High Asset Divorce in Florida
What is different about a high asset divorce?
A divorce with significant assets normally presents special challenges to the parties and their attorneys. The treatment of certain assets may make them more or less desirable than other assets. Other assets have a built-in income stream that makes them more valuable. Finally, many assets carry a high risk and may incur carrying expenses over future years. A high asset divorce can bring many more complex issues in addition to the above concerns.
In theory, a court’s task of dividing property in a Florida divorce is straightforward: The court is to divide the marital property between the two parties in a fair andequitable manner. In most divorces, this task is relatively simple. The court takes note of the marital property the couple acquired during the marriage – the house, cars, and clothing, for instance – and determines which assets will be awarded to which spouse or whether the assets should be sold. In most cases, the value of the marital assets is easy to determine, making a fair and equitable division of property easy to accomplish.
However, some divorce cases are more complicated than others and involve assets that have substantial value or are difficult to value. For instance, if Brent and Lisa divorce, the court will need to divide their marital property. But what if Brent has a large amount of stock or business interests that he accumulated during the marriage? What if the couple purchased rare artwork or antiques during the marriage? In cases that involve high-value assets, or where the value of the marital assets is difficult to determine, the court and/or may need to take extra steps in order to make sure the property division is fair and equitable.
Proper valuation of all assets in a divorce case ensures that all parties are treated fairly and equitably in the divorce and that the court enters appropriate and reasonable orders concerning the division of property, child and/or spousal support, and attorney’s fees.
Valuation of Substantial Assets in a Florida Divorce
Valuation refers to the process of estimating the value of some asset. The asset may be a house, a piece of real property, a car, or a piece of artwork (for example). Some may wonder whether proper valuation of assets is important in a divorce. In other words, would it not be easier to estimate the value of assets as opposed to spending time and money ascertaining the precise value? But a proper valuation of assets can affect much more than simply a fair division of the property.
The child support ordered by a court depends upon the net income of the parties, which is each party’s gross income less permissible deductions. Each party’s share of the child support obligation is then calculated based upon their proportion of the total net income. For instance, if a divorcing couple has $5,000 in net income each month, with the husband earning $3,000 in net income and the wife $2,000, then the husband will be responsible for paying 60% of the child support obligation and the wife will be responsible for the remaining 40%. If one spouse misrepresents their income or assets, it can affect not only how much child support is ordered, but how much that spouse needs to pay. Suppose that the husband above misrepresents his income, claiming he only has $1,000 in net income. Not only would the party’s net income be $3,000 (resulting in a lower child support obligation), but now the wife will be obligated for 67% of that obligation, and the husband would only be obligated for 33% of that obligation.
Similarly, proper valuation of assets is important in determining what amount of alimony (if any) is appropriate in the case. A court decides whether to award alimony based upon the paying spouse’s ability to pay and the receiving spouse’s need for the support. In determining the amount of alimony to award, the court considers a number of factors, including the financial situation of the parties. If a party from whom alimony is sought misrepresents his income and assets, so that these numbers appear lower than they actually are, not only could the other spouse receive a significantly lower alimony amount, but she may not receive any alimony at all.
Assets, Valuation, and Attorney’s Fees
Proper valuation of income and assets may also affect who pays the attorney’s fees as part of a divorce. Florida Statute 61.16 states that a court can consider the financial resources of the parties and order one of the parties to pay a “reasonable amount for attorney’s fees, suit money, and the cost to the other party of maintaining or defending” an action. Here again, if one spouse is able to misrepresent his or her income, hide assets, or misstate the value of his or her assets, this can affect a court’s decision of whether to award attorney’s fees.
[It should be noted that some Florida courts have been reluctant to award attorney’s fees to a party who rejects reasonable settlement offers or who pursues unreasonable or unrealistic litigation. This problem typically occurs when one spouse is wealthy and the other is not. Rather than accept a reasonable settlement offer, the non-wealthy spouse rejects the offer and takes the case to trial, believing he may be able to get more money at trial and that, in any event, the wealthy spouse would be ordered to cover his attorney’s fees. The non-wealthy spouse in such a situation essentially engages in an act of extortion, telling the wealthy spouse “Either meet my demands or be prepared to pay for your attorney and for my attorney!” In order to dissuade this, some courts have refused to order attorney’s fees where one spouse is engaging in this sort of behavior. It is important to discuss settlement offers with your attorney and be upfront about your reasons for rejecting them.]
Fortunately, there are a number of professionals who can be consulted whenever the value of assets and property is an issue in a divorce.
