We Know High-Asset Divorce
The most crucial element of a high-asset divorce is having a legal team that truly understands every nuance of your situation and what is at risk financially. Only by understanding the intricacies of your case can the team at Kathleen M. Newman Family Law, provide spot-on legal advice. When you hire us, you’re not signing on to work with one lawyer. Rather, you gain access to a whole team of highly productive and knowledgeable professionals committed to advocating for your rights in the most complex areas of divorce.
Protecting Your Privacy In High-Profile Divorce Cases
Your divorce is a private matter between you, your spouse and the attorneys you have entrusted to represent you. Our law firm regularly represents public figures and well-known names in the Twin Cities area as well as many successful legal, medical and business professionals. As a result, we understand exactly how to protect your privacy, particularly if you are concerned about the details of your divorce being covered in the media, or appearing in the public domain. To avoid this, we file minimal paperwork with the court, and sometimes do not even “officially” file until the end of the case. We will also seek protective orders to keep your private information from being included in the courthouse’s public record or from being disseminated to third parties.
If you are a business owner in Minnesota, you have likely spent years growing and investing in your company. In a divorce, when a spouse claims half-ownership or demands an unrealistic settlement based on the possible value of the business, the financial impact could be significant.
Likewise, if you are a business executive, you must consider how a divorce will affect the division of any equity position you hold in the company, your retirement account and pension, and any other components of your deferred or non-deferred executive compensation package.
Kathy Newman has more than 35 years of experience in high-asset divorce and family law issues faced by business owners and executives throughout the Twin Cities area. As a distinguished Minneapolis divorce attorney for business owners and executives, Kathy understands the applicable laws and legal nuances involving business valuations and closely held businesses.
We Handle Your High-Asset Divorce So You Can Focus On Your Business
Sometimes, divorce is a job in and of itself. We know you are busy running and growing your business and may not have time for the details involved in the dissolution of your marriage. For each client, we provide the personal assistance he or she needs to prevent him or her from feeling overwhelmed. Our goal is to manage the legal minutiae, so you can concentrate on your business or professional practice.
Defending The Value Of Your Career
Just like physical property — such as vacation homes or sports cars — your executive career has value that must be taken into account. Our law firm is dedicated to helping protect your compensation and financial interests during conflicts over alimony or complex property division.
Asset Protection in a High-Asset Divorce
Asset protection during divorce is a critically important topic. It must be addressed strategically and with consideration of the long-term implications of every part of the divorce agreement. There are specific steps you can take — both before and during a divorce — to protect your access to assets that you own fully or in part. Learn more about Asset Protection >
Divorce is difficult, but for those with complicated assets like business interests and complex stock portfolios the process can be even more frustrating.
Divorce is difficult for everyone. The split is not just the end of an intimate, personal relationship but also the conclusion of a financial partnership. As a result, couples are required to split all assets acquired during the marriage. This can be particularly daunting for those with business interests, large stock portfolios and multiple pieces of property.
High Asset Divorce
The asset division determination portion of the divorce proceeding requires the parties to split all assets including bank accounts, property, stock portfolios, retirement assets and business interests. In most cases, this involves putting a value on every piece of property to help make a fair split. Determining the value of some pieces of property is more difficult than others. Take real estate as an example. Coming up with an accurate price estimation for real estate can be thorny since a great deal depends on when the property is sold and whether it’s priced aggressively or not. Stock interests are also difficult, since the market conditions play a large role in the valuation of these assets.
Business interests pose problems as well. Marriages that contain a closely held business will have to address whether or not one spouse should buy the other out or whether the business valuation is accurate. A business valuation should include everything from the actual worth of the property the business is using, the cost of equipment and projected earnings to the value of the businesses reputation.
Unfortunately, there is no simple rule to guide this process. The correct split will vary for each divorce and is greatly impacted by state law. As a result, it can be helpful to have a basic understanding of state law when going through this process.
Property Distribution in Minnesota
Minnesota is considered an equitable distribution state. This means that property attained during the marriage is viewed by the court as owned by both parties and will be split in what it deems to be a fair. Under state law, the court will take a variety of factors into consideration when making this split, including the length of marriage as well as the age, health and wellness of each party.
Ideally, the parties will develop a settlement to present to the court. If the parties are unable to come to an agreement the court will become involved. It is important to note that court involvement can cause a great deal of personal information to become public.
