Every divorce is emotionally and financially challenging. Cases involving high-net-worth individuals (HNWI) are especially complex as there is more to be divided and therefore, greater expertise required to reach a settlement. You’ve worked hard for what you have and without solid representation, assets such as your homes, businesses, investment properties and savings are at risk.
To provide clarity on what can be expected and how to protect your wealth, we interviewed Ken Brewe, who has 24 years of experience in family law and mediation.
What are the common questions that clients ask at the early stages of divorce?
KB: There are three big questions that all clients ask: Am I going to be ok financially? What am I entitled to? What will I have to part with? Clients want to know what this process is going to look like, so I always endeavor to quell some of these feelings of uncertainty by providing a roadmap. Our first step towards answering those questions is within the documents we ask clients to bring in for their initial consultation; they serve as a starting point and help us get a clearer picture of their current state of affairs.
Why are an increasing number of HNWI’s choosing mediation over trial?
KB: I have been a family law mediator for 24 years. When I first began as a divorce attorney, I tried 40-50 cases per year (which is a lot). Since then, the process has changed significantly. In recent years, mediation has become the preferred method of resolution; especially in high asset divorces, where privacy is of chief importance. Some individuals do not realize that as soon as a case is filed in court, it goes on the public record, leaving anyone with the ability to take a look at your situation by paying a quick trip to the courthouse.
In addition to the desire for privacy, parties gravitate towards mediation because the process results in the settlement of 85-95% of cases and is considerably faster than navigating through our highly-structured court system. Because mediation is generally a quicker route to resolution, costs are intrinsically lower. It’s important to recognize that just because mediation is faster and less expensive, it is in no way a casual methodology. A substantial amount of planning and organization is required (valuing, planning, negotiation and lastly, agreement) to achieve desired results.
How long does the process take?
KB: In Washington state, divorce can be accomplished within a minimum of 90 days, however most high-asset divorces take upwards of one year to be finalized. This is largely due to the amount of data collection and expertise required. Because HNWI have significant and complex assets, the services of appraisers, valuators and forensic accountants are frequently sought out to ensure assets are accurately valued. Apart from real properties and businesses, there are less obvious assets that also require expert valuation. From comprehensive in-the-box Barbie dolls and rare guitar collections to bank accounts in the Cayman Islands, everything you’ve acquired as a couple must have a number put on it, and to do it right does take time.
What changes in lifestyle can high-net-worth clients expect?
KB: Clients often experience the biggest financial adjustment to their lifestyles when they look at their assets and realize that they’re going to have to divide it fairly and equitably (not necessarily 50/50). Both their net worth and income stream are going to be, without a doubt, impacted.
How is maintenance determined?
KB: In defining an appropriate amount of maintenance, the court will be focused clearly on the length of the marriage, each partner’s respective financial situations, their individual health and educational backgrounds and separate property which may have been accumulated, amongst many other factors.
In what ways can a high asset divorce impact your company and those with a stake in it?
KB: For clients who have an equity interest in a business (eg: a doctor in a practice group with other physicians, or partners/shareholders in virtually every imaginable kind of business) there are big decisions to be made. Dividing up the shared interest of your business in a divorce can be very difficult; particularly if you do not have other assets to fall back on. We work with highly-skilled forensic accountants and appraisers to assist in developing workable and practical payment schemes that allow the business to thrive in the meantime. Our goal is to negotiate a workable financial arrangement that ensures both you and your ex receive fair interest in your community estate.
When partners are involved, I recommend letting them know what’s coming down the pike, as it is much better for them to hear the news from you, rather than to receive a subpoena or be asked to attend a deposition without warning. A proactive attorney will likely arrange a meeting with you and your partner(s) to ensure everyone knows what to expect and understands what may be required.
What can be subpoenaed?
KB: Apart from attorney/client privileged documents, virtually anything can be requested and obtained. Whether it’s relevant or admissible in court will be dealt with later, but during the discovery process, subpoena power can be very broad, allowing attorneys to gather significant information.
What advice do you give clients in terms of communicating with their ex during the process?
KB: I don’t discourage clients from talking to their spouse so long as they can keep it civil. If you cannot, it may be wise to cut off face-to-face or verbal communication and stick to written correspondence. Keep copies of those emails and texts (just in case) and make them available to your attorney.
In your experience, what are the biggest mistakes that one can make in a high stakes divorce?
KB: Above all else, if you want to protect your wealth, you need to have skillful representation and a team of capable experts to assist in the process, be they accountants, CPA’s, valuation experts or actuaries from the beginning. If you start your divorce proceedings with an inexperienced team, trouble often ensues.
I also advise clients to ensure they’re running their business like a business – not like a personal cash register. Muddling one’s personal and business affairs only adds extra layers of confusion and ambiguity that can prolong a resolution.
It’s shocking how little some spouses know about their state of affairs; whether it’s what percentage of a company your spouse owns or what how much is owing on the mortgage. It’s very important for those spouses who haven’t been particularly involved in financial decision-making, to keep track of what’s going on. Start by documenting your assets and then find out where they’re located and how they can be accessed.
Lastly, if you have a new boyfriend or girlfriend, I recommend keeping the relationship out of the spotlight. Flaunting a new significant other oftentimes makes for an emotionally-charged case and prolonged negotiations.
What should you look for when selecting representation?
KB: It’s all about experience. Look for an attorney with substantial experience and a proven track record. While you’re shopping around, check to see if they’ve received industry accolades from prestigious organizations such as the American Academy of Matrimonial Lawyers (AAML), Best Lawyers and Super Lawyers. These groups recognize attorneys based on peer reviews and professional achievements. It’s also important to note that along with years of experience comes a network of experts such as forensic accountants, appraisers, and relationships with other lawyers (who could very well be the ones sitting across from us in mediation).
Educating yourself on the process, managing your business and personal relationships, and taking the proper steps to prevent unnecessary delays will make a big difference in reaching a resolution, however, the greatest thing you can do for yourself in a high-net-worth divorce is select a strong and experienced attorney to represent you. From your initial consultation when you asked, “am I going to be ok?” through negotiations and resolution, the decisions made during your divorce will impact you for the rest of your life. With so much at stake, you should not compromise on your legal representation. A highly-experienced family law attorney is your best resource in protecting your hard-earned assets and ensuring a fair resolution. You’ll breathe easier knowing you have a strong team who will get you through it and make sure that yes, you are going to be ok.