In this podcast, Plymouth County family lawyer Penny Nasios, a partner at Mason & Nasios, discusses the ins and outs of high-net-worth divorce in Massachusetts.
Hosted By: Diana Shepherd, Editorial Director, Divorce Magazine
Guest Speaker: Deborah Mason, Family Lawyer
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My name is Diana Shepherd, and I’m the Editorial Director of Divorce Magazine and Family Lawyer Magazine. My guest today is divorce and family law attorney Penny Nasios, who will be talking about the ins and outs of high-net-worth divorce in Massachusetts. A partner in family law firm Mason & Nasios, LLP, she has more than 25 years’ experience providing legal services in the greater Brockton area. Penny has extensive trial experience in all areas of family law, but she is especially skilled in resolving disputes using non-litigative approaches, which enables divorcing parents to maintain an effective working relationship with each other.
Penny, In most high-net-worth marriages, one spouse is often more knowledgeable about finance than the other. Does this impact how you would represent them?
Penny Nasios: Hi, Diana. Yes, it’s really not uncommon for one spouse to be more knowledgeable about family and business finances than the other. In fact, in my experience, it’s pretty typical. The more financially sophisticated spouse needs a different type and level of direction because although they understand the finances, they need information and direction about their rights and responsibilities in a dissolution case. Conversely, the less knowledgeable spouse often feels afraid, distressed, and sometimes overwhelmed. They want to see the path we’re going to take to achieve a fair outcome. And sometimes, they require gentle reality checks regarding setting realistic goals for their divorce. So these dynamics do impact how I approach representation since one client may want to see 100 pages of spreadsheets supporting a conclusion and another might shut down after seeing a sample page of numbers. Both types of client need to have a working knowledge of what assets the family has in order to evaluate what a fair outcome should actually look like.
Diana: What does a financially naïve spouse need to do to ensure that they get a property settlement that is both fair and that will meet their needs?
Penny: First and foremost, a financially naïve spouse needs guidance in order to adequately identify and understand what marital assets exist, as well as all sources and types of income. Let’s break that down. Becoming educated about what assets actually exist, in some cases, requires looking for and finding assets that may not have been fully disclosed at the outset, and also conducting discovery. Discovery is a process by which parties are permitted to gain information from one another, and can include subpoenas to financial institutions, taking the deposition or oral testimony of a party or relevant witness, making requests for certain documents, and making requests for answers to interrogatories, which are questions that need to be answered in writing and under oath. This may also mean ascertaining whether there has been or continues to be a dissipation of marital assets – such as money spent on an extramarital affair, for example – or perhaps whether there’s a stream of income from a source not previously disclosed. This process will necessarily include one or more financial experts, such as a forensic accountant, tax advisor, financial consultant, real estate appraiser, or a business valuation expert. A financially naïve spouse wants to feel as though they’ve been heard and that they’ve been treated fairly.
Diana: What makes a high net worth divorce more complex than a middle-income divorce?
Penny: A high asset and/or high net worth divorce is more complicated in large part due to the number and types of assets that need to be divided, which may include a variety of compensation types, stock or performance options, investments, real estate holdings, and business assets. Some assets are liquid while others cannot be accessed readily or at least not without a penalty or tax implication. Real estate worth 500,000, for example, is not the same as a 401k retirement asset valued at $500,000; although you start with what looks like a similar or the same values, what you end up with because of tax consequences really isn’t the same. And parties need to consider the present versus the future value of money in making a plan going forward. While it may be appropriate to say that a marital estate will be shared “equally” or “equitably,” determining what is equitable can be very complicated.
Diana: Should a high net worth client avoid going to court to make sure their private business remains private?
Penny: Maybe. Divorce pleadings, unless they’re impounded for good cause, are public. And as with any divorce case, litigation ought to be the last resort for cases that cannot otherwise settle. You should be aware that the judge may not fully understand a very complicated financial situation and may therefore hand down an inequitable ruling or order. There are effective non-litigated options for couples getting divorced that can maintain the privacy of a client, including mediation and collaborative divorce solutions.
Diana: What kind of divorce attorney is the best fit for a person involved in a high net worth divorce?
