Tag Archive for: high asset divorce

The Role of a Forensic Accountant in a High Net-Worth Divorce

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When considerable assets are involved in a Florida divorce, unraveling them can become a significant challenge.

If one or both spouses have a high net worth, there may be structures that protect these assets. In these cases, it may be wise to hire someone who can investigate finances, whether for tax purposes, the ease of succession, or to determine if each spouse is honestly declaring their financial value.

A forensic accountant is a professional with invaluable skills who can investigate each individual’s net worth as you prepare to divide your assets.


What is a Forensic Accountant?

Sometimes, a nonprofit corporation, a for-profit corporation, a government entity, or a high-net-worth individual may employ a forensic accountant. The American Bar Association reports that forensic accountants use scientific techniques to investigate the money trail, often done when money goes missing or fraud is suspected.

In the case of a pending divorce, a forensic accountant might be used to:

  • Assign a value to any business – This includes the value if and when the business is sold and its potential for future earnings. Exploring whether one party is undervaluing their business to keep from paying more to the other spouse. Has one or have both spouses breached their fiduciary duty to the company to hide fraudulent activity?

  • Determining if one party has squirreled money away overseas where another accountant might not find it. This practice may also mask illegal activities.

  • Investigating the accurate numbers of each individual’s holdings. This includes exploring debts the other spouse may want to share upon splitting.

  • Determining the value of a family trust, living trusts, and inheritances, both now and in the future.

  • Coming up with an actual value in case one spouse argues that child support or alimony is based on the other’s earnings. It’s common for one party to understate their earnings to minimize paying child support or alimony.

  • A forensic accountant will help provide information about each spouse’s tax implications, including taxes and the cost of transferring assets due to a divorce.

How Does a Forensic Accountant Work?

At the family law office of Crystal Collins Spencer, we are very familiar with divorces in which one party tries to conceal their assets. This can be accomplished by creating a secret account, transferring offshore, transferring to a family member or friend, or creating a shell company.

When we suspect this has been done, hiring a forensic accountant will provide us with the answers we seek.

For example, a forensic accountant analyzes the deposits made into the account and the money transferred out. The numbers should result in no unanswered questions. 

A forensic accountant will also investigate whether one spouse delays receiving a bonus or salary increase until the divorce is finalized. 

The forensic accountant will look at each spouse’s bank account to determine if they made any large purchases without declaring where the money came from. These might be jewelry, boats, art, vacation property, or an expensive car. A deep dive will uncover suspicious activity that needs to be explored further. 

Particularly revealing is whether the assets, deposits, and payments have changed considerably before and after the divorce announcement. Even with the first hints of divorce, we may find that one’s assets were significantly reduced or altered in some significant way. We need to determine where that money went.

Your High Net-Worth Florida Divorce Attorney

Attorney Crystal Collins Spencer is your best ally when you are involved in a high net-worth divorce. She will walk you through the process of preparing to file for divorce, discovery, financial disclosure, settlement, and, if necessary, a trial to the final dissolution of the marriage.

Her experience, combined with her compassion, will aid you in making the right decisions both now and in the future, whether child sharing and custody, alimony, division of assets, property allocation, or modification of an agreement. You only get one chance to make this right. 

Call Ms. Spencer at her Pensacola office at 850-795-4910. Whether you live in the Panhandle, including Santa Rosa Beach, Sandestin, Destin, and Ft Walton, Ms. Spencer’s services are available to those in Pensacola and the surrounding areas. 

Sources:

ABA
https://www.americanbar.org/groups/litigation/resources/newsletters/family-law/what-forensic-accountant/ABA

High Net Worth Divorces: Understanding the Intricacies of Valuing Private Equity Holdings

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Over recent years, some high-net-worth individuals have emerged from the middle class by playing the market and investing in real estate. However, a typical eight percent return may not suffice for some with loftier financial aspirations. Private equity increases the risk but may also result in higher yields on your invested money.

Also increasing is the complication in valuing private equity holdings when facing a divorce.

In the unfortunate situation of dissolving a marriage, art, jewelry, homes, property, second homes, and boats can all be valued. Private equity holdings represent complexities to valuation and may have tax consequences that must be considered.

An experienced family law attorney will advise you on separating these holdings when facing a Florida divorce.

Private Equity Holdings

In a Florida divorce, a divorcing couple follows the Florida equitable distribution guideline. That means assets acquired during the marriage become marital property and are subject to division.

