Dividing marital assets, calculating child support, and determining spousal support are important aspects of any divorce; however, these proceedings are often most complex in high net-worth divorce cases. New Jersey matrimonial law attorney and family mediator Rosanne DeTorres explains the unique challenges associated with high-net-worth divorce, particularly those involving business ownership or child support considerations.
Hosted by: Diana Shepherd, Editorial Director, Divorce Magazine
Guest speakers: Family Lawyer – Rosanne DeTorres.
About our guest speaker: Matrimonial law attorney Rosanne DeTorres practices family law with the New Jersey law firm of DeTorres & DeGeorge, LLC. An accomplished appellate attorney with experience in commercial, business, and real estate transactions, Rosanne is trained both as a family mediator and a collaborative law attorney. She is a member of the Executive Community of the Family Law Section of the New Jersey State Bar Association and the Hunterdon County Bar Association.
Learn more about Rosanne and the New Jersey law firm of DeTorres & DeGeorge law firm at www.danddfamilylaw.com.
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What is the difference between fault and no-fault divorce?
DeTorres: The difference is the reason given to the court for the divorce. Grounds for divorce refers to the basis on which you’re asking for the divorce. In New Jersey, there are both fault grounds and no-fault grounds. Fault grounds allege that some kind of harm happened in the marriage. No-fault is available to people who don’t want to allege that anything bad happened in the marriage. In New Jersey, most people file on no-fault grounds, which is either based on 18 months of legal separation or irreconcilable differences. With irreconcilable differences, you are allowed to file right away and don’t have to wait 18 months.
Fault grounds include extreme cruelty, adultery, abandonment, addiction, imprisonment, institutionalization, and deviant sexual conduct. We see very little of that in New Jersey at the present time. Fault grounds being used for divorce is very uncommon.
If one spouse is to blame for the divorce because they committed adultery, will the other spouse get more of the marital property?
DeTorres: The answer to that is almost always no, but there are limited exceptions. For example, where a spouse used marital resources for an unlawful purpose, or fraudulently removed marital resources from what we call the marital estate, or used marital resources or income to maintain a relationship outside the marriage in the case of adultery by taking the paramour on trips or buying them expensive gifts—those funds are recoverable. However, there’s no penalty per se assessed against the wrongdoer in favor of the innocent party.
How do you choose an attorney in a high-net-worth divorce?
DeTorres: A business background is a must for an attorney in a high-net-worth divorce. In a divorce that involves a business distribution, where a business is at stake, or where there’s significant real estate, intellectual property, stock options, or complex financial assets, the attorney has to have an extensive business background. If he or she doesn’t, then you’re likelihood of success is limited. If the attorney has never been involved in business formations, operations, sales, and financing, then it’s difficult for them to understand the fine points necessary to establish the value of these types of assets and the value of businesses.
At DeTorres & DeGeorge, we have the depth of experience necessary to handle any high-net-worth divorce. We have experience in significant real estate transactions and commercial and business transactions over and apart from our matrimonial law experience.
What has to be done in order to determine an equitable division in a high-net-worth divorce?
DeTorres: Pre-divorce planning and document review is a must. You can’t build a house without a proper set of plans and you can’t conduct a divorce without a complete and accurate financial picture. The easiest and least costly way of going through a divorce process is to have complete financial information available at the beginning of the case.
We’re going to assist you in completing a financial questionnaire that itemizes all of that data that we need. Even if you don’t have all the information available at that moment in time, we know how to get it from your accountants and other professionals who are involved in your financial life. We are skilled at identifying and acquiring the information that we need to do the asset valuations. These documents and all of that financial information is really the critical foundation for planning for your divorce.
Our experience with high-net-worth divorces that involve significant assets, significant real estate holdings, or business interests allows us to do these divorces more efficiently and with a better result than other attorneys with less experience.
We’re often able to predict outcomes with some basic financial information at outset of the case and any divorce attorney that you select for a high-net-worth case should be able to do that.
If only one spouse accumulates assets during a marriage, are those assets still considered marital property?
DeTorres: Yes. By definition, assets acquired during a marriage are marital property, but there are exceptions. If an asset were exempt from equitable distribution because it was owned by you before the marriage or because you inherited it and you then use that asset to buy a different asset, then the new asset is still going to be considered exempt – even though it was technically acquired during the marriage. However, as long as they are acquired during the marriage, they are considered marital assets and divisible in the divorce.
What kind of financial experts might be needed in a high-net-worth divorce to determine accurate marital property valuations?
DeTorres: If necessary, we will work closely with forensic accountants, actuaries who provide appraisals of retirement accounts, tax advisors, and financial professionals like stockbrokers and investment advisors. We will work closely with them if there is any complexity that we can’t figure out on our own with regard to a person’s stock or investment portfolios.