Real and Personal Property Appraisers in Florida
When there is disagreement as to the value of real or personal property, an appraiser may be asked to step in and provide a value for a piece of property or asset. A real property appraiser is consulted whenever real estate (i.e., a house or tract of land) is involved, while a personal property appraiser is consulted for things such as jewelry, artwork, and antiques.
Regardless of whether the property to be appraised is real or personal, appraisers generally follow similar steps:
1. The appraiser must first understand what item he or she is being asked to appraise and the reason for the appraisal.
2. Next, the appraiser will typically formulate a plan for performing the appraisal. This can include the collection of preliminary data, to which the appraiser compares the final value in order to ensure the data and value appear consistent.
Third, the appraiser identifies and analyzes the property. In particular, the appraiser will look to see if the property has characteristics that identify it as being rare or collectible and whether there are other similar articles of property with which a comparison can be made.
4. Next, the appraiser will collect market information in order to help the appraiser form an opinion as to the value of the property.
5. The appraiser next forms an opinion as to the value of the property. This can be done in one of three ways. The cost approach values an item at the amount a buyer would be willing to pay to replace the item in question. The market comparison approach assigns a value to the property in question that is comparable to the market value of similar property. The revenue / income approach tries to value property based on the amount of income or revenue a particular piece of property is expected to create. For instance, an investment property or a business that is expected to bring in a certain amount of revenue in the future may be valued according to the revenue/income approach.
6. After arriving at an opinion as to the value of an asset or property through any or all of the above approaches, the appraiser will evaluate whether this opinion is (1) appropriate for the property and purpose involved; (2) accurate based on the information the appraiser consulted; and (3) supported by the quantity of evidence and data.
If one or both spouses own a business, appraisers can be asked to provide a value for the business just as they would for real or personal property. Although the information consulted consists of the business’s records and financial documents, the overall process remains essentially the same.
Forensic Certified Public Accountants
Another tool in the divorce lawyer’s toolbox is the forensic accountant (or if properly qualified and licensed, the forensic certified public accountant). A forensic accountant is usually consulted when there is a concern that one spouse is attempting to conceal income or assets from the other spouse. This may be a concern, for instance, when one spouse handled all the financial affairs of the couple during the marriage. When the couple divorces, the other spouse is at a disadvantage in that he or she may not know where assets are located, how or when they were acquired, or even what the current balance of the bank accounts of the couple.
There are a number of ways that a spouse may attempt to conceal income or assets:
· A spouse may ask his or her employer to defer paying his or her salary, so it appears that spouse is earning less income than is accurate;
· A spouse who normally receives a bonus may try to have that bonus deposited into a separate account; or
· A spouse may not report benefits he or she receives from his or her employer, such as health insurance, life insurance, a company car, or allowances.
If one spouse is self-employed or is an owner of a closely-held business, there are additional opportunities for fraud to occur:
· The spouse may make payments from the business to others who do not work for the business, such as family members, children, or friends;
· The spouse may attempt to write off personal expenses as business expenses; or
· The spouse may delay in collecting accounts that are due or in making sales.
A forensic accountant can help uncover fraud or attempts to hide income by examining tax returns, bank records, contracts and other financial documents. The forensic accountant is trained to look for inconsistencies in these documents – for example, inconsistencies between bank records for a business and the income reported to the IRS. These inconsistencies can signal that a spouse may be attempting to conceal assets, prompting further investigation.
Conclusion – High Asset Divorce in Florida
Each divorce case presents its own unique set of issues that need to be resolved, and divorce cases involving high-value assets are no different. It is especially important in these cases to ensure that all assets are valued appropriately and that all income is accurately reported. Not only can a failure to do so result in an unequal division of the marital property, but it can also affect child support obligations, whether alimony is awarded and the amount of any alimony award, and whether a party can recover any attorney’s fees.
It is important that each party to a divorce be upfront with his or her attorney. Hiding assets or misrepresenting one’s income can result in serious legal consequences if the fraud or misrepresentation is discovered. Each party should accurately describe all of his or her income and assets as well as those of the other party, to the best of that party’s knowledge.
If you have concerns about your spouse misrepresenting his or her income or hiding assets, be sure to inform your attorney. Depending upon the facts and circumstances, a professional such as an appraiser or forensic accountant may be consulted to investigate whether an asset has been undervalued or whether income has been misrepresented.
Don’t Just Get an Attorney – Retain a Team
The Law Firm of Ayo and Iken is a large group of talented individuals that concentrate their practice in the field of matrimonial law and property division. Between our various attorneys we have many years of experience in every facet of divorce law. We also have attorneys that are seasoned business professionals – accustomed to dealing with substantial assets. We look forward to analyzing your case and fighting for your goals.