Unlike a community property state where 50/50 division is the standard, equitable division allows the couple to consider their version of what they believe is “equitable.”

For example, a boat purchased with marital assets may mean more to the husband than the wife, and in turn, she can retain something of similar value purchased with marital assets.

Meanwhile, homes, property, art, jewelry, and second homes all have value, which can be accurately ascertained.

However, the value of a private equity fund (PE) is often unclear, as it is increasingly an investment choice for ultra-high-net-worth individuals. They promise higher returns, especially over the long term, but PE involves risk and is not easily liquified. Typically, an investment lasts from five to 15 years.

While company shares can be valued, private equity (PE) refers to shares of a company that are not listed on the stock exchange.

Private equity partnerships may manage and invest in mature companies before they are sold. To value private equity, the company’s future profitability must be considered by looking at the earnings projection, management team, growth projections, and current revenue.

Also, consider the industry: Is it likely to grow in the future?

Valuing Private Equity Holdings

When dividing private equity holdings, valuation should consider publicly traded comparables, company analysis, and discounted cash flow methods. These are standard approaches in private equity valuation:

  • Publicly Traded Comparables (Comps): This involves comparing the target company to similar publicly traded companies using various financial metrics such as price-to-earnings (P/E) ratio, enterprise value-to-EBITDA (EV/EBITDA) ratio, and price-to-sales (P/S) ratio.
  • Company Analysis: This includes a detailed analysis of the target company’s financial performance, growth potential, and market position.
  • Discounted Cash Flow (DCF): This method estimates the present value of the company’s future cash flows, adjusted for risk and time value of money.

Complications in a Florida Divorce

When facing a Florida divorce, several issues can arise:

  • Prenuptial and Postnuptial Agreements: If one of these agreements exists, asset valuation may be a moot point if the assets are excluded from the division. Florida law allows for prenuptial and postnuptial agreements to dictate the distribution of assets, potentially bypassing the need for valuation.
  • Expectation for Future Investment: Calculating the value of private equity holdings can be challenging due to the expectation of future investments to realize the fund’s total value. Legal and tax advisors may need to analyze both the present and future value of these investments.
  • Volatility: Private equity investments are typically long-term and can be highly volatile. The value of these investments may fluctuate significantly, and there is always a risk of the company failing. Any valuation should consider the potential for losses and the long-term nature of these investments.

Buyout or In-Kind Transfer Options

  • Buyout Option: One spouse may buy out the other’s interest by paying half of the estimated valuation. Taxes and fees should be considered in this process.
  • In-Kind Transfer: This option allows the spouses to split ownership equally, with each spouse responsible for providing additional capital when needed to increase the investment.

Valuation Process

  • Director Consultation: A discussion with a company director may provide insights into the value of the investment and its future prospects.
  • Financial Statements and Tax Returns: These documents are essential for estimating the fair market value of the investment. Normalized financial statements, which adjust for non-recurring or non-economic items, provide a more accurate picture of the company’s earning capacity.

Your Florida Family Law Attorney

Attorney Crystal Collins Spencer understands the complications presented by dividing the assets of a high-net-worth couple in a Florida divorce. She is focused on providing her clients with a sound plan that allows a spouse to move on with their lives, retaining what is most important to them. During a consultation, Ms. Spencer can outline some options for moving forward. Call her Pensacola office at (850) 795-4910 to begin the conversation.

Sources:
Investopedia
https://www.investopedia.com/terms/p/privateequity.asp

Unpacking the Complexities of Trust Funds in High-Net-Worth Divorces

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High-asset divorces are more complicated than divorces for couples of modest means, especially if trust funds are involved. A trust fund defines the formal relationship between the grantor, trustee (a third party), and beneficiary. An individual with assets transfers them into a trust, which defines who will manage the property if they cannot do so.

A trust fund is essential for protecting assets, estate planning, and naming beneficiaries. No couple expects that when they say, “till death do us part,” they will need to divide assets in a divorce, but as we know, half of all marriages fail. Unpacking the trust fund may become essential to dividing assets in a Florida divorce.

Suppose you plan to divorce or marry, and significant assets are involved. In that case, you may want advice from a family law attorney with decades of experience in high-asset divorces and marriages. Crystal Collins Spencer can help answer your questions during an initial consultation.

Trust Funds

A trust is one way to protect assets before a divorce, especially since an individual cannot move assets during a divorce. At that time, the court will consider the timing fraudulent.