When we’re dealing with personal property, things like high dollar value collections, artwork, automobiles, jewellery, and even livestock – we live in an area that has a very big equestrian community and horses are high value real estate – we work with professional appraisers who are specialized in each of those particular areas to get an accurate valuation.
What makes a high-net-worth divorce different from the average divorce?
DeTorres: The stakes are much higher and therefore the risk of doing something wrong is greater. A high-net-worth client wants to be assured that they’re going to get the very best legal representation by an attorney that knows the laws and how those laws affect their lives. Even more importantly, they want an attorney who knows how to achieve their goals and objectives, but at the same time preserve their assets and minimize the tax consequences that are inherent in distributing assets between spouses.
What factors are considered when calculating child support or assessing child custody for high-net-worth parents?
DeTorres: Custody is the same no matter how much money you have. For calculating child support, we run the New Jersey child support guidelines to get a baseline number. However, the New Jersey guidelines only cover parents that have a combined net income of up to $187,200 per year. After that, we supplement the guidelines with a discretionary amount based on the remaining family income that is in excess of what the guidelines allow.
So, how do we do that? We go through and consider all of the statutory factors, like what are the needs of the child? Is this a child that has a special interest, sport, or activity that they participate in? What was the lifestyle of the child during the marriage? What kind of things did the child have or do? What other income and assets are available to the parents? Do special provisions need to be made for the child’s higher education? Does the child have an income? Some children in high-net-worth families have incomes derived from their own investments that are being held in trust for them. We put all of that together to come up with a child support amount, because the New Jersey guidelines only give us a number up to a certain point.
How is spousal support calculated in a high-net-worth divorce?
DeTorres: We start by looking at all of the sources of income. Alimony in any case is a function of needs and an ability to pay, but we also apply all 12 of the statutory factors.
We first look at all of the various sources of income available to each party and whether income should be imputed to a party – which is when they don’t make an income, but we say that they do for purposes of analyzing and figuring out what the alimony number should be, how long alimony should be paid for, and how much. In high-net-worth cases, there’s an added layer of analysis that has to take place because we’re not just looking at wages, we’re looking at unearned income from various sources, such as investments and investment property. Even real estate that’s not income-producing of its own can still be imputed as income for purposes of calculating alimony. Even child support can be, for that matter. We look at all of these things, and we look at the length of the marriage, the health of the parties, and the marital lifestyle. It’s very fact-sensitive.
Do high-net-worth divorces usually settle out of court or go to trial?
DeTorres: Statistics are the same for high-net-worth marriages as they are for any other marriage and 95% of them settle out of court without a trial.
What is a prenuptial agreement and who is it good for?
DeTorres: A prenuptial agreement is a contract signed by two people before a marriage that outlines the parties’ rights and responsibilities during the marriage and in the event of divorce. It is like pre-planning the divorce settlement. We strongly suggest a prenup, we actually call them premarital agreement in New Jersey for high-net-worth individuals as a tool to preserve assets and limit spousal support obligations in the event of divorce. It could save both spouses significant financial and emotional expense if the marriage doesn’t work out, because it already sets out the settlement of the divorce.
If one spouse signed a premarital agreement forfeiting rights to substantial property before getting married, is there any way to have the contract set aside during the divorce process?
DeTorres: It’s not easy to do, but it’s possible.
In 2013, there were some revisions made to the Premarital Agreement Act in New Jersey and we now evaluate premarital agreements at the time they are signed rather than when they are sought to be enforced. It’s possible to have it set aside, but the hurdles you have to overcome are steep.
You have to show that you either didn’t execute or sign the agreement voluntarily, that somebody coerced you into doing it, that you were threatened, or that you were under duress. One of the ways this happens is that before you get ready to walk down the aisle, your spouse presents you with the document and says, “I’m not going to marry you unless you sign this.” There has to be a pretty good window of time between the time you are presented with the agreement and the time that you actually marry – having the agreement signed in proximity to the marriage date is frowned upon.
Another way is if the agreement was unconscionable at the time it was signed, which means it’s patently unfair and renders you destitute. For instance, if you’re a homemaker spouse without any skills or employment opportunities of your own and your husband is an affluent business owner with millions of dollars and your premarital agreement says it doesn’t matter how long you stay married, you’re not getting alimony if we divorce, then that’s going to be deemed to be an unconscionable contract.
There has to be full disclosures made at the time that it’s signed and an opportunity given to you to evaluate those disclosures. What are they? Those are – the financial disclosures, tax returns, and records about assets and liabilities. If you didn’t have an attorney at the time that you signed it or an opportunity to consult with counsel, then that is a suspicious contract. Those are a couple of ways that we can undermine premarital agreements and we go to great pains to make sure that they are enforceable and comply with the requirements of the statute.