Legal Counsel Can Help
Whether a couple going through a divorce is able to develop a settlement agreement with minimal court involvement or finds themselves in the midst of a contentious divorce, steps can be taken to help keep as much information as possible private. Contact an experienced high asset divorce attorney to discuss your options and help to better ensure a more favorable outcome.
Marital property is defined as all property acquired during a marriage through a couple’s joint efforts (Minn. Stat. Sec. 518.003 Subd. 3b). In a divorce proceeding, all marital property is divided equitably. Equitable does not necessarily mean equal, but in the majority of dissolutions, both marital assets and marital debt are assigned equally
Valuing Shareholder Interests
Assets valued in a divorce proceeding also include the marital value of professional practices. Often, the value of a shareholder’s interest in a law firm (organized as a corporation) is determined by a shareholder agreement the lawyer signed with his/her firm. As valuation of these interests is relatively straightforward, there are generally few disputes over valuation of this type of an ownership interest.
Valuing a Law Practice Can Be Challenging Law practice valuation issues can, however, become very complex when the lawyer is a sole practitioner or a member of a very small firm. Minnesota courts have held that the value of a law firm includes hard assets, such as office furniture and equipment, shareholder’s equity, accounts receivable and work in progress. Peterson v. Peterson, 367 N.W.2d 90 (Minn. Ct. App. 1985). The value of a firm may also include contingency fees for work in progress that began before the valuation date. Stageberg v. Stageberg, 695 N.W.2d 609 (Minn. Ct. App. 2005).
If a law practice was formed prior to the marriage, it will have both a marital and non-marital component. The law practice would then be valued twice. First, the non-marital portion of the value would be determined as of the date of marriage, and the marital portion would be determined as of the date the dissolution was commenced. The difference between the two would constitute marital property.
You Might Need a Valuation Expert
Valuation can be based on the fair market value of a practice, the book value or the liquidation value. In order to set a value, a business valuation expert is usually retained. As mediation and/ or other ADR processes are favored by the courts, parties will often agree to retain a neutral appraiser to value a law practice.
Choosing the Right Expert
The valuation expert should have experience in the valuation of professional law practices, as there are significant differences in valuing a different type of business, such as a retail or manufacturing business. Some valuations include the calculation of goodwill, marketability and minority discounts. Generally personal goodwill of an individual attorney is not included in a valuation. However, goodwill attributable to the practice or the firm brand, may have a value. Many solo practices derive a significant number of their referrals based upon the reputation of the practitioner. As reputations are not transferable per se, this type of goodwill is not included in a law firm’s value. There are, however, some smaller firms that have an independent reputation in a specific area (such as a bankruptcy firm where all of the attorneys focus exclusively in that field), and in that case, firm goodwill might be included in the practice valuation.
Your Accounts Receivable are Assets
In the case of Huntley v. Huntley, 1989 WL 109318 (Minn. Ct. App. 1989) the lawyer/husband claimed that his firm’s accounts receivable should be considered delayed income, but the court determined it was part of the total value of the business. “Whether the business be carried on as a family corporation or a partnership or a sole proprietorship, income earned during the marriage, whether distributed or undistributed and reinvested in the business, is marital property.” Nardini v. Nardini, 414 N.W.2d 184, 195 (Minn. 1987). As a law firm’s receivables are an important component of value, substantial attention should be given to the collect-ability of the receivables. As the likelihood of collecting past due receivables drops dramatically with the passage of time, this must be discounted accordingly. According to the Commercial Collection Agency Association, the successful collection of a receivable older than a year drops to only 22.8 percent.
Best Practices for the Solo Practitioner
The best practice for a solo practitioner involved in a divorce proceeding is to retain counsel with experience in divorces involving a professional practice, and, through your divorce lawyer, to retain a business valuation expert with experience in that area as well. From a cost and settlement perspective, this is best accomplished by retaining a neutral valuation expert and negotiating a settlement during mediation based upon the neutral’s opinion. Litigation, and a possible battle between experts, is not only financially costly, but emotionally draining. For a solo practitioner, a dispute such as this takes away from the focus necessary to be competitive in today’s challenging marketplace.
No doubt, divorce is not pretty. It is emotionally draining and becomes even more so when couples begin the process of figuring out who gets what. The anger and emotion get kicked into high gear if the couple can’t agree on property division, alimony, who gets the house and that painting you both spent a fortune on during your honeymoon.
