What not to do in a high net worth divorce in Los Angeles

Divorce is rarely easy but when the financial stakes are high, stress levels can increase and tensions rise.

In California, high net worth divorces are relatively common but many couples do not seek the specialist legal advice that such divorces generally require. This can result in unnecessary conflict and time-consuming disputes.

Navigating the legal hurdles in high net worth divorces can be challenging and it’s important to know the dos and don’ts to protect yourself legally. Here, we focus on what not to do in a high net worth divorce so that you can avoid the most common mistakes made by other couples in Los Angeles County.

The traditional understanding of a high net worth divorce in Los Angeles (involving marital assets of a million dollars or more) no longer applies.

The concept of “high income” varies from one county to another. No single definition exists. In practice nowadays in California, many cases involve multimillion-dollar estates, often including at least one high-earning spouse, real estate holdings (domestic or international), pensions, complex equity holdings, and/or business interests.

As in all cases when married couples separate in California, the marital estate must be divided according to community property laws, which usually results in an approximately equal division. This is subject to negotiation according to the specific circumstances. If the spouses cannot agree through collaboration or mediation, a judge will need to decide.

High net worth divorces are more likely to proceed without conflict if legal counsel is sought by the divorcing parties.

The best way for couples to avoid mistakes is to seek the counsel of high-asset divorce attorneys, who are accustomed to guiding the process and can remove many of the “red flags” that wealthy couples face when they divorce.

A seasoned attorney will provide the following important pointers about what not to do during divorce proceedings:

Do not criticize your ex to your children

Divorces are tough on children and using them as “weapons” in a battle against your ex can make it much harder for them. Avoid badmouthing or talking ill of the other parent and try to keep things civil if there is a custody dispute. Remember, the parental relationships continue long after the divorce is completed, so try to preserve these relationships as best as possible.

Do not try to hide your assets

Concealing assets in an attempt to get a larger share of the marital estate than you are entitled to is almost certain to backfire. You may be sanctioned by the court and be ordered to pay extra fees—or assets that may have been divided may simply be awarded wholly or partly to the other spouse. In high net worth divorces with a suspicion of hidden assets, there is an increased likelihood of forensic accountants being involved, which will also drive-up costs and increase the prospect of expensive litigation.

Do not move joint savings into your bank account

Do not attempt to move jointly held money to new accounts in your name. This is a breach of the fiduciary duties you have towards your spouse and, if discovered, can result in stringent penalty fees from the court.

Do not make assumptions about your divorce

Many conflicts arise due to incorrect assumptions during divorces, often leading to unnecessary litigation and lengthy court processes. Just because your friend’s or colleague’s divorce turned out in a particular way doesn’t mean yours will follow suit. Do your homework, understand your legal rights and obligations, seek the assistance of a qualified attorney, and follow the advice provided. Every case resolves according to its specific circumstances, and making assumptions about what you are entitled to receive may lead to frustrations, tension, and disagreements.

Do not ignore tax concerns during a high net worth divorce

Factoring in the tax implications, such as capital gains considerations, is essential during high-asset divorce settlements. Failure to do so can lead to unwanted financial surprises after a home or other property is sold, for instance. A qualified high-asset divorce attorney should be able to advise you on tax-friendly strategies or refer you to an accountant who can help.

Calmness, transparency, and honesty are important qualities for spouses during high net worth divorces. If both spouses can practice these qualities, the chances of an amicable settlement will increase.

Remaining calm when decision-making

Emotionally charged decisions can derail the divorce process and lead to unintended consequences for spouses.

It’s natural to react emotionally when expectations are not met or you hear bad news but making financial decisions that could affect the rest of your life at such times can be detrimental. Talk matters through calmly with people you trust, including your divorce attorney.

Being transparent

As noted above, intentionally trying to earn a greater share of the marital estate by moving, misidentifying or concealing assets is inadvisable—and likely to end in sanctions against you by the court.

As part of the discovery process during a divorce, spouses must fully disclose their assets, debts, income, and expenses (with dates wherever appropriate). This will enable the division of communal and separate property, and your lawyer can help with this. Trying to corrupt this process will be viewed very dimly by the court if litigation results from your actions.

A prenuptial agreement may simplify the process but if the enforceability of the agreement is challenged, the chances of litigation may increase.

Accurately evaluating assets

Overvaluing or undervaluing assets intentionally during the asset/debt disclosure process to earn a larger share of the marital estate is also unwise.

Rather than relying on online evaluations of significant assets, conducting professional appraisals is recommended if large sums are involved. Small deviations can make a big difference to the overall property division outcome.

A final word of advice for spouses in high net worth divorces: don’t try to rush the process and agree to settle simply to get it over and done with.

Set realistic goals at the beginning of the process after discussions with your divorce attorney. Then, remain patient during the process. Settling simply to speed the process up might mean accepting less than you are entitled to or paying more than you are obliged to—either with property division, spousal support, or another matter.

Most divorce cases in California do end up with a settlement but with high net worth divorces, the chances of litigation and a trial increase.

Understand the numbers, be clear on your legal rights and responsibilities, and then follow the process through to a marital settlement agreement with your lawyer, as long as it may take.

The family attorneys at The Sands Law Group APLC in Los Angeles can help with high net worth divorce matters. Contact us online or call 213-788-4412 today for a free 15-minute case evaluation.