The simplest definition of a high net worth divorce is a divorce involving a client who has a considerable amount of wealth amassed – generally speaking, this would be someone with at least $5 million in liquid assets. But that’s not anywhere close to being a complete definition, for high net worth divorces typically involve a broader range of financial and legal considerations.
At Hance Wickham, we list high net worth divorces as one of our specialties, specifically because of the level of complexity those cases involve. A great number of our past high net worth clients have had estates well in excess of $5 million, along with one or more of these criteria:
Being an owner or co-owner of a closely-held business
Being an owner or co-owner of a family business
Being a benefactor of or an heir to a family trust or inheritance
Being the owner of property (or other assets) prior to marriage (called Separate Property in Texas)
When working with a high net worth client, one of the first things I do is sit down with him or her, and with a financial professional, to go over that client’s complete financial picture. We begin to determine what is community property and what is separate property, and we decide which illiquid assets the client wants to protect most. This is best done before the client initiates a divorce – that way, we can establish the best strategy possible to move forward and give the client’s assets maximum protection.
Unless it’s not appropriate for some reason (major mental health issues, active addiction issues, family violence, etc.), I then encourage the client and his or her spouse to enter into a collaborative law agreement if possible. Collaborative law offers at least two specific advantages to litigation that benefit high net worth clients – more flexibility and creativity possible in negotiating financial settlement, and the ability to have those negotiations privately.
If a client isn’t able to enter into a collaborative divorce with his or her spouse, there are still steps to take to protect privacy. First, court filings should be made either anonymously or confidentially; otherwise, the details of a divorce could be out there for business competitors, nosy neighbors, identity thieves, or anyone else to peruse. Then, of course, if a client can settle out of court and negotiate the terms of the divorce, this is typically preferable to an outcome left to the judge – especially when the client might be found at fault for the divorce, and that factor figures into the court-determined settlement. And if it appears that litigation will be necessary, then detailed case preparation as well as strategies for the most persuasive presentation of the client’s position are essential.
All divorces deserve diligent, competent representation for both parties, but in cases involving high net worth clients – where the degree of difficulty can be quite high – a different level of competence is required.
(In my next article, I’ll go over some specific mistakes that clients – especially high net worth clients – should avoid when starting divorce proceedings.)