HIGH-NET-WORTH DIVORCE

High-net-worth individuals are classically categorized as those with 1 million or more in liquid assets. Given the high cost of living in many areas of New York City and surrounding areas, such as parts of Long Island and Westchester, we see many high-net-worth divorces and so do the courts, especially in New York County, which services Manhattan – think Upper East Side, Upper West Side, Tribeca and other high real estate value areas.

There are special considerations in high-net-worth divorce, including:

  1. The statutory guidelines for maintenance (aka spousal support/alimony) and child support payments tend not to apply, since the hallmark feature in support is maintaining the standard of living, the statutory guidelines and calculations don’t yield nearly enough in support to maintain the standard of living.
  2. Standard of living analyses are a key measure in high-net-worth divorces to ascertain the lifestyle and cash flow.
  3. Forensic accountants, tax specialists, financial professionals, and business valuators are often needed, which can increase the cost of the divorce itself.
  4. Tax consequences are especially important – homing in on capital gains taxes and maximizing the tax savings between the parties in a mutually beneficial manner, albeit any tension and resentment inherent in the divorce.
  5. More often than not, high-net-worth clients prefer to keep their case private and try to settle outside the court, if their case lends itself to such a – more discreet – resolution.

New York County judges, who adjudicate a large volume of high-net-worth divorces, often say they take it for granted that each child’s direct expenses (expenses like private schools, camp, enrichment programs and extra-curricular activities) will be a minimum of $100,000, and this must be factored into any support analysis.

While money can help, typically in conjunction with a good attitude, it, obviously, does not shield people from the same emotional, physical, and mental toll divorce can have. Some of the highest functioning, blessed, and gifted people I know have said they felt they were in a state of temporary insanity during periods of their divorce. While these proclamations may be hyperbolic, they convey a depth of emotions felt during divorce. These sorts of feelings run the gamut of the socio-economic spectrum. Emotions don’t discriminate. Needless to say, this is an obvious point. It is common to feel fearful, anxious, sad and loss when a marriage ends – however fierce and unperturbed you are in other areas of your life. One of our goals is to make the process as smooth, unruffled, and contained as possible.

Three good case reads that can be applicable to some high-net-worth divorce cases are the DeJesus, Sykes, and McMahon cases.

The DeJesus case talks about unvested stocks. There is typically a marital component to unvested stocks and forensics often perform an analysis to determine that marital component. The parties then negotiate the allocation between themselves on that amount. When they can’t agree, judicial determination is needed.

The Sykes case talks about having skin in the game. It involves a high-net-worth couple who started with nothing and built themselves up to extreme wealth over the course of their long marriage. The husband, who worked in finance, was termed the monied spouse. Yet, the court held the decision on attorney’s fees in abeyance until the end, so that both parties would have skin in the game. The judge did not want the wife to be needlessly litigious and dilatory thinking her husband would be ordered to pay all her attorney’s fees. The judge, in this way, was demanding accountability from both sides in how they fought their court battle.

The McMahon case can take you for a real loop. The wife files and serves the Summons for Divorce and the husband files a Notice of Appearance. No Verified Complaint or pleadings are exchanged. The husband, who works at Goldman Sachs, then hits the jackpot with his Goldman Sachs shares hitting over 30 million because Goldman Sachs goes public. Since the Summons with Notice is the equitable distribution cut-off date of the marriage, the wife does not want to lose out on this windfall and discontinues her divorce action. She then refiles and serves a new Summons with Notice post the Goldman Sachs IPO and the husband objects arguing that the date of the first Summons should be the determinative date for equitable distribution. The judge rules in the wife’s favor and allows the Goldman Sachs shares to be considered Marital Property with the question then being how it should be allocated between the parties, and not whether it should be allocated.

DeJesus v. DeJesus:

https://casetext.com/case/dejesus-v-dejesus-4

https://law.justia.com/cases/new-york/court-of-appeals/1997/90-n-y-2d-643-0.html

Sykes v. Sykes:

https://law.justia.com/cases/new-york/other-courts/2014/2014-ny-slip-op-50731-u.html

McMahon v. McMahon:

https://caselaw.findlaw.com/court/ny-supreme-court/1327563.html