For couples dealing with extensive (and expensive) assets, this process is even more elaborate. The key to surviving a high-asset divorce is to use your head instead of your heart and be smart about what you want and what you are willing to compromise on. Anger, jealousy and resentment only lengthen this painful process. For same-sex couples, who are not married, the process can be even dicier. The key is to keep your cool, do your homework and know the law.
- sift through records, photos and receipts to verify assets
- collect and keep track of attorney bills
- beware of cheaters
- take your half
- assume you’ll get spousal support
- have your heart set on the home in Hawaii
- turn a blind eye to his gambling (or her shoe collection)
- think you can avoid alimony payments
Do Sift Through Records, Photos and Receipts to Verify Assets
Buy the Mercedes before you were married? Do you have the documents to prove it? These are the questions you’ll be asked as you gather evidence for this portion of the divorce. You’ll be asked to verify separate property, income, and inheritance or family gifts. Examples include: wills, trusts, financial statements, banking information, brokerage statements, loan documents, credit card statements, deeds to real property, car registrations, insurance inventories, tax returns, loan applications, and insurance policies.
Do Collect and Keep Track of Attorney Bills
A high-asset divorce can be costly. Keep track of the costs because it will ultimately be a part of the final total when the divorce is settled.
Do Beware of Cheaters
I’m not talking about infidelity; I’m talking about parties who try to hide assets. If your spouse has a 10 carat diamond necklace that is suddenly “missing”, keep track of this discrepancy and try to find documents or photos of its existence. It is common for divorcing spouses to hide assets; make sure you document and even take photos of valuables around the house—jewelry, art, cars, boats, etc.
Do Take Your Half
You are entitled to half of everything acquired during your marriage. So, when it comes time to split items up, don’t pass up an asset because you don’t like it. For example, if you always hated his Harley motorcycle, don’t pass it up if he’s willing to part with it. Consider selling the motorcycle and the money it would provide. Divorce is essentially a business transaction. Be smart and consider your bottom line not your anger or emotion.
If there is something you do want, like jewelry or property, you can potentially trade items to get what you want.
Do Not Assume You’ll Get Spousal Support
Spousal support is financial assistance that recognizes a partner’s contribution to the marriage and helps the recipient achieve financial independence. Alimony is available only to those who were legally married; and, rules vary by state. The court will award financial assistance based on factors such as the duration of the marriage, each person’s earning capacity, contribution to household or career, and physical health of the recipient. Spousal support is never guaranteed and in many cases, is difficult to obtain.
There may also be specific guidelines in the prenuptial agreement about spousal support. Be sure to understand and agree to those terms. This is especially important for same-sex couples who were not legally married.
Do Not Have Your Heart Set on the Home in Hawaii
Whether it’s the home in Hawaii or the yacht parked in Miami, don’t assume these items will not be sold as part of the high-asset divorce. For example, two incomes may have made the Hawaii house possible. So, even if you get it in the settlement, can you afford the mortgage and the taxes? Same with the yacht. It’s not enjoyable if the docking fees and maintenance are too much for you to afford. It’s simply a sad but true reality of divorce that lifestyle changes are unavoidable and even more evident when both parties earned substantial salaries.
Do Not Turn a Blind Eye to His Gambling (Or Her Shoe Collection)
Hidden debt is a common surprise among divorcing couples. In the nine states with community property laws—Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin—you’ll be held responsible for half your spouse’s debt, even if it’s not in your name. You may also run into trouble in a non–community property state if you and your spouse hold credit cards or loans jointly. Get a full credit report to make sure there are no surprises on it.
Do Not Think You Can Avoid Alimony Payments
You will likely have to pay alimony if you are the breadwinner of the marriage/family. The payment could be a lump sum or regular checks.
The key to alimony is understanding the term “the standard of living of the marriage.” It is how the law determines if you are entitled to alimony and if so, how much. The basic idea behind alimony is that when your marriage ends, you both should be able to go on living as you were before the divorce. If you make all or most of the money, you would probably have to share that income with your spouse.
A high-asset divorce can be very difficult or bearable. Your experience will depend on your mindset and preparation. Understanding the financial obligations expected of you during and after the divorce proceedings helps you keep sensible expectations. Make a plan for the assets you want to keep. Be flexible. And, finally, don’t let anger, greed or resentment cloud your judgment. It could cost you more in the end.
Retention of legal counsel experienced in such divorces can be especially important. Minnesota divorce law requires that marital property and debts be equitably and fairly divided between the spouses. When one or both are high earners or are recipients of familial or inherited wealth, complex legal and factual issues can arise, taking property division to another level of sophistication.
