Alimony and Lifestyle Maintenance: Understanding Equitable Distribution in High-Net-Worth Divorces 

July 18, 2024 O'Connor Family Law Divorce

The Massachusetts divorce process can be daunting and complex for all families regardless of the assets and accounts to be divided. But when spouses have extensive estates, with or without sizeable variation between either partner’s income levels, it can become increasingly difficult to keep track of each part of the estate that needs to be taken into consideration. Part of the difficulty with high-net-worth divorces can come with mismatched expectations for negotiation outcomes. If one or both spouses have lived a lifestyle in accordance with their partner’s assets or wealth, especially for those who have been together for longer periods of time, it can be difficult to find a solution to which both sides are amenable. A Hanover high-net-worth divorce attorney can help negotiate on your behalf to protect your lifestyle while helping you understand what provisions or changes may need to be made in order to maintain a positive-trending future path.

How To Define a High-Net-Worth Divorce

A common question that our prospective clients often ask is what exactly constitutes a high-net-worth divorce. This can be a rather subjective term and is of course relative to your environment but a divorce in which one or both spouses have a high income or amount of assets compared to the median income in their region is often considered a relatively high-net-worth divorce. One of the larger difficulties that can arise when it comes to high-net-worth divorces is determining what kind of lifestyle each spouse will be able to maintain following their divorce and how the court should best support such transitions. This will depend on a variety of factors including but not limited to

A high-net-worth divorce can also have major tax implications (for example, whether either spouse has to pull from their 401k early may incur a higher tax bill and/or additional penalties for early withdrawals), as well as necessitate certain lifestyle changes for one or both of the parties. Further complications can occur when one spouse earns significantly more than the other (for example: one spouse maintains the household while the other focuses on income). In this case, alimony may be a major negotiating factor during the divorce process. A Hanover high-asset divorce attorney can help protect your best interests while preparing you for various probable outcomes throughout the divorce process. 

Read More: How Divorce Affects Your Taxes

Why High-Net-Worth Divorces Are Complicated

When filing for divorce, most people simply want to move on with their lives efficiently. That is, they want to split the property and end their marriage so that they can focus on the future. However, deciding how to divide those assets can prove especially tricky in a high-net-worth divorce. Part of the problem is that both spouses want their fair share, but dividing assets in a way that seems fair to both parties can be challenging. Homes, vehicles, and other objects of significant value (like a wedding ring that has been passed down from beloved family members) may become sticking points for more than their numerical values.

Read More: What Happens to the Engagement in a Divorce?

What if One Spouse Feels They’re Entitled to More of the Estate? 

Assets acquired during a marriage in most states are generally considered marital property, meaning they must be split during a divorce. Massachusetts is an “equitable distribution” state, meaning that assets held by either party acquired either before or during the marriage, including assets received via gift or inheritance or assets held at the time of the marriage, are “equitably” divided at the time of divorce. There may even be instances in which judges consider future inheritances or other viable future valuables depending on the nature of such assets. Although the divide can be 50/50, it is important to note that an equitable distribution does not require an even split. Instead, a court must decide how to divide marital property in a way that it deems fair to both parties, taking into consideration a number of different factors.

In the Commonwealth of Massachusetts, the judge considers a number of factors in the division of assets. He or she will evaluate how long the parties were married, their ages and lifestyles, their employability, their opportunity to acquire income and assets in the future, and the needs of the dependent children of the marriage. There are many other factors the judge may evaluate in seeking to ensure “equitable distribution” of the couple’s assets. As with all legal issues, equitable distribution involves case-by-case analysis and careful consideration of many relevant details that can’t be covered in a simple blog post.

A point of contention for many high-net-worth divorces is simply the equitable division of property. Often, one spouse sees an “equitable split” as something different than their soon-to-be-ex. Maybe they feel that they contributed more to the asset base through income, or perhaps it is because they made certain decisions in their own career and life that their spouse was able to obtain higher levels of income. For example, a high-income physician may feel that they are the reason for the family’s wealth compared to their stay-at-home spouse while the spouse feels that they deserve more because they stayed at home to take care of the children, therefore allowing their spouse to focus on work and significantly reducing childcare costs. When one spouse has a much higher income or one party gives up a career to raise children, spousal maintenance, also called alimony, is a common outcome.

Likewise, when one spouse comes to the marriage with more assets from the start, they may balk at a division of those assets because they brought them into the marriage. Especially if the assets have significantly grown or changed throughout the course of the marriage, a judge may see the case differently than the spouse who sees the asset as entirely their own. There may also be issues surrounding the valuation of certain assets, particularly in cases where one or both spouses are self-employed or run their own small businesses. Sometimes, it may be necessary to engage an independent third party that specializes in asset valuation. 

What if Assets in A Divorce Are Not Liquid?

In many marriages with substantial assets, the couple may have accumulated non-liquid assets that cannot be easily or quickly split. These include real property such as a primary residence and perhaps a vacation home, a boat, stock or stock options (read more about RSUs in divorce), ownership of small or large businesses, and even art, rugs, jewelry, and other valuable items. Often, many or all of these non-liquid assets must be liquidated before a divorce can be finalized but your attorney may be able to help you find alternatives to asset liquidation throughout the negotiation process.

Some couples may choose to divide the assets they share with a former partner rather than liquidate them. This is fairly common if they jointly run a business, for example. It’s important that this is all done in accordance with local laws to avoid future third-party lawsuits and/or credit issues. 

What if One Spouse Suspects Hidden Assets?

Sometimes, divorcing spouses engage in surreptitious conduct and try to hide assets. If a spouse has reason to believe that there are significant hidden assets in their spouse’s estate, a forensic accountant may be necessary during the discovery phase of the process. A forensic accountant or other qualified third-party professional can help find hidden or inaccurately valued assets and include them in the marital estate.

Read: I Think My Spouse is Hiding Assets. What Should I Do?

Your Tax Situation May Get More Complex

High-net-worth couples may find that they experience significant changes in their tax burden following Massachusetts divorce proceedings. In cases where significant assets have been sold or properties have been purchased for different living arrangements, there may be changes beyond just income tax. The selling of assets for division during the divorce process can also incur some one-time tax changes. For example, if one spouse has significant stock options, they may face capital gains tax depending on the details of the divorce and property split.

Read: How Could My Taxes Change During and After the Divorce?

Contact a Hanover High-Net-Worth Divorce Attorney 

High-net-worth divorces often result in one or both parties having to adjust to a new financial reality. There are many moving parts in this type of divorce, and a number of third-party experts such as forensic accountants and valuation experts may need to be engaged. Whether you are looking for a collaborative uncontested divorce or anticipate high-conflict negotiations, we have an amazing team of attorneys ready to protect your peace of mind and fight for your rights. Contact O’Connor Family Law at 774-314-4725 today.

About the Author

Divorce Attorney Lydia Field handles high-level negotiations with grace and tact. Her care for clients and commitment to truly listening and learning their stories is a great asset in her family law approach for everything from mediation to litigation.

We know how to deal with tough exes because we’ve done it in our own lives and our family’s lives. Get a team that gets it. Get O’Connor Family Law.*

*Here at O’Connor Family Law, 100% of our attorneys have personal or familial experience with family law issues which means that we understand what it’s like to walk in your shoes.

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