Challenges for Dividing Investments in High Net Worth Divorces

While dividing cash or your personal property might be relatively straightforward in a high net worth divorce, things become a little more complex when dealing with financial investments. Spouses dealing with a high net worth divorce often have significant funds tied up in various financial investments. These might include stocks, dividends, retirement accounts, and many other financial products. So, how do these assets get divided? What are some unique challenges that you will encounter?

If you want the answers to these questions, your best bet is to consult with a qualified divorce attorney in Mooresville. These legal experts can explain how financial investments are divided in a clear, concise manner. In addition, an experienced divorce attorney in Iredell County can guide you through the entire process of a high net worth divorce. It is best to consult with an attorney who is specifically experienced with high net worth divorces, as these experts are aware of the common issues that surround these unique situations.

In all North Carolina divorces, assets are split into two categories — marital property and separate property. Marital property includes all assets that you have accumulated over the course of your marriage, while separate property includes assets that you accumulated before your marriage took place. If you have made investments over the course of your marriage, then they would be classified as marital property. This means that they become eligible for equitable distribution.

When spouses in Mooresville hear the words “equitable distribution,” they might assume this means “equal distribution.” This is not always the case, especially in the context of financial investments. Let’s say you have 100 stocks in a company and you made this investment during the marriage. If a court followed a system of “equal distribution,” 50 stocks would be awarded to each spouse.

The practice of equitable distribution can be markedly different. Equitable means that the court will consider a number of different factors that may impact the perceived fairness of the division. For example, if one spouse has contributed significant funds to the investment, the court may be inclined to award more stocks to them. Another fact that could impact the division is child custody. One parent may be awarded a larger amount of stocks because they have primary custody.

Finally, spouses may be awarded less stock based on any past criminal or questionable behavior, particularly in the financial world. If one spouse has a history of engaging in frauds, ponzi schemes, or similar activities, they are unlikely to receive an “equal” amount of stock. This is because the court would likely assume that their economic misconduct represents a threat to the overall value of the asset.

When you are dealing with extremely high-value investment portfolios, avoiding taxes and fees is absolutely essential. Unfortunately, divorce proceedings can force you to convert or withdraw funds at inopportune times, causing you to incur needless expenses. That being said, there are a few ways in which you can avoid these taxes and penalties.

First of all, it may be better to withdraw funds from a 401(k) rather than an IRA during a divorce. This is because you will likely be hit with a 10% fee when withdrawing funds from an IRA, whereas there are ways to get around similar penalties when withdrawing funds from a 401(k) (or any other ERSA-governed group retirement plan). As a general rule, you should always wait for the best time to withdraw your funds based on changes in the market. While it is true that you should try to wrap your divorce up as soon as possible, there may be some leeway in terms of exact dates. If you do this correctly, you can pay tax on lower values, and not on future growth.

Some spouses may not be particularly well-versed when it comes to managing portfolios. Often, spouses in high net worth divorces may be financial experts, while the other might be completely clueless. If this is the case, it is important for the less-experienced spouse to convert any aggressive portfolios into more conservative portfolios in order to account for stock market risk tolerance.

If you are searching Iredell County for a divorce attorney who can help you with these matters, look no further than Arnold & Smith, PLLC. We have a wealth of high net worth divorce experience, and we can help you with a range of potential issues that may come up during these cases. We understand the complexities of dividing financial assets, and we can guide you through this potentially complex scenario in an efficient manner. Reach out today, and we can help you plan out your next steps.