“High net worth” may sound like a subjective term, but it actually has a specific definition. The Securities & Exchange Commission has defined “high net worth” as an individual net worth in excess of one million dollars. Note that this is calculated without including the value of the person’s main home.
There are some other potential definitions of high net worth as well. If the individual’s income has been higher than $200,000 for at least two years, they may qualify. If a married couple’s joint income is more than $300,000 for at least two years, both individuals qualify as having a high net worth. A person who has had a high net worth in recent years can be expected to continue having a high net worth during the current year.
Some people might not have an income that meets this definition. However, they still might meet the one million dollar threshold based on any of the following factors:
- Real estate properties other than their primary residence
- Any businesses they own
- Valuable assets excluding the primary residence
- A valuable stock portfolio
- Maintenance of an expensive lifestyle
- Holding of certain professional licenses
High Net Worth Divorces Take Longer
As a general rule, when there’s a great deal of money and assets involved in a divorce, the negotiating process can become lengthy. You may simply want to sit down with a list of everything you’re willing to surrender, but this isn’t how the process works. Instead, you’ll have to go through an asset evaluation and complete financial audit. The process of gathering this information alone can take significant time.
Throughout the process, you’ll have to attend depositions and make appearances in court. It’s important to have a realistic expectation of the overall timeline and process. Your lawyer can help you develop the best strategy. Make sure you get an attorney experienced in negotiating high net worth settlements.
Financial Issues at Play
There are a number of different financial factors that need to be evaluated and audited. New York has an equitable distribution law. This means that both spouses receive fifty percent of the total marital assets in the divorce. To get a total amount of the marital assets, you’ll need to evaluate:
- The estimated value of any partnerships in professional practices
- Complex and high-income business transactions
- Family businesses and personal businesses
- Retirement assets including stock options, pensions, and 401k plans
- Any trusts
- The value of any real estate property
- Any degrees or professional licenses that increase a person’s earning potential
The Importance of a Statement of Net Worth
There are a number of document that are vital to your divorce proceeding. One of them is the Statement of Net Worth. The document includes information such as your most recent pay stubs and tax returns. You need to provide a full financial disclosure and file it with your court.
It’s not enough to simply produce the statement. You also need to swear that it’s accurate under penalty of perjury. Your divorce attorney will go through all the listed information to be sure everything is complete and accurate.
This document is used to show a basic look at your current financial situation. From there, estimations can be made regarding your needs, lifestyle, and ability to pay spousal support or child support.
Retirement Plans and Stock Options
Corporate executives often have a number of different stock options. These options will be evaluated differently depending on the type. Sometimes forensic economy experts will be brought in for the process.
It can be difficult to divide and evaluate stock options. For this reason, it’s important to talk to an experienced lawyer who can help you strategize the best way to protect your assets. Ideally, your lawyer will have prior experience with stock differentiation and an in-depth understanding of stock options.
Another factor in the marital assets is retirement plans. Depending on the circumstances, they can be a major portion of the estate. Usually, experts will gather information about the plan’s value through an evaluation of a pension plan. From there, decisions will be made regarding how retirement assets are divided.
For people with children, both spouses have a right to 50 percent of the money in a retirement plan. The exact value is calculated according to the number of years the money was earned during the marriage.