Unique Considerations for High-Net-Worth Property Division

Judging by the statistics alone, it is fair to say that high-net-worth families are inherently rare. According to Statista, there are 7.4 million high-net-worth individuals across North America. Statista defines high-net-worth individuals as having assets worth over $1 million. You might say that this definition is fairly generous, as $1 million is not quite as impressive as it once was due to rampant inflation. Even with this generous definition, these high-net-worth individuals only make up about 2% of the US population.

However, it is easier to fall within the top 1% in North Carolina than in many other states. To reach the 1% in North Carolina, you “only” need about $2.4 million – roughly half of what it takes to reach the same upper echelon in New York. It is clear that high-net-worth individuals are a rare breed – and so it should not come as a surprise that they encounter unique issues when approaching divorce.

One of the most overlooked considerations for high-net-worth families is the increasing popularity of fixed-income investments. Treasury bills, corporate bonds, GICs, and even a simple high-interest bank account can generate excellent yields in the current economic environment. This is especially true when you consider the ability of high-net-worth individuals to invest large sums.

For example, a $30,000 fixed income investment that yields 5% per year only provides $1,500 per year. On the other hand, high-net-worth families can receive $150,000 per year with a $3 million investment instead. Compared with securities, there is lower risk associated with fixed income, especially with options like treasury bills.

However, these fixed income investments often require spouses to tie up their funds over a long period of time. If a divorce occurs in the middle of this period, there may be serious questions over how to divide the asset. Assuming that it represents marital property, spouses may suffer financial penalties for early withdrawals of funds.

In many cases, the real net worth of an individual can be surprisingly difficult to ascertain. This may be due to a web of corporate ownership schemes, hidden assets, and even more creative strategies. Recently, a multi-millionaire soccer player shocked the world when it was revealed that he technically owned almost nothing. All of his paychecks went directly to his mother, and she essentially served as a bank for this individual. When the wife of this soccer player divorced him, she found it incredibly difficult to access any of the marital wealth. This is just one example of a potential strategy, and many high-net-worth individuals are extremely creative in their efforts to reduce or even eliminate any public records of their wealth.

In addition, the assets themselves can also be difficult to value. For example, an art collection may have a highly subjective value. What might seem like a few lumps of metal could actually be a priceless statue built by a world-famous artist. Taking the time to properly value these complex assets is very important for spouses. There are many other examples of assets that may be difficult to value. Sometimes, appraisers can help spouses determine these values.

Discovery is the pre-trial phase of a divorce that involves the gathering of information. In the case of a high-net-worth divorce, much of this information will revolve around financial documents. If spouses have a high number of high-net-worth assets, the logical outcome is a high number of accompanying financial documents. This can make the discovery process tedious and extremely time-consuming.

Finally, many high-net-worth spouses wish to keep their true wealth confidential. Divorce may reveal these details to the general public, and so many spouses choose more private options such as collaborative divorce.

If you have been searching for a divorce attorney in North Carolina, look no further than Arnold & Smith, PLLC. Over the years, we have assisted numerous high-net-worth spouses and families as they approach divorce. We are well aware of the unique issues that these families tend to face as they end their marriages. Book a consultation today to discuss your specific situation and determine the most appropriate course of legal action.