a spouse when they don’t want to share fairly. But in high net worth divorces, spouses may have not only more incentive, but more options, for squirreling away property and funds. If you suspect your spouse is hiding assets, you need to work with an experienced divorce litigator and a forensic accountant who can trace assets.

Protecting Your Financial Interests in Divorce

The single best way to protect yourself financially in a high net worth divorce is to work with an experienced family law attorney who can assemble and head up a team of experts to address the financial issues in your divorce. To learn more, or to schedule a consultation, contact Strickler, Platnick & Hatfield today.