Individuals who hold executive positions in corporations or in their own businesses must take special care when it comes to divorce, as they typically have much at stake. An influential individual has much more to protect than just assets and a certain lifestyle. It usually takes a long time to build a business or to rise to the top of an organization. They work hard to earn the respect of business partners as well as the employees who work for them. Once a business has grown to a level where it employs many people, an executive tends to have earned this trust and the respect of his or her employees. A nasty divorce tends to put the reputation of an executive in jeopardy.
Divorce is never easy, as it involves legal battle in addition with the anger, heartbreak, betrayal and the insecurity that comes with starting a new life. You may be anxious about your ability to maintain the lifestyle you’ve grown accustomed to. High-profile separations are even more complex than the average divorce, which is why executives and their spouses should hire the most well-equipped San Diego executive divorce attorney possible to represent their best interests.
An executive divorce has challenges that exceed those of a typical divorce, and since high profile executives typically have substantial assets and income, as well as bonuses, profit-sharing, and stock options, there are many aspects to consider. An executive's family will typically expect to maintain the lifestyle with which they have become accustomed. In addition to division of property, an executive who seeks a divorce will require separate agreements for child custody and spousal support. Those matters typically require the expertise of a highly experienced family law specialist. Hiring the right legal representation will ensure that your liability is minimized and your reputation protected. The right legal representation will ensure that assets are divided fairly and that it meets the needs of both parties.
Executive Divorce in California
California's community property laws allow spouses to seek fifty percent of assets in a divorce, unless it was precluded by a prenuptial or postnuptial agreement. High net worth individuals usually protect their wealth and businesses against property and spousal support claims.
Prenuptial agreements are only water tight when drawn up by an attorney with significant experience in safeguarding high net worth executives. We can also help ascertain whether a pre- or post-nuptial agreement is enforceable against claims.
Also, in an executive divorce, some assets may not be considered marital property. Therefore, mediators and litigators will have to determine whether some assets are included or excluded, based on how the assets were acquired, and to what extent the spouse participated in supporting and promoting the executive's career.
Executive Divorce Strategy
Strategy is key when it comes to handling an executive divorce which involves a highly compensated professional or business executive. Before your first consultation with a San Diego executive divorce attorney, you may want to consider:
- Do you have a basic income and expenses sheet?
- Do you have deferred income?
- Do you have a pension plan or retirement investment?
- What are your primary concerns?
- What is your budget for the divorce matter?
Your lawyer will probably want to discuss these issues with you, so it will save time if you have the answers at hand.
Couples may decide on the division of assets via mediation, or with the help of the court. You may opt for a private judge or a public judge to hear your case. A private judge is a great option when you would like to keep the details of your case and your income private. Most cases filed in court are public record, which means that the public may view facts regarding your matter. As a high-level executive, the last thing you need is the embarrassment of having your dirty laundry aired publicly while trying to deal with the intricacies of a bitter or antagonistic divorce.
Executive divorces can become complex when both spouses have complex property portfolios in addition to their accumulated property. The strategy is divided into four main areas:
- Business valuation
- Division of varied assets
- Child support
- Spousal support.
The process of dividing assets will include real estate, investments, offshore accounts, jewelry, securities and any other marital assets. Child support will include decisions regarding custody and visitation as well.
A high net worth executive divorce typically involves:
- significant real estate
- business and other investments
- pensions that can only be divided on retirement
- professional practices and business partnerships
- securities portfolios
- motor vehicles and boats
- stock options
In addition to the above, high asset executives and their spouses tend to have hidden assets, such as:
- vehicles and jewelry
- bonds and stocks
- mutual funds
- insurance policies
- faulty tax returns
- cash and traveler's checks
Any property that was acquired during the marriage could become potential assets that must be divided as part of the divorce settlement. While this looks simple enough, there are many exceptions and it is not always practical or in the interest of either spouse to divide property in that manner.
Gifts and inheritances received during the marriage are usually considered separate property, however, you will have to prove that it was a gift. This can typically be done by supplying cards, photos or other documentation. It is usually easier to prove an inheritance, as there will be legal documentation, such as a will.
Separate property includes money or assets:
- acquired before the marriage
- received as gifts or inheritances
- received in exchange for separate property that was acquired before the marriage
- received in exchange for separate property that was acquired by gift, descent, devise or bequest
- acquired after legal separation
- excluded from a prenuptial or postnuptial agreement.
Spouses often co-mingle their bank accounts, and this can lead to issues. Once married, couples often share previously separate bank accounts after they are married and it becomes community property, which makes it subject to division. Marital property can include items that were shared or acquired during the marriage, including:
- family homes
- and more.
