Divorce… High Marital Estate, High Assets

WTDW Podcast | Episode 34: What To Do When… You Are Divorcing with a High Marital Estate.

What To Do When Legal Chat Podcast... As Seen on the News from Critzer Cardani PC

WTDW Podcast | Episode 34: What To Do When… You Are Divorcing with a High Marital Estate.

What To Do When… Intro 00:01
Welcome to What To Do When… A podcast from real lawyers with real perspective, where we explore a variety of legal issues and scenarios. Each week we focus on a new topic and discuss what to do when and if any of these legal scenarios ever happened to you or a loved one. With over 40 years of combined legal experience, our hosts offer their unique perspectives and insights on a range of real life legal situations.

Jackie Critzer 0:29
Hi, and welcome back to another podcast with Critzer Cardani. I’m Jackie. I’m Scott. And we’re here today coming at you from Critzer Cardani In Richmond, Virginia.

Scott Cardani 0:33

Hey, Jackie, what’s on the docket for today?

Jackie Critzer 0:41
Today, we’re going to talk about what to do when you are divorcing with a high asset marital estate.

Scott Cardani 0:48
Well, that’s interesting, Jackie, what’s it what what do we consider a high asset divorce?

Jackie Critzer 0:54
So I mean, I think it’s sort of relative. But but generally speaking, I think the legal community considers a high asset divorce north of or in excess of a million dollars. I would caution you into thinking that only because it’s really not just a net worth of a million dollars, because you can have human land rich and cash poor. So if it’s not liquid, it really does change the dynamic of what the marital estate value really is. What you’re really looking at is the liquid nature of a million or more. So if it’s all liquid investment accounts and bank accounts and those types of liquidity, then we’re talking about maybe north of a million dollars. But if it’s mostly, you know, the ranch that’s worth 750,000, and the marital residence worth 400,000. I’m not sure I’d consider that necessarily a high net worth or high asset divorce.

Scott Cardani 1:48
And usually, when you get into high net worth divorces, or high asset divorces, you’re talking like huge stock market portfolios, retirements, maybe multiple businesses, all kinds of things, rental properties, you know, vacation properties, things like that. That you’ve accumulated over life. And you got to this unfortunate point where you have, you’re separating, and that becomes a big deal. There’s a lot of factors to consider.

Jackie Critzer 2:15
And specifically what we want to really address is why we would handle or the process for high net worth or high asset divorce is or should be different, then something a divorce or marital estate that has just lesser value. And part of that is because of the level of conflict that can be included. Right? You take a look at some of these really big divorces the Bill Gates of the world, they they didn’t go through years of litigation and spend hundreds of 1000s or even millions of dollars in litigation. And that wasn’t by accident, right? They had good advice. They knew what to expect going into the process. And maybe Melinda Gates didn’t have her hand in the middle of all of Bill Gates business dealings, where maybe most of the money was grown out of. There was an understanding that it’s just part of the marital estate, and I’m not familiar with the California Rules and divorce law and equitable distribution, and what that looks like in California. But here, whatever they accumulated together, if Bill and Melinda Gates lived here would have been married a part of the marital estate, and there’s really, it’s possible, like we’ve talked about before to get an unequal division, but that’s where you start, you start with the 50/50. Yeah.

Scott Cardani 3:34
And you know, you have to look at two, you know, if somebody’s got an inheritance or things like that, you know, sometimes somebody gets a $20 million inheritance. And unfortunately, that’s usually not part of the marital estate without some other things happening. So some people think, well, we have $20 million to divide and really, you have a house a couple cars and something else because that and what happens, you know, what we want to things we wanted to talk about is what happens. Sometimes is you know, there’s this thing you need an aggressive attorney, we hear it all the time, this aggressive attorney and you know, it’s not really about being aggressive. It’s really about being strategic and not fearing having to take stands when you have to take stands and but really, sometimes you can be aggressive and just run up a bill that really in the end did nothing to take the case from A to B it just cost your client a lot of money.

