Preparing Your High-Value Assets for a Divorce

If you’re initiating a divorce proceeding in California, you may be anxious about how the state will handle the marital assets that make up a central part of your divorce. While California law is designed to make the process of divorce as quickly as possible, a high asset divorce typically becomes embattled or contested when both spouses are fighting to secure the lifestyle to which they’ve become accustomed. As such, determining how to value and split your marital property becomes one of the riskiest aspects of a high net worth divorce. If you’re embarking on a divorce and have a significant amount of assets at stake, an Irvine divorce attorney can help you begin preparing your assets for divorce.

From understanding and possibly shielding the type of assets that can be considered marital property to determining how to value and offer to divide the assets in questions, below are some of the best practices to prepare your high-value assets for a divorce.

California Law Requires Spouses to Receive ‘Equal Value’ of Marital Property

In California, all property acquired throughout the marriage will generally be considered marital property unless a prenuptial agreement states otherwise or unless the assets were obtained through an inheritance or a gift. There are a few other exceptions, but generally, you should be prepared to have most of your assets considered part of the marital estate in a California divorce. Because the state also requires an equitable division of the assets, this could mean that you must be prepared to lose half of your net worth to your former spouse in a divorce.

Working alongside your Irvine divorce attorney to compile a list of all of your marital assets and make compelling arguments for why some should be considered your individual property is an essential first step toward protecting yourself in the divorce proceeding. You should also work with your lawyer to assess your prenuptial agreement.

Disclosing Your Assets with the Help of an Irvine Divorce Attorney

No matter who the primary earner is in the marriage, both parties will be required to declare their income, expenses, and debts so that the court understands the precise financial panorama for each of the parties. The spouse initiating the divorce will be required to file a declaration of disclosure with their divorce petition or within 60 days of its receipt. The other spouse will then have another 60 days to file their response and subsequent declaration of disclosure. During this process, you should prepare to complete all of your property appraisals, including real estate, businesses, jewelry, art, and other collectibles. Your debt load will also be reviewed and analyzed as part of the divorce proceeding.

Most crucially, our attorneys will focus on protecting the assets that your spouse theoretically should not be able to lay claim over, such as your business. Because your business was able to succeed under your expert management, your Irvine divorce attorney will make a strong case for allowing those assets to remain under your total dominion and control. Your attorney will likely suggest making a settlement offer to your former spouse so you can avoid court and minimize exposure of substantial losses.

Ready to initiate the process, or have more questions about how to proceed? Our team is ready and willing to assist you. Contact our offices today.

Frequently Asked Questions

What documents should be gathered before a divorce is filed?

Several years of personal and business tax returns with every schedule, bank and brokerage statements, retirement and deferred compensation statements, business financial statements and the general ledger, entity formation and buy-sell documents, equity compensation grant agreements and plan documents, real property deeds and loan documents, appraisals of art, jewelry, and collections, insurance schedules, loan applications, and any premarital or postnuptial agreement. Access to this material is easiest before a case is filed, and the disclosure rules will require most of it regardless.

Should assets be moved or restructured before filing?

No. Once a petition is filed and served, automatic restraining orders prohibit transferring, encumbering, concealing, or disposing of community or separate property without consent or a court order, other than in the ordinary course of business or for the necessities of life. Even before filing, spouses owe each other a fiduciary duty in the management of community property, and the disclosure obligation reaches transfers made in anticipation of a divorce. Restructuring done to reduce a spouse’s share is discoverable, reversible, and expensive in fees and sanctions.

Do high-value personal assets need to be appraised?

The significant ones do, and the standard of value matters as much as the appraiser. Insurance or replacement value is usually well above fair market value, and fair market value is what governs division. Art, jewelry, wine, classic automobiles, and collections each have their own specialist market, so category-specific expertise produces a number that holds up better than a generalist opinion. Documentation of provenance and condition affects value substantially, which is a reason to assemble it rather than reconstruct it later.

Why does the cost basis of an asset matter in the division?

Because two assets with the same nominal value can carry very different tax consequences. Transfers between spouses incident to divorce are generally not taxable events, but the receiving spouse takes the transferor’s basis, so a low-basis stock position and a cash account with the same nominal value are worth materially different amounts once the position is sold. The same is true comparing a pre-tax retirement account to a taxable brokerage account. Whether a division should be measured before or after the tax each side will eventually pay is argued rather than settled, and California courts divide value rather than after-tax value unless a party raises the tax and proves it. The spouse who wants the tax accounted for has to put it in front of the court, which is a reason to work the question during the negotiation.