All divorces are not created equal. Although the laws are universal, facts and circumstances in high income/ high net worth divorces, require special consideration.
In Greenwich and Westport and other cities and town in Fairfield County and Connecticut, there is an unusually high concentration of wealth. In our practice at Broder & Orland LLC, we are experienced in the intricacies of the sources and value of this wealth and its impact in divorce cases.
Most commonly, family fortunes have been amassed in the financial sector. This includes investment banking, bond trading, hedge funds, private equity, alternative investments, stock options, and business transactions. It may also have been derived from beneficial trust interests, gifting and inheritances. In some instances, wealth has been passed down to the generations however, much of what we see in our practice, is new wealth, especially that created prior to 2008.
So what happens when couples in this financial stratum get divorced? Connecticut is an all property state, which means any assets owned by either or both of the parties at the time of divorce, no matter how titled, are marital property and subject to equitable division. In determining the share of the marital estate it awards to each party, a Court will consider the numerous factors set forth in CGS sec. 46b-81. The statutory factors that most typically come into play in high income/ high net worth divorces are: the length of the marriage; the causes for the dissolution; the age and health of the parties; their occupation, earning capacity, amount and sources of income; the opportunity of each for future acquisition of capital assets and income; and the contribution of each party in the acquisition, preservation or appreciation in the value of their respective estates. Most cases end up with something close to a 50-50 division, but in cases of significant wealth that statistic is often skewed based on the source of that wealth.
If the wealth was entirely created from compensation of one or both of the parties during the marriage, the chances are it will be equally divided. Marriage is a partnership and the law recognizes each party’s economic and non-economic contributions to the marriage. While the hedge fund or private equity husband might have earned the dollars, his wife’s responsibility of taking care of the children and the home, has recognizable value as well. Where the wife spent years as an investment banker traveling the globe doing mergers and acquisitions, her husband’s small business close to their home provided security and constancy for their family, and thus, value.
On the other hand, there are divorce cases where the source of wealth might create a disparate property division. This may be true if the money flowed to one party from trusts, gifts or inheritances. Or where one party brought significant assets to the marriage or received assets other than those from compensation. The division of those assets will depend on their value, use of and reliance on these funds, whether they were segregated, and the global asset picture at the time of divorce. There is no clear cut formula in these cases. Again, the Court will look at the many statutory factors in making its determination.
Valuation of the asset classes described above may be complicated, especially in the case of hedge funds, private equity, alternative investments and business ventures. The nature and effect of carried interest on the Court’s financial orders is often the subject of litigation. In our practice, we typically add to our team a forensic valuation expert whose job it is to determine and substantiate value of assets and income streams. That expert works with us and our client to not only establish the value of our client’s interests but to analyze and in many cases refute the opposing expert’s opinion of value.
How does alimony and child support come into play in high income/ high net worth divorces? The answer is, it depends! At some level of wealth, alimony disappears although that threshold is not a fixed number or necessarily the result of any mathematical formula. The amount of child support at upper income becomes more discretionary. Experienced counsel can provide you with some likely parameters based on the statutory factors, case law and prior trial court decisions.
While the discussion above is premised on trial outcomes, most cases are settled without the need for trial. This allows divorcing parties to be as creative as they want in dividing assets, determining the need for alimony, and establishing child support. But settlement, particularly in high income/ high net worth cases, is always informed by the likely outcome had the case gone to trial.