Fancy car & house.

What is a High Income or High Asset Divorce?

High asset & high income divorces have issues which attorneys and clients alike may not necessarily think about in a “normal” divorce case. And as we explain below, cases involving affluent clients differ from other cases from the very start, both in terms of how the process, how we litigate the case, the applicability of certain statutes, and even the law.

If you are high income, or have a high asset divorce, you don’t have to have a high asset divorce lawyer, but you need one – someone who knows what they’re doing, and has been there before. The stakes are too high to gamble with an attorney who is out of his element and will make some of the common mistakes in a high-asset case.

At Graham.Law we are not only family law specialists, but we have represented countless spouses in high-asset divorces, from basic millionaires to couples with marital estates worth tens of millions of dollars. We know that a high income or high asset divorce is not just like any other divorce, except you slap an extra zero or two after the number. You don’t win prestigious awards, such as Colorado Super Lawyers and U.S. News & World Report Best Law Firms in America without knowing what you’re doing.

The Process in a High Asset Divorce

The divorce procedures set forth in Colorado statutes and court rules apply equally to all cases, whether a high asset divorce or not. But how a case proceeds is different, from the very start, in a high asset divorce.

Prenuptial Agreements

Jeff Bezos High Asset DivorceJeff Bezos High Asset Divorce

Not all wealthy spouses have prenuptial agreements (Donald Trump had one every time, while Jeff Bezos did not have a prenup). However, a person with high-dollar assets is more likely to consider ways protect those assets going into a divorce. And that means having a prenuptial or a postnuptial agreement where the spouses agree on certain financial issues in case of divorce.

Marital agreements raise questions – is the prenup binding? Can a spouse challenge it? Were the disclosure and other procedural requirements imposed by law followed? (Colorado adopted the Uniform Premarital and Marital Agreements Act in 2013, but the issue in a divorce is whether the agreement was valid under the then-existing state law, where and when it was executed).

Does the prenuptial agreement address permissible issues? They can’t touch child support or child custody issues. And as long as the prenup is valid, then the property settlement it contains is legally binding, no matter how one-sided it may be. Finally, alimony is a gray area – while a prenup or postnup can address spousal maintenance, the clause is only enforceable if it is fair at the time of enforcement.

The most common prenuptial agreement provisions in a high-asset divorce provide that whatever separate property each spouse brings into the marriage remains that spouse’s property upon divorce – including increases in value, or exchanges (selling a premarital home and buying a new one).

Use of Experts in High Dollar Divorce Cases

High asset divorces are far more likely to need experts than other divorce cases. A CPA to value the family business. A commercial property appraiser. Specialized experts to appraise unique high-dollar items like boats or artwork. And in cases with a lot of moving financial parts, a financial expert is often used to prepare the marital asset spreadsheet, instead of relying upon the attorney to do so (even though I am handy with Excel and Google Sheets!).

Complex tax issues will often require a CPA with specialized tax knowledge to figure out issues such as basis vs capital gains, accumulated depreciation, carryover losses, tax-effecting retirement accounts, etc. At Graham.Law, we work with prominent financial and other experts on a regular basis, and can assist in recommending which experts may be helpful to your dissolution.

While the average middle-class person may spring for a residential real estate appraiser in a divorce, paying for a custody evaluator is sometimes out of reach, which means compromises – hiring a CFI instead of PRE. struggle to afford even one custody evaluator. While no one wants to waste money needlessly on experts, high income earning spouses can at least afford the experts necessary to protect their interests.

Finally, your attorney better have experience with dueling experts, and know how to cross-examine them. Because a wealthy spouse who disagrees with the initial expert report may well decide to hire a rebuttal expert.

Binding Arbitration

High income earners may have several reasons to want their case handled outside of court – no one likes the publicity of an open court hearing, least of all more prominent members of our community. And trying to get a full-day hearing in front a judge is not easy, much less a multi-day hearing which may be necessary to untangle the more complex issues from a high asset divorce.

Finally, while few doubt the intelligence of our district court judges, they are generalists. Their dockets include not just family law, but criminal and civil cases as well. If the spouses agree to arbitration, they can select as their arbitrator a respected family law specialist who truly understands complex family law issues. And arbitration can last for days if necessary, plenty of time to listen to the experts.

Picking Your Battles

Finally, no matter how much money a spouse has, if you are using court time, you necessarily have to pick which issues are worth fighting on. When you have just three hours to present your case where there is a marital estate of $10m, are you really doing to spend 30 minutes of that precious time trying to prove that one spouse’s $10K of careless spending constituted marital waste or dissipation? Probably not.

While $10,000 is nothing to sneeze at, you don’t spend 15% of your case fighting about one-thousandth of the money at stake. A wealthy person won’t stay that way for long wasting time, energy, and money fighting on relatively small issues.

Division of High Value Assets in a Divorce

As we explain more thoroughly in the assets section of our Colorado Family Law Guide, courts are required to divide marital assets equitably (i.e. “fairly”) in a divorce. While the division need not be mathematically equal, in most divorces judges strive for an equal division of marital assets.

Marital vs Separate Assets

Often in a high-dollar dissolution of marriage one spouse brought substantial property into the marriage, or came from a family with money and received significant gifts or inheritances during the marriage. In either situation, your lawyer must truly understand the interplay between separate and marital property.

