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high asset divorce

New Podcast: High Asset Divorce in New Jersey

If you’re going through a high asset divorce, there are likely considerable high value assets that impact your settlement.  If your or your spouse acquired high value asset during your marriage, they will likely be considered marital property in New Jersey, and are subject to division upon divorce. New Jersey is an equitable distribution state, which means that the court divides assets in a manner it considers to be fair and reasonable, which may not necessarily be a 50/50 split.

In this podcast, Zeigler Law Partner Sonya K. Zeigler, Esq. discusses financially complex high asset divorces that involve property division, business valuation and cash flow determination, and spousal support, including:

  • If private business records and private financial records will become public records during the divorce
  • Financial misbehavior
  • Pitfalls to watch out for in high value asset divorces
  • How the court determines if an asset is considered a marital asset
  • Whether inherited assets are included as marital assets
  • If stock options, bonuses and commissions are considered marital property
  • How to determine if your spouse is being truthful about their financial assets 

Talk To A New Jersey Family Law and Divorce Attorney

Our Toms River and Moorestown family law attorneys understand the unique issues concerning high asset divorces. Our team has reached countless favorable resolutions on behalf of individuals involved in high-net-worth, complex and litigious cases.

Contact Zeigler Law Group, LLC to learn how our New Jersey child support lawyers can help you at 732-361-4827.

Transcript

Diana Shepherd:

My name is Diana Shepherd, and I’m the editorial director of Divorce Magazine and a facilitator here at The Divorce School. Joining me today is Sonya K Zeigler, a family lawyer based in Toms River, New Jersey. Sonya specializes in financially complex divorces that involve property division, business valuation and cash flow determination, and spousal support. Today we’re going to be talking about some of the complex issues in high-net-worth divorce cases. Let’s get started. Sonya, will private business records and private financial records become public records during a divorce in New Jersey? I can see how a business owner would be very concerned about that.

Sonya K Zeigler:

Typically, the answer to that question would be no. The business records and private financial documents would not become public records during the course of the divorce. The documents that would be supplied by a business owner or a doctor or an attorney during the course of the divorce, while someone’s trying to ascertain what the value of the business is or the cash flow of the titled owner, would be exchanged as part of what we call the discovery process during the course of the divorce litigation in New Jersey. However, those documents would not be filed with the court to the extent that they would be ultimately recorded in Trenton.

Sonya K Zeigler:

What we do in a lot of our cases, especially with people that have a relatively high profile, we enter into what are called either confidentiality agreements or protective orders, where we, as the attorneys and/or the accounting professionals, create a document which limits who is able to review and/or obtain copies of the documents that we identified in that agreement, so as to protect the litigants from things like competitors viewing their financial information and/or anyone else publicly seeing things that they otherwise don’t want to be shared.

Diana Shepherd:

Sonya, how common is financial misbehavior during high net divorce cases, from hiding money in offshore accounts, to stealing marital assets to cover gambling debts?

Sonya K Zeigler:

I can only speak from the cases that I’ve dealt with directly. I guess, overall, I would probably say that it’s not too common. I think that, unfortunately, a lot of spouses, when they come to an attorney to begin the divorce process, they believe that oftentimes monies have been hidden, monies have been redirected overseas, or that there are cash components to someone’s business that they are attempting to conceal from the other spouse.

Sonya K Zeigler:

However, the reality of that situation is that, with the exception of offshore accounts, which are a little bit of a challenge to identify sometimes, the forensic experts that we retain in these cases to review the books and records of these companies and to make a determination on the cash flow of the titled owner, they are so skilled at looking for exactly what you’re referring to in terms of someone trying to divert funds, decreased monies in the bank, reduce cash flow, or to demonstrate, for example, that sales are off in a particular business year because they’re trying to reduce the amount of the business valuation. Although I can’t speak to how many people in my cases actually try to conceal assets, I can tell you that I do not believe that it is typically a successful attempt, either on the part of my clients or on the part of the other side, provided that there is a very skilled forensic accountant involved.

Diana Shepherd:

What pitfalls should someone watch out for in the divorce process, particularly if there are a lot of assets at stake?