The court will determine whether property should be deemed:
- community property
- separate property
- or quasi-marital property.
If you are concerned about assets that have not been declared, it is important to inform your lawyer. The right representation will ensure that all marital and separate assets are traced and valued with the help of professional estate planning experts, tax advisers, forensic accountants and appraisers. If the court finds that a spouse has deliberately hidden an asset, it is likely to award a greater value of that property to the other spouse. Neither spouse may try to reclassify community property into separate property during proceedings.
Executive divorces can take months to resolve, and if there are many disagreements relating to spousal support, custody or division of property, it can take several years. Law firm partners are more than just experienced divorce attorneys. They are also highly proficient in deciphering the intricacies of financial and accounting practices to help speed up the process. They will work closely with certified public accountants through the balance sheets, and reallocate assets and income streams according to California law.
The right law firm will take great care to maintain your privacy and protect your professional and financial interests as well as your reputation. They will be experts at handling cases that involve:
- residential and commercial real estate;
- IRAs, pensions, 401(K)s and other retirement accounts;
- patents, royalties, copyrights, trademarks and other intellectual property;
- stock, options and other financial investments;
- trust interests, including generation skipping trusts
- limited liability companies, family partnerships, closely held corporations, sole proprietorships and other business interests.
Once an asset is allocated as marital property or separate property, each item will be evaluated. In addition to property, the executive's professional career will be considered, as well as the impact of the other spouse on the appreciation or depreciation thereon. The non-executive spouse’s earning potential will also be considered as part of the spousal support matter.
Child Custody in Executive Divorce
Resolving child custody issues early on helps to avoid issues from escalating later on. Lengthy litigation tends to bring out the worst in people, and a professional San Diego executive divorce lawyer will try to encourage spouses to find a resolution regarding child custody and visitation as soon as possible. It's no secret that executives are busy, and that makes it difficult to stick to a standard visitation schedule. As such, the amount of time an executive spends with the children will often differ weekly. This should be factored into the agreement.
Spousal Support in an Executive Divorce
By California law, both men and women are entitled to spousal support if there is a large discrepancy in income between the spouses.
Unless spouses are able to reach an agreement, the court will award a fair spousal support agreement. Many aspects determine the amount and duration of spousal support, so one should not reach conclusions based on the outcome of other people's cases. Different rules apply across the different states, but when it comes awarding spousal support in California, the following issues are considered:
- monthly salary of the spouses
- employment history of both spouses
- level of education of the spouses
- length of the marriage
- children as a product of the marriage
Although spousal support usually only lasts for a few years, and is usually only awarded in long-term marriages, it may be awarded if a spouse or child is disabled. Executives and their spouses should bear in mind that spousal support agreements are not permanent. The earning potential and lifestyle to which spouses were accustomed will be taken into consideration.
Spousal support payments may be modified or terminated if circumstances change. It is usually only payable until the other spouse remarries, and may be reduced if the spouse lands a lucrative career. A spouse may not refuse to work in order to keep receiving spousal support. If he or she has been out of the workplace for a long time, the court may award assistance in helping him or her return to the workplace, and it may require proof that the individual has put effort into finding employment.
If an individual waives the option to receive spousal support at the time of the divorce, it may not be requested later on.
The IRS considered spousal support alimony, under Code 71. That means that spousal support is considered income to the payee, will have to pay taxes on the money received. Alternatively, it could be structured as 100% tax deductible to the person who pays spousal support.
The person who receives spousal support must withhold sufficient money to pay taxes. A financial planner or CPA can help to more accurately predict your future tax obligations.
Family support is less common in California, where judges award spousal support and child support separately. Similar to spousal support or child support, family support can be 100% taxable or deductible. Family support combines the two payments, and people usually opt for this for tax purposes. Spouses must be crystal clear about their tax obligation.
Help With an Executive Divorce
Divorce is a trying time that often leaves all parties concerned physically and emotionally exhausted. The good news is that - whether you or your spouse is the executive - you have access to legal rights that can be used to protect yourself and your family. San Diego Divorce Attorney can advocate for your personal and professional interests and help protect your reputation while navigating you through the various stages of divorce.
You can rely on us to act aggressively on your behalf, because we understand that your reputation is at stake, we will act with discretion and confidentiality, taking every step necessary to provide you with as much peace of mind as possible throughout the process.
Act now! Call 858-529-5150 right away to schedule a consultation with an experienced San Diego executive divorce specialist to learn how we can help you achieve the best possible outcome for your divorce and the settlement of your division of property, spousal support, child custody, and visitation matters.