High Net Worth Divorce
A high net worth divorce is one in which the family’s income, net worth, or asset structure adds complexity to their dissolution of marriage. Fortunately, the attorneys at Stern Mendez have extensive experience in high net worth divorce and can expertly support you in navigating the process.
Any divorce in which the size of the marital estate or a party’s income adds complexity to the divorce process may be best handled by an attorney focused on high net worth divorce. Tax issues relating to a family’s income or assets, as well as the source or sources of money, often complicate the division of assets, maintenance and child support.
Our divorce and family law attorneys at Stern Mendez have expertise navigating tax shelters and determining how to best manage family gifts, high income and complicated compensation structures. We handle these delicate cases ethically and confidentially, while ensuring your income and assets are protected.
Our experience with high net worth divorce has proven that mediation leads to more favorable outcomes than litigation. With substantial amounts of money and complexity, mediation allows divorcing couples to better focus on the specifics of their case. However, whether your divorce leads to mediation, collaborative law or litigation, we will represent you zealously and help you find the best resolution for you.
What Constitutes a High Net Worth Divorce?
Many factors contribute to classifying a divorce as high net worth, but these are common situations that add complexity and necessitate an attorney familiar with the nuances of high net worth divorce:
- You receive income from a K1, 1099 from trading and sale of securities, stock options, or unusual incentive bonuses from your company.
- You have both a high and highly variable income.
- You receive substantial income from a trust or family business.
- Much of your income is tied up in complex investments, including closely held private businesses.
- Your spouse’s family owns a large business. In order to marry into the family, you have to sign a pre-nuptial agreement to protect their trust.
How Do High Income and Tax Shelters Affect My Divorce?
Tax shelters are commonly used by households with substantial income to offset their higher marginal tax rate. Tax shelters can take many forms, although private LLCs and real estate depreciation are perhaps most common.
When a high-income couple divorces, it is possible that one spouse may continue to have a substantially greater income than the other. As such, the assignment of privately held LLCs and other tax-assisting assets will play a role in the final settlement above and beyond their fair market value. This can, in turn, benefit the spouse who is likely to receive maintenance (alimony) if it permits the other spouse to have a greater net income.
If your income is significantly higher than your spouse’s, our divorce attorneys at Stern Mendez have experience setting up tax shelters and private LLCs—and can assist you in protecting your income during divorce.
What Happens to My Trust and Family Gifts During Divorce?
High net worth divorces frequently involve family wealth. Depending on how your spouse receives gifts from his or her family, said gifts may be included in a spouse’s income. During the dissolution of marriage, the source of wealth often complicates the division of assets.
In many cases, individuals with substantial family wealth will create a prenuptial agreement before marriage, often at the discretion of their family lawyer. The prenuptial agreement will hold ultimate authority and act as a protective measure to ensure that any trust and family gifts are retained in divorce.
If you have significant family wealth and did not sign a prenuptial agreement, our divorce attorneys can work with you to determine how to navigate division of assets, maintenance and child support in a fair and ethical way.
How Are Maintenance and Child Support Payments Determined in High Net Worth Divorce?
In nearly every marriage, there is an income discrepancy between spouses—and sometimes, it can be a substantial difference. Maintenance and child support exist to ensure that the lower earning spouse can continue living a similar lifestyle to that during the marriage, and that the child or children have everything they need at both households.
Maintenance and child support are determined using a formula dictated by Illinois statutes. However, the formula only applies to couples with a combined income of $500k or less. There are no specific legal guidelines for spouses with a combined income exceeding this cap—leaving maintenance and child support to the discretion of a judge, the attorneys or the divorcing couple depending on how the marriage is being dissolved.
For couples who make less than $500k combined per year, maintenance will be awarded as 33% of the higher earning spouse’s income minus 25% of the recipient’s gross income. (See our Maintenance Calculator.) This formula does not always make sense—nor is it legally required—for spouses grossing more than $500k.
If you and your spouse are earning $500k or more per year, it’s critical to hire a divorce attorney who understands the discretion and judgment required above this income level—as well as the intricacies of Illinois statues. For high-earning couples, their income is frequently complicated by an income that flexes with compensation, sales, family wealth and money tied up in investments.
To determine ethical maintenance and child support in these cases, our attorneys at Stern Mendez can work with you to develop a structure that ensures you give or receive a fair amount of money in your divorce. This may mean a monthly payment schedule or a lump sum, depending on the specifics of your divorce and income.
Contact Our High Net Worth Divorce Law Firm in Evanston, Chicago, Lake Forest and Oak Brook
If you have further questions about high net worth divorce or wish to discuss your case, please contact Stern Mendez for a a free consultation online or call us at (847) 868-9584. We will happily meet with you at our offices in Evanston, Chicago, Lake Forest and Oak Brook or at another location.
Other FAQs About High Net Worth Divorce
How are complex assets like business interests and stock options divided?
A privately held business is typically valued by an independent appraiser before it can be divided. Rather than splitting the business itself, courts often award it to one spouse. The other spouse is then offset with other marital assets of similar value.
Stock options, RSUs, and other executive compensation are handled differently, based on when they were granted and when they vested. Because these assets can be hard to value or even locate, a forensic accountant is often part of the process. We work closely with valuation and forensic experts to make sure your share is calculated accurately, which is one reason property division in these cases takes more time than a standard divorce.
Is marital property always split 50/50 in Illinois?
No. Illinois follows “equitable distribution,” which means marital property is divided fairly, not automatically in half. Courts consider factors like each spouse’s income, contributions to the marriage, and the length of the marriage. Property you owned before the marriage, or received as a gift or inheritance, is often considered separate rather than marital. Our post on premarital assets in a high-net-worth divorce looks at how that separate property is identified and protected.
How are family trusts and inherited wealth treated in a divorce?
Whether a trust counts as marital property depends on the type of trust and when it was funded. A trust created and funded before the marriage is more likely to stay separate property. One funded during the marriage with marital income is more likely to be treated as shared. Mixing separate funds with marital funds over time, sometimes called transmutation, can also change how an asset is classified. Our post on the transmutation of assets explains this in more detail, and if a trust is involved in your case, it’s worth reviewing early with an attorney.
How is income calculated for support when it comes from a business, bonuses, or commissions?
When income is steady, calculating maintenance and child support is fairly simple. Business owners, commissioned salespeople, and executives with bonus-heavy pay often see their income shift significantly from year to year. Courts typically look at several years of income history to establish a fair average. Our post on variable-income families breaks down how this calculation works in practice.
What happens if my spouse is hiding assets or income?
If you suspect your spouse isn’t fully disclosing income or assets, your attorney can use formal discovery tools to require it. These can include subpoenas, depositions, and requests for financial records going back several years. Courts can also sanction a spouse who fails to comply with these requests. When a spouse won’t cooperate, divorce litigation is sometimes the only way to compel full disclosure.