Jackie Critzer 4:28
Consider this that okay, you you go for it the Bulldog, the pit bull attorney, I There are times when you need that person when you know, your spouse is going to be a nightmare to deal with for no reason other than just being a nightmare. Those and there are attorneys and we’re capable of that sort of thing, but there are communities in every community, I assure you who have those reputations. However, if you’re looking for that kind of attorney and a high asset divorce, you’re likely going to get someone who just wants to bill…. bill, because what happens is they notice and see, I would argue it’s unethical that it happens. They see this steady stream of income for as long as you will pay them to be the nasty, aggressive Pitbull Bulldog attorney, because you have the assets to pay them. None of us want to work for free. And certainly when we see someone, you know, who’s who’s capable of paying us there can be an inclination, not saying we do not have that practice in this firm. But there can be an inclination on the part of any professional not just an attorney, right? To just sort of milk that out a little bit. So choosing an aggressive attorney isn’t always the best case and a high asset divorce.

Scott Cardani 5:39
Yeah, and remember, really be careful with the word aggressive, because it doesn’t really mean anything. In really legal terms, you know, you can, like Jackie said, you can have the most aggressive attorney in the world and end up in a worse position than you were at the beginning. And after that so many times where I had a super aggressive attorney on the other side. And in the end, our offer at the beginning, we got better than what we offered to settle the case at the beginning because of the actions that went through it. And I’m like, Well, what are they doing? Okay, if they want to do that, I’m just gonna let them do it. I didn’t fight back because they were winning my case. Sure. So you have to be as an attorney, you have to see the big picture, you have to see where, how can I get my client divorced, and get him the most that he’s supposed to have? And the most that should be given to him in a way that, you know, fair and equitable. But also, sometimes, you know, you have to dig deep. And sometimes you have to be super aggressive to get some of those things, and that’s easy for us to do is no big deal. What we’re trying to say is, you really have to look at it, you really have to see what you’re getting. So like a counselor, you can go to a counselor. And there are some counselors who every week they see you and see you and see you and you don’t really get anywhere. And there’s some counselors that say, Hey, we’re gonna get here, we’re going to take care of this, and we’re gonna get to be and all of a sudden, you’re feeling better. And so you want an attorney who’s going to get you to the end of this road, not just drive around in circles.

Jackie Critzer 7:04
Well on this road, right is going to include an a high net worth high asset divorce is going to include tax consequences. And unless your attorney is a tax attorney, which they’re probably not in family law and tax law, okay, they can’t really give you that advice. In fact, most of our agreements, you know, that we send around and property settlement agreements specifically say that the attorneys are not tax advisers, because most of us are not in the family law. We’re not tax advisor. So importantly, you need to team up with an attorney who is either financially savvy. And also it shouldn’t be in or okay, it should be in and also familiar with some certified public accountants or some finance in front of investment, people who can help you navigate through what the tax consequences are going to be whether there are traditional or Roth IRAs and how those tax consequences may balance out differently, depending on how those things are split, I understand that there is a in the marital residence, there is a tax threshold for capital gains. I think maybe now it’s at $500,000. Don’t quote me on that, again, I’m not a tax professional. But if you are selling the marital residence for a million dollars, and you stand to make over $500,000, of $500,000 threshold, and you’re going to be paying capital gains taxes on the excess, and that is going to make a difference at the end of the day. So you need one of the things you need to do find an attorney. That makes sense, right? Not necessarily the most aggressive, most obnoxious attorney, but also one that can help guide you and team you with the right financial professionals and accountants to help you figure out what the real best division is going to be.

Scott Cardani 8:47
Yes. And that you know, especially in all these things, there’s bases of what the thing was good with like a say a vacation home and what you paid for it and how much is there and what that tax base is going to do to your your financial situation, you may I want that vacation house, no matter what, that’s my house. And it may be the worst decision you ever made. If you don’t get the right team around you and look at the long term implications of you getting that house and how that’s going to affect your bottom line. So here at Critzer Cardani, one of the things we want to do if you’re coming in here is we’re gonna get you the help you need to get the best decision you can get. And sometimes maybe on paper, it may look like you’re giving up something that somebody else may think you can’t give up anything you gotta get half 50% everything. Well, sometimes it works out to even be better. So lastly, here we want to do some don’ts and do’s and some important things that you need to know about if you are a person with a high net worth and you’re in this situation, unfortunately getting divorced.