Anyone in a marriage of wealth facing divorce, whether he or she is a high earner, or has supported the other’s successful career, should seek legal counsel with experience in division of high-value assets. In this kind of high-asset divorce, the nature and extent of the assets requires proper valuation, and classification as marital or nonmarital property.
A family lawyer who regularly represents clients in high-asset marriages will aggressively and thoroughly inventory and evaluate all assets:
- Closely held or family businesses, including physical assets, equipment, real estate, accounts receivable, inventories, good will, and customer lists
Professional practices, including patient or client lists, good will, equipment and real estate
- Real estate, including residences, second homes and vacation properties
- Luxury goods like automobiles, boats and aircraft
- Jewelry, antiques, art and other collectibles
- Retirement accounts like pensions, 401ks, IRAs and others
- Intellectual property like copyrights, trademarks, patents and others
- Executive compensation packages, stock options, bonuses and similar executive employment benefits
- Stocks, bonds and other securities
- Assets held outside the U.S. in foreign accounts or locations
The unfortunate truth is that sometimes a dishonest spouse hides money or other assets, or excessively spends or gifts them outside the family in secret. A skilled attorney will launch an investigation of the potentially fraudulent acts, including retention of a forensic accountant to analyze records for evidence of secretive behavior.
Experts must be retained to properly value assets, including CPAs, appraisers and realtors. It can be challenging to evaluate a family business or professional practice and to project future income, but accuracy is crucial and qualified experts must be involved.
Another possible issue in a Minnesota high-asset divorce is whether any property is nonmarital, meaning owned by one spouse alone and not subject to division such as inheritances or gifts to one spouse only.
It is crucial to accurately project the tax consequences of a property division scenario and to provide for payment of related tax liability. Division of marital debt is equally important and in a high-asset situation, debts can be correspondingly high.
Finally, if the parties had signed a premarital or postmarital agreement in which they agreed to dispose of assets in a particular way in divorce, legal counsel must assess whether the agreement is valid or should otherwise be challenged. If the agreement is valid, an attorney can oversee that it is implemented according to the agreed-upon terms.
Procedurally, many high-asset divorces will settle before trial, meaning the parties through their attorneys or using an alternative dispute resolution method will negotiate to agreement all legal issues, including property and debt division. Still, to negotiate from a position of strength, a spouse and his or her lawyer must have full and accurate information about all tangible and intangible assets, as well as liabilities.
If the case does not settle and goes to trial, legal counsel must present admissible evidence of the size and value of the marital estate to the judge for accurate, meaningful assessment.
With offices in downtown Minneapolis, the attorneys of Kathleen M. Newman Family Law, represent high-asset divorce clients with complex estates throughout the Twin Cities.
Family disputes do not always conclude at the end of a trial. They can often go up for appeal.
Whether you wish to appeal the trial court’s decision or protect it while on appeal, the law office of Kathleen M. Newman Family Law, can help. We have more than three decades of experience in family law matters both standard and unusual. As a result, you will know that you are relying on guidance from attorneys who have been there before.
Our experience as a family law trial firm enables us to thoroughly examine the components of your case to determine which elements may be best to address on appeal, whether you wish to change a determination at the lower court or uphold it. In doing so, we understand how to examine a lower court’s decision and factual record in order to build a case for you on appeal. This experience also means we already know the practicalities of how the appellate courts work. You will not have to worry about us learning the basic rules of appellate law while handling your case.
Minnesota Appellate Attorney
When you need family law representation at the appellate level, you can turn to us here at the law office of Kathleen M. Newman. We can offer you the experienced appellate level advocacy you need in your family matter.
Unlike some family law attorneys, our practice is not limited to the delivery of only one dispute resolution model. Instead, we embrace a broad variety of resolution options in order to give you the legal representation most responsive to your legal and practical needs.
Our full menu of appellate options includes both traditional and contemporary approaches. For instance, in addition to our offering of traditional appellate representation, we also offer appellate mediation services. These alternative appellate resolution strategies can often provide you with the result you seek in a manner that is also prompt and economically efficient.
Our success in representing family law clients at trial and in mediation directly informs our lawyers’ appellate work. Our grasp of trial proceedings, for instance, means we can analyze your lower court’s factual record thoroughly to identify those components of the case that will best serve your legal goals on appeal, whether you wish to challenge the court’s ruling in some respect or preserve it in another.