There are two different types of trust funds.

  • A revocable trust means the grantor can change it at any time, has full access, and can move assets into and out of the trust. A revocable trust, overseen by the grantor, a party to the divorce, means the trust may be divided during a divorce.
  • An irrevocable trust protects property against creditors and legal judgments. It cannot be modified for any reason, which creates complications when a divorce is pending.

There are other types of trusts, and whether they are subject to division depends on the trust’s language and when it was formed.

Funding a Florida Trust Fund

Dividing a trust fund in a high net-worth divorce requires that many questions are asked and answered, for example:

  • Was the trust set up before the marriage? The funds then may be the sole property of the grantor if that can be determined.
  • If set up during the marriage, did marital funds contribute to the trust fund? Monies earned during the marriage are subject to division unless a prenuptial or postnuptial agreement specifies that the trust assets are not to be included in a divorce and both partners agree to that language.
  • Dividing a trust fund becomes more complicated if your assets have been co-mingled during the marriage. Have trust assets been deposited into a joint account? Besides cash assets, was one person working and the other taking care of the children? All contributions to the marriage will be considered in a divorce, even non-financial contributions.
  • Was the trust set up to benefit the children or their education? If so, it could be subject to division in a divorce.

Your Florida Divorce and Family Law Specialist

Attorney Crystal Collins Spencer understands that dividing a trust fund in a high net-worth divorce requires accurately valuing it. She and her team will investigate who contributed to the fund and whether all assets have been disclosed.

Ms. Spencer has seen some creative avenues someone may take to hide assets, and she understands how to uncover them.

Offshore trust funds will also be subject to investigation and division in a divorce if both spouses contribute financially to the trust. Even non-financial contributions need to be valued and considered an asset subject to division.

As a soon-to-be-single person, concessions made before and during a marriage should now be reevaluated as you plan on moving ahead without the financial support of a marriage partner.

Whether property, brokerage accounts, business interests, homes, cars, or art, you must consider the tax implications of assets post-divorce.

Seeking legal representation when considering a divorce can put you in the best financial situation as we negotiate your separation. Now is not the time to passively agree to any settlement to get it over with. It is also not the time to try to shift assets, as the court will not consider that favorably.

For more than thirty years, Attorney Spencer has advised high-net-worth individuals facing divorce in Pensacola, Sandestin, and Fort Walton.

Let Crystal Collins Spencer’s professional guidance give you the peace of mind you will need moving forward.

Call her Pensacola office at (850) 795-4910 to arrange a consultation to help you move forward in your life.

Protecting Intellectual Property Rights During a High Asset Divorce

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A high-asset divorce can bring particular complications to the settlement table.  Both parties will understandably want to retain what they consider their individual property, but a marital settlement in Florida will divide assets equitably.

While intellectual property (IP) often cannot be divided, its future profits are a consideration for a divorcing couple.

To retain your particular intellectual property rights, you must contact a family law specialist who understands the intricacies a high-asset couple brings to the table.

Intellectual Property

What is intellectual property?  It can be a book, script, radio or television show, an invention, computer code, art, or any creative effort that can be patented, trademarked, or copywritten to protect the owner.

A patent is the most common type of protection for intellectual property rights. With a patent, the owner can sell the invention or license it to another party. IP can deliver value to its owner, who can then develop, protect, and monetize the property.

Protecting Intellectual Property Rights

Several things must be done to get organized as the first step in protecting intellectual property rights during a Florida high-asset divorce. You must know what you have and its value.

  • First – Compile a list of intellectual property (IP) assets and gather the documents that validate such agreements, such as certificates, financial records, and licensing agreements. Determine who contributed to the IP, including financial and other contributions, contracts, and nondisclosure agreements,
  • Second – Hire a professional appraiser who can value the intellectual property in the present and future. That will be speculative but provide some idea of future income from the IP. Consider tax implications and the ongoing cost of maintaining the IP. A forensic accountant or IP attorney will be needed to accurately determine the value of your property before considering how to distribute it equitably in a divorce proceeding. The other option is to use this assessment as the basis for a payout now, not in the future.
  • Third – Protect your intellectual property by closing loopholes, updating confidentiality agreements, and preventing unauthorized access to sensitive information or trade secrets. Document the contributions to the IP made by both spouses.
  • Fourth – Your divorce settlement must address all of your IP concerns. With the help of your attorney, a mediation might include a post-nuptial agreement that addresses how intellectual property will be treated in the divorce. Include in the mediation the assessment of what the value of the IP will be in the future. A non-disclosure agreement, as well as other contracts, may be required as part of the mediation.
  • Fifth – There needs to be an enforcement mechanism in your mediated divorce settlement that may include monitoring and protecting intellectual property rights and a penalty for any violations.Your

Your Florida Family Law Attorney

Among the assets a divorcing couple will address, intellectual property has the potential to generate some of the most contentious and bitter fights.

