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An Overview of High Net Worth Divorce

The simplest definition of a “high net worth divorce” involves a client who has at least $5 million in liquid assets—but that is far from a complete definition.  It’s not just a grand total: net worth divorces involve a host of financial and legal considerations that cover a wide range of potential hurdles. 

At Hance Law Group, we list high net worth divorces as one of our specialties, as we regularly work with and effectively represent husbands and wives in complex cases. Past, and current, clients have had assets to be analyzed and divided in the hundreds of millions to a billion dollars, along with one or more of the following criteria: 

  • Being an owner or co-owner of a closely-held business;
  • Being an owner or co-owner of a family business;
  • Being a benefactor of, or an heir to, a family trust or inheritance;
  • Being the owner of the property (or other assets) prior to marriage (called Separate Property in Texas).

Step one is working with a high net worth client involves meeting with both client and a financial professional to scrutinize and internalize the complete financial picture.  We begin with which assets are indisputably community property and which may be considered separate; this process allows us to determine which assets are subject to division in the divorce, and which would be segregated as separate property. Ideally, this process occurs before a client initiates the divorce, allowing us to establish the best strategy to provide the client’s assets maximum protection. 

Unless it is simply not appropriate for whatever reason—which may include major mental health issues, active addiction issues, or family violence—I encourage the client and his or her spouse in this situation to enter into a collaborative divorce agreement.

Collaborative divorce offers at least two specific, tangible advantages to litigation that benefit high net worth clients—namely, flexibility and creativity in negotiating a financial settlement, and the ability to undergo negotiations completely privately. If a client can negotiate terms of the divorce and settle out of court, this is highly preferable to an outcome left to the judge – especially when your divorce is in a court where the outcome is difficult to determine because of the character of the Judge.  

If, however, a client is not able to enter into a collaborative divorce, there are still actionable steps to protect privacy. First, court filings should be made either anonymously or confidentially (there are a number of methods to accomplish this); otherwise, the details of a divorce could be exposed to business competitors, nosy neighbors, identity thieves, or anyone else.  

If litigation appears unavoidable, an essential component for the attorney becomes detailed case preparation as well as strategies for the most persuasive presentation of the client and his or her position.  It is important that the judge understand the nuances, and that all helpful information is presented very clearly and persuasively.

Obviously, all divorces deserve diligent, competent representation from attorneys, but in cases involving high net worth clients – where the degree of difficulty often soars – a more specific and evolved level of competence is required.

(In my next blog, I will cover specific mistakes that clients – especially high net worth clients – should avoid when starting divorce proceedings.)