Sonya K Zeigler:

I would say that one of the primary concerns in a case where there are substantial assets is to be certain that the manner in which the assets are allocated, ultimately as the final equitable distribution in the case, should really be selected based on what’s in the best interest of the individual that you represent. For example, when dividing a money market account or a brokerage account which contains tens of thousands of shares of stock, it would be important to be sure that the stock was divided in a way that the person receiving it would receive the same tax benefit, or be limited to the same tax liability as the other spouse, from a capital gains perspective, in the event that the stocks were ultimately sold. It is not so simple that you can just say, “We have IBM, and we have Apple stock. I’ll take all the IBM, and she can keep the Apple stock.” Unless you’ve actually looked at those particular holdings and identified that their bases are comparable and that the capital gain, if any, that would be recognized by either spouse would be something that spouse understands and is able to absorb.

Sonya K Zeigler:

I think that with regard to other pitfalls, identifying what assets that they should seek, that can generate an income for them, you may not want to seek the marital home as well as the Florida home, as well as the beach home, if you are not the earning spouse, and you’re only receiving alimony, because you might need to generate income from another source. Things like homes that are not otherwise rented out would not generate a stream of income and, in fact, would just increase the expenses that the spouse would have to satisfy. I think that one of the things that sets attorneys apart when it comes to representing litigants in these relatively complex and high-asset divorce cases is being able to identify what it is that you should be attempting to gain and move to the silo of the ledger of your particular client that will work best for them and for the status that they are going to be in and the objectives that they have for moving forward subsequent to the divorce.

Diana Shepherd:

Sonya, are private practices, such as a dentist, doctor, chiropractor, et cetera, considered assets of the marriage, and does it matter if the practice started before or after the marriage took place?

Sonya K Zeigler:

The answer to both of those questions is yes. Practices, businesses, lawyers, law firms, they’re all considered assets of the marriage to the extent that there was a value change from the date of the marriage to the date that someone files the complaint for divorce. The reason being is that New Jersey does recognize a carve-out for the premarital component of an asset. For example, if you represent a surgeon, and the surgeon has a practice for 10 years, he then marries and he works another 10 years before the complaint for divorce is filed. It would be up to the attorney and the forensic accountant to establish the value of that practice as of the date of the marriage, which would be the carve-out that the title doctor would retain. And then the change in the value from the date of the marriage to the date of the complaint, that is the only portion that would be subject to the equitable division in the divorce process.

Sonya K Zeigler:

However, the burden to establish the premarital value falls on the part of the individual claiming it should not be included. One of the things we do right away, when we find out we’re representing someone who does have a business or a practice with a premarital component is we immediately contact their accountants or the Internal Revenue Service to try to gather records, tax returns, financial statements, whether they’re unaudited or audited, copies of QuickBooks from that period of time, so that we have the financial data that we’re going to need in order to calculate a very good guesstimate of what the value was as of the date that they got married. And then, with regard to the marital portion, it’s important for people to know that, unlike the division of most assets, which are typically divided equally, although that is not actually what New Jersey law requires, New Jersey law requires assets to be divided equitably. However, for the most part, non-business assets typically are divided equally.

Sonya K Zeigler:

A business asset would not be divided typically on a 50/50 basis. Instead, the spouse that does not own it would receive about a third of the value of the marital portion of the asset owned by the titled spouse. The reason for that is that over the years, the cases have evolved and have recognized that if you or I own a business, and someone says, “It’s worth two million dollars to you today; when you sell that business, you’re going to recognize capital gains associated with the sale, such that the dollars you receive are not going to net you two million dollars. In addition to that, you, as the titled spouse, assume the risk that you’re going to be able to maintain the business at a level where its value would stay two million dollars subsequent to the date of the divorce and the division of the value of the asset. For those reasons, case law has evolved, which has basically established for us as matrimonial practitioners in these types of cases, that it’s about a third of the marital value that’s received by the title … strike that … by the non-titled spouse.

Diana Shepherd:

If someone inherited a significant non-business asset, such as a house or a vacation property, perhaps, or other real estate holdings, before they got married, is this asset their separate property now that they’re getting a divorce?

Sonya K Zeigler:

It depends. The general proposition regarding the division of assets and what comprised the estate are the assets that are required during the period starting with the date of the marriage and ending with the date of the complaint for divorce being filed. With assets that are inherited or gifted to a spouse, inherited would be in a scenario where someone dies and leaves you something. Gifted would be in a scenario where someone gives you something, and they’re still alive. Those assets are considered exempt from equitable distribution provided that a few things happen.