Jackie Critzer 9:45
So do an inventory. We’ve said this even in a in a divorce not considered high asset right you need an inventory. Maybe you are the spouse who are the non investing spouse, or the stay at home spouse who focus more on running the family household, which is a very serious and very important role. But that doesn’t necessarily mean you had your hands in the finances and know where the money is or where it went or how it got there. And so you need to be able to do an inventory. And on the flip side of that, it is critical that you not hide assets or debts, whether you’re the earning spouse, or the non earning spouse, or maybe you’re both earning spouses and maybe I want to hide this, I don’t want them to know about that. There’s no way they’re going to trace it. If it’s ever discovered, most courts will address that very specifically, there are some I’ve read some where it was a marital asset and so they divided equally. That’s what it should have, you know, it was just hidden. Well, then you’re going to be responsible for paying the attorneys fees to reopen the case, the attorneys fees to to go after what the hidden asset, you’re going to be paying probably for any private investigator or somebody who maybe a forensic accountant who said, Oh, my gosh, you know, you guys didn’t catch this. This one account that was over at T Rowe, and there may be a lot of money and you find out that anyway, you get the point, hiding assets is a big no, no. Making an inventory is the big to do.

Scott Cardani 11:11
Yeah, and listen, Jackie has really, sometimes one spouse may not know even that close to the breadth of what they have. They may know they were living off very high income, and they can do what they want, they get new cars every year, and they have a couple million dollar house and vacation homes. And they have no idea. And that’s okay. We know how to help you, we know how to do the discovery and do the things to try to help you. But our point is to get as much as you can on your own and start paying attention. Lift your head up and go, Okay. This is not going well, my role is going to change here and I need to start paying attention. And, you know, mail comes in usually, and this stuff you probably never even opened and you start opening that mail and see what’s going on. And sure, you know, start collecting things, you know, especially if it’s in both of your names, and you know, all those things. So just be aware, you have to start becoming aware, if you’re not aware. And like Jackie said, if you’re aware, there’s really not a good reason to hide. I used to put all my Separation Agreements for a lot of years. And it’s funny, because I could always tell when somebody’s had an asset I put, if any assets are hidden, they forfeit to the other party – I’m not signing that. And I’m like, Well, why would you not sign that you’re not hiding anything are you? You know, little things like that.

Jackie Critzer 12:19
And I think another to do is to consider estate planning as part of the divorce process. Because there are, in particular, the high asset High Net Worth divorces where they’ve set aside maybe five to nine accounts are great. Because it’s really money set aside for the children, it’s hard to argue that the five to nine account, which is a college savings account, is not for the children. But let’s say it’s, you know, it was another investment account, and it was for your two or three daughters or children to get married. And you’ve set aside $250,000 Because you could. And now, you know, instead of that money being preserved and reserved for the children, and for their weddings, and honeymoons and whatever that was supposed to be, it’s being dwindled down because both parties just want to fight over one does and one doesn’t. So consider in the process, some of the estate planning, I want to preserve this for our kids. Can we agree on that? And when it’s a more amicable situation, you want to try to preserve what you’ve set aside for the kids actually being for the children. And the next question is, well, how do you do that somebody has to be in control of their money? And that’s true. But there are agreements and there are trusts and there are ways to protect the money from if you think or suspect your spouse may have a spending problem or may develop one or maybe their new spouse wants to get their hands on, right. There’s ways that that we can help you protect that money. And again, that comes in handy with the financial advisors that we also know and involve in the high asset divorces.

Scott Cardani 13:48
And as we said, inheritance is a big thing and knowing you know, I have seen attorneys go after things that are so frivolous. So clearly an inheritance, you know, for instance, save the father of the wife had a estate in Georgetown his whole life, it was worth $20 million. It’s his huge place palatial place, and he dies and he leaves it to life and the husband’s like, why need have that estate? I’m like, sorry, but I’ve seen it. I’ve seen the aggressive attorneys go after that file motions, do all that stuff. In the end. The real truth is, there’s nothing there.

Jackie Critzer 14:23
Right? And it’s important on the other side of of the inheritance issue is not to count your chickens before they’re hatched. Right. It’s a it’s a not to do. Don’t assume that your wealthy in laws are going to provide some sort of lifestyle of extravagance once they pass on and leave your spouse and don’t assume it for yourself, right. Don’t assume that your parents are going to leave you a whole bunch of money. That is a foolish way to consider and planning for your future. Make sure you are actually counting the eggs that are in the basket, not the ones to be hatched.