That’s because it is personal property, and the owner may be very attached to his property and not willing to put it in the pool that is to be equitably divided.  However, if there is present and future value to the IP, and it falls under the definition of a marital asset, unless you’ve negotiated otherwise, it may need to be divided in a Florida divorce.

Attorney Crystal Collins Spencer advises clients that the rights to the income generated by IP will be subject to a discussion about an equitable division along with property, investments, cars, homes, and even time with the children.

At this time, staying closely in touch with the mediations is advised to explore your options thoroughly. Equitable division in Florida does not mean equal, and a settlement may become more favorable if you can work with your ex-spouse rather than have the court impose a divorce settlement.

Attorney Spencer has nearly four decades of experience in high net worth and complex divorce matters. She will be your ally in the division of IP if you call her Pensacola office, Spencer Law, at (850) 912-8080 to begin the conversation. Her family law practice represents individuals from Pensacola to Ft. Walton, Sandestin to Santa Rosa Beach, and Panama City.

Divorce and the Impact on Luxury Assets: Yachts, Jets, and Beyond

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Like 40 other states, Florida views divorce through the lens of “equitable distribution.” Equitable distribution requires both spouses in a divorce to be transparent about their assets before they are divided in a divorce.

The process can become particularly complicated for high-net-worth individuals who have amassed a great deal in their lifetime, whether it be property, financial accounts, investments, business interests, cars, art, yachts, jets, jewelry, and other luxury items.

Family Law Attorney Crystal Collins Spencer understands that each asset must be disclosed to be valued as an essential part of equitable distribution. Fairness and transparency are required in the process, which can become very contentious.

Ms. Spencer focuses her family law practice on high-net-worth divorces. After many decades in practice, she has amassed the expertise and compassion you need at this crucial time.

Marital Assets

In some marriages, acquiring luxury property is a priority. Maybe one spouse has a high-value car collection while the other collects art. The fair market value of these assets needs to be determined.

Equitable distribution does not mean that the value is cut in half. Instead, assets or their value will be distributed depending on the contributions each made to the marriage.

Contributions may include value other than financial. Raising children, supporting one spouse’s education, and business all play a part in determining what ultimately is equitable. Besides the contributions to the marriage, liabilities, such as debts, will all play a part in determining equitable distribution.

Additionally, some of the following factors need to be considered:

  • Is there a prenuptial agreement?   Some high-net-worth individuals marry after both parties have signed a prenuptial (prenup) agreement. In some cases, a postnuptial agreement (postnup) is created. Each spouse retains their own lawyer to advise them before signing an agreement.

Both agreements specify the ownership of possessions that have been acquired both inside and outside of the marriage. These agreements generally ensure you will keep what you brought into the marriage, but they may be vulnerable to a challenge.

A prenup or postnup can be applied to property, cars, jewelry, and financial assets, particularly if one spouse owned them before the marriage.

The theory is that you are most agreeable before a marriage. Ms. Collins will be your best ally if you are presented with one of these agreements prior to a marriage. It may not be in your best interest to sign one of these agreements as it is presented but rather use it as a basis for negotiation.

  • Fair Valuation – A luxury vehicle may be more than a car. It may hold sentimental value if it is a hobby or inherited from a relative. A professional appraiser specializing in valuations should be involved when items are highly valued. Not only the item’s value but what will it cost to maintain and retain that possession? Both should be considered to determine the actual value of an asset.
  • Lifestyle – Luxury items may include a jet, yacht, cars, jewelry, art, or something of extremely high value. In planning for the future, both parties should consider whether their life will be measurably changed without that asset.In the case of a jet – is it used as an essential part of business? Is a yacht for business or pleasure? The cost of maintaining and retaining this asset should be considered as part of the valuation. Is it a marital or non-marital asset?
  • Penalties for Hiding Assets – If you suspect valuables are being hidden, working with a forensic accountant to explore undisclosed assets such as bank accounts, offshore accounts, and hidden businesses is essential. You must launch an investigation to realize an accurate financial picture of assets.