Penny: Aside from having experience in handling high asset cases over a period of years, a party involved in such cases ought to look for a divorce attorney who is familiar with complex financial concepts, is an attentive and detail-oriented problem solver, and who can patiently and competently explain a party’s options as well as their risks given a proposed course of action. Look for an attorney who suits your communication style and, ultimately, one who has the capacity and willingness to honestly answer all of your questions.
Diana: Will spousal support or alimony be granted when there are also a lot of assets to be split?
Penny: It’s possible. Spousal support in Massachusetts is not guaranteed to any party. It is by statute a needs-based payment or schedule of payments to aid in the support of a spouse. The amount and duration of alimony are governed by statute, which will take into account the number of years the parties were married, and their respective incomes (not including income that is utilized to determine child support). There are circumstances when it is appropriate and preferable for one spouse to “buy out” alimony, which will essentially mean that there are sufficient assets for one party to give the other a lump sum payment of cash or assets – a disproportionate share of the marital estate, essentially – in lieu of a future promise of alimony maintenance payments. For example, rather than leave the question of future alimony open in the future, one spouse may wish to receive a larger share of the assets at the time of the divorce. The benefits to a recipient spouse of taking a lump sum payment might include freedom to remarry and freedom from having to return to court to have to demonstrate need.
Diana: Are there any benefits to the payor to making a lump sum payment of spousal support?
Penny: Certainly: benefits include making financial plans about one’s own future and life course without having to worry that your former spouse will bring you back to court to pay alimony. The freedom from that intervention is an extraordinary benefit.
Diana: If a couple has signed a prenuptial agreement, which is sometimes called a prenup, can it be contested during a divorce? Or is it written in stone?
Penny: A prenuptial agreement is a contract between two parties entered prior to and in anticipation of marriage that is intended to safeguard premarital or family assets. It can be binding so long as it’s fair and reasonable at the time it is entered and at the time of divorce. Whether it’s fair and reasonable at the time of its signing will depend on circumstances whether parties made full disclosure to one another of all of their assets, income, and debts, and may also depend upon whether each had the advice of counsel. A court will also ensure that the agreement would be reasonable if enforced at the time of divorce. A court can take a second look at a prenuptial agreement and decline to enforce it at the time of divorce if it would be inequitable to do so. This means it is possible a prenuptial agreement may be contested at the time of a divorce.
Diana: Penny, can you talk to us about what some of the common mistakes that people should avoid with a high asset divorce?
Penny: With a high asset or high net worth divorce, the most common and perhaps most costly mistake is failing to consider the tax consequences of a proposal. Tax consequences are an essential consideration in high net worth and high asset dissolution cases. Simply adding up values of assets and then cutting the sum of the marital estate in half is not enough: it’s too simplistic an approach for most high asset cases. Unless you’re dividing each individual asset in half, you’re likely to need to tax-affect certain assets, and when you do that, $1 does not equal $1. For instance, receiving a 401k retirement asset is not the same as receiving a cash asset – especially if you will need funds to secure future housing or cover certain other expenses. If you hope to keep a family home or vacation property, you must know the tax basis of the property, the rules related to capital gains taxes to be imposed on a subsequent sale of a property, and what, if anything, you can do to lower your tax burden. Taxes play an important role in valuing a business for any purpose – including divorce. Counsel in high net worth cases really need to be assisting their clients, together with financial experts, to assess after-tax cash flow of a proposal or offer in order for the clients to completely understand what they are getting and whether it’s a good deal.
Secondly, another common mistake is failing to at least consider a non-litigative solution to the divorce. Having more means that there’s more to lose. I would urge all parties going through a high net worth divorce to give adequate consideration to a non-litigative approach to resolving your case. A collaborative divorce or a mediated approach to divorce is more likely to help you preserve a greater portion of your marital estate, and given the unpredictable nature of litigation, it provides more control in the outcome of the case. A party to a high net asset divorce should seek out experience, competence – a problem solver – to gain the best value and ultimately the best outcome.
Diana: My guest today has been Brockton family lawyer Penny Nasios. The co-founder of Mason & Nasios, LLP, she focuses her practice on divorce, division of the marital estate, spousal support, and child custody and support. To learn more about how Penny and her team can help you with your high-net-worth divorce issues in Massachusetts, go to www.masonnasiosllp.com