During a high net worth divorce in the Charlotte region, you may be faced with the possibility of liquidating significant assets. Equitable distribution in North Carolina is not always a straightforward process, and sometimes it is not as simple as trading assets back and forth between spouses. In some instances, one or both spouses might believe that it is best to liquidate certain assets so that the funds can be easily accessed and split. However, this is by no means a simple process, and many issues may be raised as a result.
If you are faced with a scenario like this, it is best to work with an experienced, qualified divorce attorney. You should search specifically for a divorce attorney who is experienced with high net worth divorces. When liquidating high-value assets, there may be many additional considerations that less experienced divorce attorneys may not be aware of. In addition, an attorney with experience in high net worth divorces can guide you through your separation.
Spouses Often Liquidate Assets Due to DisputesIn many situations, assets are liquidated when spouses cannot come to an agreement on how the property should be divided. Spouses with high net worths often negotiate and mediate before any legal proceedings take place. These spouses may both want access to one particular asset, such as a house in Charlotte. If neither party is willing to back down, one of the few remaining solutions is to liquidate the property and split the funds in line with an equitable distribution.
Liquidating Assets Frees You from ResponsibilityOne of the key benefits of liquidating assets is that it frees you from responsibility or potential long term negative consequences. Some properties require significant oversight, upkeep, taxes, and fees that can last for many years. By simply liquidating the asset outright, you can avoid these expenses and responsibilities. Sometimes, it is preferable to simply move on with your life - especially if you would need to continue interacting with your former spouse in order to manage the asset properly.
Do Not Liquidate Assets Without PermissionYou should never liquidate assets without consulting an attorney first. Some spouses may assume that they have free reign to sell off various pieces of property as soon as the separation begins. Even if you intend to split the proceeds with your former spouse, this is probably not the right move. When you go through a divorce, your every financial move is carefully scrutinized. The divorce court must oversee these types of transactions in order to ensure each spouse receives a fair amount in line with an equitable distribution.
Liquidating Assets Can Cause Significant Tax IssuesOccasionally, liquidating an asset comes with potential negative consequences. One of the biggest issues that surrounds liquidating assets is the potential tax consequences. This is particularly true in the case of a high net worth divorce, as you may be dealing with very high-value assets. As soon as you liquidate one of these assets, you will trigger a taxable event. If you do not have the necessary funds to cover these tax bills, this can cause a serious headache.
For example, you might want to liquidate a real estate property that classifies as marital property. If you do this and take 50% of the resulting funds, you could face a massive tax bill. If you and your spouse have a multi-million-dollar home, this taxable event could trigger unwanted expenses that may cripple you financially. There are many instances of spouses who have faced significant financial consequences because of these taxable events, such as defaulting on their mortgage (or failing to get approved for a mortgage when buying a new house).
Should You Liquidate Your Assets?When considering whether to liquidate assets, you should always consider the potential future value of the property. Weigh these potential gains with the benefits of freeing yourself from the responsibility of keeping the property. How important is it for you to “move on” and sever any joint financial ties with your spouse?
Many financial experts believe that liquidating assets should always be a last resort, mostly due to the potential tax consequences. In contrast, spouses who “trade” or transfer assets back and forth can avoid these tax consequences. In the end, the right decision depends on your unique goals, priorities, and needs.
Enlist Help from a Qualified Divorce Attorney in North CarolinaIf you have been searching Mecklenburg or surrounding counties for an attorney who handles high net worth divorces, look no further than Arnold & Smith, PLLC. We have helped countless spouses approach their high net worth divorces in an efficient, and dignified manner. We understand the importance of maintaining your assets during this difficult time, and we can employ a number of different strategies to help you in this regard. Contact us today to scheduled a consultation.