High Net Worth Divorce & Business Valuations
High net worth cases often present unique challenges in a divorce. There are often complicated tax issues related to capital gains and basis when dividing assets. There are more complicated issues related to valuation of real estate and closely-held businesses. In these cases we often hire financial experts or neutrals to assist the parties in dividing assets so that they are divided in the most equitable way possible. It is important to have attorneys and experts involved in these cases that understand the complexities of divorce, business valuation and tax consequences.
High-net worth cases can also involve significant non-marital claims and complicated spousal maintenance scenarios. It is not uncommon for generational trusts to be at play in a high-net worth case, which often impacts the property and cash-flow pieces of a case. In these cases we bring in attorneys that have represented the business or estate in the past, as well as hire new experts to help distill and analyze the information in the context of a divorce.
If the marriage owns a business, knowing the value of that business is crucial to prepare the balance sheet to equitably divide assets. There are three ways that a qualified expert can approach a business valuation: the income approach, the market approach, and the asset approach. An income approach valuation is the discounted value of the projected future income stream to the company. A market approach valuation is a valuation based comparison of the company to other comparable companies that have been sold on the open market. An asset approach is a valuation of the assets of the company only, which is essentially a liquidation valuation of the company.
Generally speaking, the income approach is the most frequently used method for valuation because all of the information needed to conduct the income approach is usually available in the company’s financial statements. Business valuations are done by professionals who have Accredited in Business Valuation (ABV) credentials. Most commonly, spouses will agree to hire a neutral professional to streamline the process and overall cost. An attorney can help you decide if an evaluation is needed and select an appropriate professional.
Ultimately high-net worth cases are the same as a typical divorce in that we need to divide property and establish a cash-flow structure for the parties. As in all of our cases, our goal is to help our clients get divorced in the most efficient and cost-effective way possible. In a high-net worth case the process typically requires more expertise in the areas of non-marital claims, business valuation and tax law but overall the goal is the same: to help clients