This is one of those very times when how an asset is titled matters. In general, if a separate property asset remained separately-titled during marriage, the principal is still separate property, through the increase in value is marital Consider three hypotheticals of a spouse with a $3m premarital home at the time of marriage:

  • In one case, the spouse sold the residence during marriage, and used the proceeds as a down payment to buy a new one, which was jointly-titled. That new residence is presumptively marital property.
  • If that same spouse had kept the old house instead, then it would remain her separate property, but the increase in net equity would be marital (i.e. increase in value plus the paydown of the mortgage).
  • Finally, a more complex issue is if the spouse sold the premarital residence and used the proceeds as a down payment on a new home which was separately titled. IN that case, there would be issues of commingling – some marital funds (income during marriage) and some separate property were used, and a financial expert may well be necessary to help “de-commingle” the separate and marital property interests.

Hidden or Concealed Assets

High income earners are not any less honest than anyone else, but when a marital estate has dozens or hundreds of different accounts or other assets spread throughout the country, or even the world, it’s easier to hide something than when a couple has one house, two cars, and a few financial accounts. So it’s easier for assets to get “lost in the shuffle”, if they were deliberately, or inadvertently, omitted from a spouse’s financial disclosures. This is where an organized attorney not intimidated by high dollar values or the sheer number of assets is important.

Assets Unique to High Dollar Divorce

While a family business is not unique to the wealthy, family businesses are more common on high asset divorces. This means a business appraisal, or maybe competing appraisals. Often the appraisal will need to be a “lookback” appraisal to determine how much the business increased in value during the marriage.

Antiques, collectibles, oil interests, airplanes – we’ve seen them all. And while I don’t know how to pilot a plane or refine crude oil, I know how to find people who can help us. Family trusts present particularly unique issues – and are treated differently depending upon whether they are vested or not, revocable or not.

Note – I don’t want to sound like I’m pushing experts. While they usually are the best way to determine high dollar asset values, they are not the only way, and our firm has had high asset divorces without the need for experts. Sometimes the spouses may agree on values. Or the asset is listed for sale, so the net proceeds will be used as the value. Or the asset was only recently purchased, so the acquisition price may still be a good indicator of value. We only recommend hiring experts when it provides the best bang for the buck.

High Income Child Support & Alimony

A divorce involving high-income earners requires family law attorneys who know what they are doing both in finding income, as well as presenting a case where statutory guidelines don’t necessarily apply.

Finding that High Income

High Income DivorceHigh Income Divorce

Most middle-class incomes consist of salary, with occasionally another source or two. But highly-compensated spouses have complex income situations – salary, irregular bonuses, stock options, trust income, business or self-employed earnings, income from investments or capital gains, royalties, etc. (See our Income article in the Colorado Family Law Guide with an index to more in-depth discussions of the various types of income).

Some of that income may be untaxable. Sometimes it’s realized only on paper. Other times a spouse may have “perks” in lieu of salary which need valuing. But before we can even discuss child support or maintenance, we have to know how Colorado courts determine a spouse’s income.

Child Support in High Income Cases

The Colorado Child Support Guidelines cap out at $360K/yr of combined income, and while extrapolation above that level used to be rare, a recent Colorado Supreme Court decision gives courts more leeway to award support in excess of the guidelines.

A high-income earning family may have children expenses which are reasonable given their lifestyle, but a court would likely not order middle class parents to pay for. So wealthy clients may well end up sharing the costs of a live-in nanny, private school, or vehicles for teenagers.

Putting on a support case for such unique expenses or when child support may exceed the guidelines requires an attorney who actually knows how to put on evidence. Not to mention creativity and understanding your unique lifestyle.

High Income Alimony

Before 2014, Colorado divorce lawyers actually had to litigate maintenance cases using the traditional alimony factors, such as need, ability to pay, assets, age & health of the spouses, duration of marriage, etc.

In 2014, Colorado implemented a spousal support guidelines which, like the child support guidelines, applied to cases where the combined incomes did not exceed $360,000/yr. Since then, the guidelines have changed to lower the cap to $240,000 and to make other adjustments to reflect the fact that maintenance is no longer taxable.

The guidelines have sapped some of that legal creativity – anyone can plug the spouse’s incomes into a Colorado alimony calculator, and see how much is owing.

But slavishly applying the maintenance guidelines is a mistake. They are not legally binding, but simply one factor for the court to consider. And more important for this discussion, Colorado’s maintenance guidelines are completely inapplicable to high income spouses with a combined income over the $240K threshold, even as a persuasive data point.

A high income divorce needs an attorney who can do more than punch numbers into a calculator. Sure, behind the scenes we will see what the formula would yield, but then the experience of actually litigating maintenance cases kicks in. And even the factors don’t necessarily apply the same way with wealthy spouses.

In a low-income or middle-income family, “need” represents the funds necessary to survive. But in a high-income divorce, “need” more likely means the funds necessary to enjoy a similar lifestyle as during the marriage. And while a judge in a lower income divorce may order maintenance to share the misery/burden more evenly, in a high income case alimony may be used to help balance out the surplus each spouse has after marriage.

Award-Winning El Paso County High Asset Divorce Lawyer

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U.S. News & World Report calls Graham.Law one of the Best Law Firms in America, and our managing partner is a Colorado Super Lawyer. Our family law attorneys have years of experience helping clients navigate the Colorado legal system. We know Colorado divorce & family law inside and out, from complex multi-million dollar property or child custody cases to basic child support modifications.

For more information about our top-rated El Paso County family law firm, contact us by filling out our contact form, calling us at (719) 630-1123 to set up a free consult, or click on:

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