Top Three Considerations in a High-Net-Worth Divorce

Our skilled family law team is here to support you through the unique challenges of separation and divorce.

Money often complicates relationships, and the same can certainly be said of divorce.

Even the humblest set of shared property can generate hostility between separating spouses, so it can be a challenge for couples who have amassed a more complex and valuable collection of assets during their time together to keep relations cordial.

However, with the help of an experienced family lawyer who understands the unique nature of high-net-worth divorce, former spouses can set themselves up for a successful split.

In this blog, I will outline three important factors that I have found lawyers and their clients will benefit from considering during a high-net-worth divorce:

Financial experts

On the face of it, the division of a married couple’s property is a relatively straightforward affair: the province’s Family Law Act generally provides for an equal share for each spouse in the property accumulated during the marriage, subject to certain deductions and exceptions — with an equalization payment owing from one party to the other to make up any difference.

The bare bones of the formula are the same for high-net-worth couples, but getting the numbers to input into the equalization calculation can be more of a challenge when complex assets such as businesses, professional practices, pensions, investment property and stock options are involved.

The same difficulties often apply to the process of establishing an individual’s income for spousal or child support purposes when the person has multiple sources of income.

As a result, our firm will connect clients with a whole range of other financial experts as needed, including accountants and business or real estate valuators.

In addition, both parties may wish to call on the expertise of a tax professional to determine the most tax-efficient ways to divide property such as pensions or business interests.

On that note, if a couple can agree to jointly retain the services of any experts required in their matter, it can significantly reduce their costs. Not only does this avoid duplication of effort, it also increases the likelihood of settling without going to court.

Section 7 expenses

Section 7 expenses, which take their name from the portion of the Federal Child support Guidelines dealing with “special or extraordinary expenses,” are among the most contested matters for high-net-worth couples with children.

These expenses cover a broad spectrum of significant expenditures that are often not an issue for less wealthy couples, including extra-curricular activities, private school tuition, post-secondary educational costs and healthcare spending not covered by insurance plans.  

In court, judges are typically inclined to share these kinds of expenses between parents in proportion to their income, but former partners who are willing to explore alternative dispute resolution methods may be able to come up with a more convenient arrangement that suits both sides.

Mediation

I recommend that all of my clients consider mediation for the resolution of their family law disputes, but high-net-worth couples may have more to gain from the process than most.

For example, the confidentiality of the process is a big attraction for former partners with significant assets or private business interests that they do not want to see laid out for public viewing as they would be in court documents associated with their case. In mediation, neither the parties nor the lawyers involved are able to share information about what was discussed

In addition, the flexibility of mediation allows the parties to tailor the process to match their individual needs. Former spouses may opt to have their sessions overseen by a mediator with expertise in financial matters, and are free to bring in outside experts to deal with matters of finance, tax, investment or business interests.

When it comes to settlements, parties to mediation are also free to explore solutions that work for both of them, despite departing from the strict letter of the law. The tax treatment of transactions in particular represents a potential source of mutual benefit for parties who are willing to get creative in the structure of payments, such that the amount of capital gains or income tax payable is reduced.

If you are in the process of separating from your spouse and would like to discuss your options, schedule a consultation with me. I would be happy to help.