The spouse attempting to hide assets will suffer legal consequences and lose credibility with the court.

Your Florida Family Law Attorney

Pensacola attorney Crystal Collins Spencer understands the division of assets involves valuation, liabilities, individual plans, and the ability to maintain the item. Financial professionals will be brought into the collaborative process to ensure equitable division that is fair and satisfactory.

The duration of the marriage, education, children, alimony, the health of those partners, and their ability to earn in the future will all be considered, as well as non-financial contributions to the marriage.

Ms. Collins has experience as an expert negotiator in a high net-worth divorce to address these complex financial issues. Call her Pensacola office at (850) 795-4910 to make an appointment and see how Ms. Spencer can help you.

Navigating the Transfer of Real Estate During a High Asset Divorce

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A Florida divorce is one of the most stressful events you can endure. Many individuals would like to stay put in the family home, especially if children are involved, and one of the most frequent questions from divorcing couples is whether they can keep the home.

The answer is it depends.

Florida is an “equitable distribution” state. That means that unlike community property states, where assets are tallied and divided “equally,” a divorcing Florida couple can divide assets as equitably as they determine. They will outline their decision in a divorce settlement crafted with the help of their attorneys.

In a high-asset divorce, there may be contributions to the marriage that deserve consideration even though they are not financial. The division of assets will be finalized in a divorce settlement that may not divide assets in a 50/50 manner but instead in a manner that reflects the contributions each made to the marriage.

Transferring Real Estate

The court will first determine if the real estate is marital or separate property.

If marital property, under Florida law, married couples hold the property as tenancy by the entireties, meaning they are both 100 percent owners of the property and entitled to any profit and liable for any debts associated with the property.

In the case of separate property, if the home was owned by one of the divorcing spouses before the marriage, it could remain the property of that spouse, providing that joint assets were not used to improve the home or pay off the mortgage. If the couple used marital assets to maintain the house or to pay down the mortgage and taxes, the equity in the home may be subject to an equitable distribution.

If assets are needed to address the divorce settlement, one spouse may agree to a buyout over the property. A buyout releases one owner in exchange for assets, usually cash. That may be a necessary outcome when one person wants to remain in the home and the other wants to leave.

In a marriage where the primary asset is the home’s value, the court may order the house sold as part of the divorce.

Key Words to Transfer Real Estate in a Florida Divorce

Dividing Florida property during a divorce is accomplished by filing a quitclaim deed. Real estate is transferred via a deed, and a quitclaim deed is the most efficient way to remove the name of a soon-to-be ex-spouse, removing all of their interest in the property, not just half.

The recipient (grantee) is named as is the grantor (granting the property to the other). The deed does not indicate whether the grantor has an interest in the property.

Within families, quitclaim deeds are often used when the grantee understands the grantor has some ownership of the property.

Transferring real estate during a high-asset divorce should involve keywords to transfer the property correctly.

Under Marital Settlement Agreement and Final Judgment of Dissolution of Marriage should include:

  • The date
  • The correct names and addresses of the grantor and grantee
  • The legal description of the property and parcel identification number
  • Using a notary and both grantor and grantee signing before two witnesses
  • Recording the deed at the county recorder’s office

The grantee then will have a clear title to apply for a new mortgage in their sole name. The other spouse then will have no further legal obligations to the mortgage holder.

This property division should only be undertaken if the grantee maintains the home and pays all the bills.

If the divorcing couple has settled, the final divorce judgment will likely state both parties must sign the quitclaim deed. If one refuses, the other can take him back to court.

The receiving spouse can legally transfer the title by filing a copy of the divorce judgment with the clerk of court records.

You will want to accomplish a transfer of property at the time of the divorce so that you are not surprised down the road when you go to sell a property you thought you had an interest in and find you must negotiate with a former spouse whose name is still on the property.

Your Florida Family Law Attorney

Transferring real estate during a high-asset divorce can be complicated and open to interpretation. That is why Crystal Collins Spencer is your greatest asset at this time. She has spent more than three decades delving into the tactics one spouse may use against the other in a high-asset divorce. Let her experience work for your side in negotiating a favorable dissolution of your marriage.

Attorney Spencer works with individuals and complex family matters in Pensacola, Sandestin, Fort Walton, and the surrounding Florida communities. Contact her to schedule an appointment at (850) 795-4910.