Getting divorced as a high-net-worth individual involves unique considerations in New Jersey. While the same basic principles apply to all divorces, the more you own, the more you have at stake, and the more careful you must be to protect your financial interests during the divorce process.
So, if you own substantial assets, what do you need to know before you get divorced? Here is an overview of seven important planning considerations:
1. Identifying Your “Separate” and “Marital” Assets
Under New Jersey law, only “marital” assets are subject to division in a divorce. Any assets that qualify as your “separate” property are yours to keep (the same, of course, applies to your spouse’s separate property as well).
In New Jersey, any assets acquired during a couple’s marriage are presumptively marital property. However, there are exceptions to the general rule, and assets acquired during a marriage can qualify as separate property under various circumstances. Likewise, while assets acquired before the date of marriage will usually qualify as separate property, there are circumstances in which separate assets can transform into marital assets that are subject to distribution during the divorce process.
As you begin preparing for your divorce, it will be helpful to identify the assets that you owned before the date of your marriage. Make a list, and make copies of any pertinent records (i.e., deeds, titles, business filings or account statements). You will ultimately need to rely on your attorney to determine which assets are on the table in your divorce, but your attorney will look to you to provide information about the assets that require evaluation.
2. Obtaining an Appropriate Valuation of Your Marital Assets
When going through a high-net-worth divorce, it will often be necessary to obtain valuations of individual high-value assets. This in itself can be a time-consuming and potentially contentious process, as each spouse will have competing reasons for seeking a higher or lower valuation. If you have recent purchase records, or if you obtained recent valuations for insurance purposes or other reasons, you will want to compile these to provide to your attorney as well.
3. Understanding What New Jersey’s “Equitable Distribution” Rule Means for Your Divorce
Under New Jersey law, all marital assets are subject to “equitable distribution” during the divorce process. The one major exception is for cases in which the spouses entered into a prenuptial or postnuptial agreement.
Importantly, equitable does not necessarily mean equal. Instead, it is necessary to consider all pertinent factors to arrive at a fair resolution based on the circumstances of the spouses’ divorce. An equal distribution will be equitable in many cases, but you should not automatically assume that you and your spouse will be dividing your marital assets down the middle.
Section 2A:24-23.1 of the New Jersey Revised Statutes establishes a list of 15 factors that must be considered when determining what is equitable within the context of a particular divorce. As you begin your preparations, you will want to review these factors and start thinking about how they might work to your (or your spouse’s) advantage.
4. Dealing with Secured and Unsecured Debts During Your Divorce
In addition to dividing your marital assets, going through a divorce also triggers a requirement to divide your marital debts. This applies to both secured and unsecured debts. For spouses who have the means to do so, it may make sense to pay off certain debts during the divorce process—although deciding to pay off debts is a decision that should be made in consultation with both your divorce attorney and your financial advisor.
For any debts that will not be paid off, it will be necessary to determine how they will be distributed. With regard to secured debts, divorcing spouses will frequently choose for liability to go with the underlying asset. For example, if a spouse will keep a particular house or vehicle, then that spouse will assume sole responsibility for the mortgage or car loan. However, there are other options available, and, again, you will want to make an informed decision based on your advisors’ insights.
5. Considering the Tax Implications of Potential Distributions
As a general rule, distributing marital assets during a divorce is not a taxable event. However, if you will be disposing of assets as part of the process – as many high-net-worth spouses choose to do – you will need to consider the relevant tax implications. For example, if you sell securities to pay off a mortgage or other debt, then the sale will trigger reportable gain or loss. As you begin weighing your options, you will want to keep this in mind, and it will be important for you to work with a New Jersey divorce attorney who is knowledgeable about these types of tax issues.
6. Jointly Addressing Property Division and Alimony
By their nature, many high-net-worth divorces involve alimony in addition to the division of marital property. While these are separate, stand-alone issues, it will often make sense to address them in tandem. Are you (or is your spouse) willing to accept less in alimony in exchange for receiving a larger share of your marital estate? If so, you may be able to negotiate an overall divorce settlement that is better suited to your circumstances and minimizes any potential tax liability.
7. Prioritizing What Matters Most To You
Finally, it is important to begin getting your priorities in line when thinking about property distribution and alimony. Do you want to protect certain assets with sentimental value? Are you focused solely on securing the largest portion of your marital estate possible? Whatever the case may be, if you plot your priorities in advance, then you can work with your attorney to devise a strategy that is focused specifically on achieving your personal goals.
Schedule a Confidential Consultation with a New Jersey Divorce Lawyer at Helmer, Conley & Kasselman, P.A.
If you would like more information about planning for a high-net-worth divorce in New Jersey, we encourage you to get in touch. To schedule an appointment with one of our experienced New Jersey divorce lawyers, please call 877-435-6371 or inquire online today.