Sonya K Zeigler:

Number one, the title to the asset, let’s assume for argument’s sake that it’s a house and that a house is given to the husband during the course of the marriage. Provided the husband keeps the house in his name alone, and that the husband does not make any considerable improvements to that house, for example, a several hundred thousand dollar addition or a very expensive kitchen or an expensive swimming pool, then the value of the house would not be pulled in for equitable distribution purposes. However, as with everything else, a good lawyer would make a contrary argument and say, “Well, to the extent this house was received during the marriage, even though it stayed in that spouse’s name alone, if the spouse paid the taxes and the mortgage and the caring cost and the homeowner’s insurance with dollars generated from that person’s income during the marriage, then there’s arguably an asset value generated that the other spouse would share some percentage of.

Sonya K Zeigler:

To put it into a quantifiable example, if someone has a home and it has a mortgage, and they receive it as a gift during the course of someone’s marriage, and during the course of that 10-year marriage, they pay the mortgage and the property taxes for the house, from their earnings, from their job, so that when someone ultimately files for divorce, the mortgage has gone from $100,000 at the time that they are married or at the time of the gift, to $75,000 by the time somebody files for divorce, that $25,000 of difference is arguably equity that has been created in that asset because of dollars that were used and generated during the marriage. In that scenario, I would argue that half of the $25,000 equity generation is a marital asset subject to division, even though the home itself is not necessarily an asset subject to division in the divorce.

Diana Shepherd:

Are stock options, bonuses, and so on treated any differently than any other assets in a divorce settlement?

Sonya K Zeigler:

Stock options, bonuses, and commissions would all arguably be facets of someone’s income, which could be considered for purposes of determining alimony and child support. When someone has a job where they receive a salary, and, in addition to that, they may receive a bonus or a commission, the attorneys have to ascertain whether they’re going to approach that by including the total each year consisting of the salary plus bonus or commission as the number utilized for alimony purposes, or whether they’re going to base alimony on the salary of the individual and then give the non-titled spouse a percentage each year of the bonus that’s received. For example, if someone’s salary is $500,000 and they typically receive a bonus of $200,000, a decision has to be made in that case, whether or not to base alimony on the $700,000, or to base alimony on the $500,000, and then to give the spouse a percentage of the amount that’s received via the bonus.

Sonya K Zeigler:

How to structure that and once you set it up in that manner really depends on the facts of each case. You have to look at whether or not the individual that is the employed individual gets a bonus every year. Are the bonuses comparable? Are there years that are anomalies, so the bonus is $200,000 one year, but the next year it’s $50,000, such that on an average basis, the non-titled spouse might make out better by averaging the dollars and just receiving a percentage of the total, instead of getting a percentage of the separate bonus when that’s received by the employed spouse.

Diana Shepherd:

Sonya, how can a financially inexperienced person know if their spouse is being completely truthful in their financial disclosure during divorce?

Sonya K Zeigler:

The only way that the spouse will know whether or not the disclosure is accurate and encompasses all of the assets and income of the marriage is if they retain professionals that they trust and who are capable and experienced enough to identify and obtain that information. Attorneys that handle cases like I typically handle know exactly what to look for. Even though sometimes people think that they are going to outsmart the attorney and perhaps attempt to mask an asset or not disclose a particular source of income, we have pretty much seen it all. Between myself and a forensic accountant, we are able to identify what is really there.

Sonya K Zeigler:

In scenarios where someone like the earning spouse doesn’t want to disclose and doesn’t want to confirm something, a court would treat them as though they have that income or assets, if the right case is proven on the part of the attorney for the other side. In a scenario where someone says that they really don’t have cash coming in through their medical practice, but the forensic accountant says, “We don’t believe that to be true, and we believe that a practice of this nature similarly situated in this geography with these gross receipts would have cash receipts of $50,000 per year.” Well, then that would be the number that we would use if we’re lacking any other concrete information for purposes of determining the cash flow for alimony and child support.

Diana Shepherd:

My guest today has been Sonya K Zeigler, a family law attorney at Zeigler Law Group, LLC, which is a boutique family law firm in Toms River, New Jersey. With a Master of Laws in Taxation and having previously worked as a tax attorney for the world’s largest professional services firm, Sonya has the skills and experience to resolve even the most complex cases. For more information about Sonya and her firm, go to www.zeiglerfamilylaw.com.

Contact Zeigler Law Group, LLC
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Sonya K, Zeigler, Esq. and her team have a well-earned reputation for committed and fierce legal representation. Our firm is here to provide you with the best possible guidance. Call Zeigler Law Group, LLC, at 732-361-4827 or contact us online to schedule a free consultation. Located in Tom’s River, Red Bank, Princeton, and Mount Laurel, New Jersey, we serve clients throughout the surrounding areas.

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