Scott Cardani 15:01
Anything else Jackie – anything else to know in a high asset divorce?

Jackie Critzer 15:04
Well, I think the bigger question is how do you accomplish doing all of these things without racking up 10s or hundreds of 1,000s of dollars in attorneys fees? How do you weigh in and not everybody wants to agree and everyone wants to try it? Well, that’s true. But the Bezos is in the gates of the world with more money than we even can consider at this moment. We’re able to handle it and maturely walk through the negotiations and reach agreement. I think it’s important to have realistic expectations that it used to be the starting point point is going to be 50/50. If there’s a reason to deviate from that, fine, but but rarely is the case where there’s this high asset divorce and all this liquid money available for division that a judge is going to say that spouse shouldn’t get 50% of it. Because you know, they emotionally withdrew six months ago, or, or for some other reason that you think they ought to not have their hands on half of the net worth.

Scott Cardani 16:04
Yeah, just remember, judges are people too. And they’ve gone through divorces a lot of times, and they’ve had situations where they’ve paid support or paid this. So they’re colored, just as we are by our experiences in life. And so I think a lot of people have real unhealthy expectations about how this is going to work. And, you know, you catch your spouse who’s, you know, the CEO of the biggest company in the world, and you catch him in adultery, and you think, Wow, this is going to, you know, give me 85% of the estate, and he’s gonna get screwed. And there’s a lot of people out there who say those things, but in the end, check in, I can tell you who’ve tried, we’ve tried hundreds and hundreds and 1000s of cases. In the end, there may be some disparity off the 50/50, maybe, maybe you might even get to 60/40. And a good really, really, really good case. I’ve never seen it, but I’ve heard about it once you know, but the reality is the percentages kind of just move a little bit if they move at all. So you know, going through a lot of rigor or more when it’s not valuable to you. And that’s what we try to do. We sit down, we say, Look, this is what we believe here. We’ve looked at all this stuff.

Jackie Critzer 16:32
And this is what the law says about it.

Scott Cardani 17:17
This is what the law says about it, you know, for instance, the judge can never give you more than 50% of his retirement, retirement. That’s right. And people think I’m gonna get all his retirement Well, it’s not gonna happen. Well, if we litigate, the judge will see how bad he was to me, and I’ll give it to him that he can’t the statute says 50. And that’s it. So there’s things like that, that you have to know that you have to be aware of, and to have a good division of these assets. You have to have somebody who understands the law and has given you advice on the global picture, include incorporating tax advice, and financial planning advice, so you can get this done, where it benefits you to the greatest possible perspective.

Jackie Critzer 17:59
So I think are three big takeaways are, first and foremost, match yourself with an attorney that makes sense for your particular divorce. Not every divorce attorney should be dealing in high asset or high net worth divorces, not every attorney should be. That’s just the way it goes. So find somebody – interview the attorneys. I’m big on telling my clients go with your gut. Excuse me, if your gut says I’m okay here, great. If your gut says I just something something felt funny, you need to go with your gut. When it comes to attorneys, you’re probably going to get a far better response and reaction out of the relationship, if you can, can feel good and confident when you walk away from whatever consultation you have with with the attorney. So that’s the first thing I think the second thing is to to really do your best to keep an open mind about mediation and negotiation. It is it is by far the best way you get to make the decisions for your family at that point in the division of property. Rather than a judge who is only going to know a couple of hours worth even if it’s a full day, they’re only going to know the full day’s worth of whatever evidence can be squeezed in during those seven or eight hours or two or three hours as is often the case. So it’s always better. To keep in mind that mediation or negotiation is a better way to go. And lastly, maintain realistic expectations. If your attorney is not giving you realistic expectations and promising new things that you’re not seeing come to fruition that should be a gut check for you. You should be considering how they’re guiding you and leading you and maybe not managing your expectations.

Scott Cardani 19:31
We look forward to talking to you again. Make sure you like and subscribe. We’ll talk to you soon. Thanks.

Jackie Critzer 19:36
See you next time.

What To Do When… Outro 19:37
We hope you’ve enjoyed this episode of What To Do When… For more episodes, be sure to subscribe to our podcast and we encourage you to check archives to listen to previous topics. Tune in next week for a new episode and some fresh perspective from Critzer Cardani.

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We look forward to helping you in this venture and Good Luck!