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Do You Handle High Net Worth Divorces?

By: Leslie A. Satterlee & Gregg R. Woodnick

You would be surprised how often I hear this question.  I hear it during formal consultations in our office and often in passing sitting at the bleachers while making small talk with parents on one of my kids’ sports teams.

I used to just say “yes” or “of course,” but recently have changed my response to a question: “What do you consider high net worth?” The reason why I ask this question is because high wealth is subjective – different people have different impressions of high wealth.

For example, to a schoolteacher earning $45,000 a year, high net worth may involve a divorce from their OBGYN hospitalist husband who earns $360,000 a year and who has a house in Scottsdale and a cabin in Flagstaff. To someone else, high net worth involves fractional jet ownership, multiple homes, drivers for the children and business interests that are intertwined in trusts with cryptic names, foreign locations, and tax planning mechanisms.

The complications of “high net worth” divorces are endless, but here are a few often-recurring issues:

(1) Valuation of business interests (e.g. corporations with multiple partners, ESOPs, generational trusts) – these are not your typical assets and valuing and dividing them can be difficult to do.

(2) Asset valuation of properties held outside of the United States – with this you need to be able to find ways to value properties and understand that ownership interests in different countries may be restricted by different rules and laws.

(3) Securities – here, understanding tax implications can be key.

(4) Uncovering undisclosed assets in complex financial instruments – finding the assets can be a task upon itself. With offshore accounts and cryptocurrency, there are a lot of places that money may be hiding.

When dealing with children in these high net worth cases, other issues that may not be addressed in other divorces arise, including:

(1) Dual citizenship/passports – understanding complexities of rules and restriction of traveling with children in divorced families, and Hague Convention implications.

(2) Deviations of child support – the Arizona Child Support Guidelines may not be an appropriate calculation for every high net worth clients and the cost to support children.

(3) Tutors/aides/security contractors – these are additional costs that need to be considered and a division of the cost needs to be negotiated.

(4) Privacy (especially if the family has a conspicuous social profile) – keeping things out of court, or limiting exposure to the public, may be an important consideration here.

Due to the many complications that may arise, it is very common to see a lawyer not well-equipped to handle these kinds of cases. An attorney should not attempt to navigate the entire process without any help. Even after practicing law for years and trying family court matters with and without significant assets, the best lawyering is knowing when to consult and associate with outside help, such as a vocational expert or tax guru.

One way to address these concerns is via consulting experts.  This subject was addressed at a recent MCBA conference moderated by Gregg Woodnick.  The presentation addressed a litigation (and ultimately settlement) tool used by our office in representing parties dealing with complex issues.   The notion, often humbling and impossible for an attorney to accept, is that we do not know everything there is to know about every subject matter.  Educating the lawyer is the first step towards educating the other side and then eventually the court as to why your position should be adopted. This requires confidentially engaging the insight of subject matter experts.

An easy example of how this works is that we may engage a forensic accountant on a consulting basis for our clients. This consultant is fundamentally different from an expert witness because they are considered to be separate by court rules and the law. The consultant does not act as a witness and would not testify. Essentially, the consultant’s role is to assure that we, the attorneys, are getting accurate information necessary to be certain that (because we are not ourselves forensic accountants) we have the knowledge and data set to educate actual experts and the court of the issues. Using consultants in a divorce often results in a more efficient process, more comprehensive disclosure, and an easier path to value the assets and income for division pursuant to Arizona Law.

Here is another example where we may use a consultant:

In a spousal maintenance/alimony claim, one spouse indicates that, notwithstanding their graduate degree, they cannot return to work (and be expected to earn money to support themselves) due to medical issues arising during the marriage. Again, we are lawyers—not doctors. We are able to review medical records and read the notes; however, we lack the comprehensive knowledge of a real medical expert. Bringing in a consulting specialist, like a neurologist, to review the records better equips us to ask the right questions to uncover the validity of a claim and address it persuasively.

With serious financial stakes, the old axiom that “the juice is worth the squeeze” holds true when consulting experts.  Assembling the right team saves time and tens of thousands of dollars that may be expended to attempt to correct a case that has gone off course.

Offending the Court

Judges take an oath of impartiality and a commitment to follow the law as written – this is a fact known by everyone. However, just because they took this oath does not mean that it prevents judges from being disgusted by opulence or what they perceive as a waste of time. Nationally, judges earn an average of $133,840 [1]. In Arizona, judges can earn anywhere from $107,000 to $160,000 [2]. Their incomes  double the median income of an Arizona family, but compared to a higher wealth client, they may deem opulent spending downright offensive.

When your client is spending more on cosmetic procedures than the judge earns in a year, there is a problem. When your client’s purse collection is worth more than the average home, you have a problem. When your client’s driver (who takes the kids to school and runs errands while they are there), drives a G-Wagon while on the clock, you have a problem.

Opulence does not play well in courts.  These cases are most often and best resolved by gathering the data and engaging the right experts and consultants and then working with opposing counsel to bring the matter into private mediation.

Private mediation is key, particularly in asset-based cases, to prevent the parties from bringing a bad case to trial. Mediation allows for creativity and flexibility in resolutions and creates options for confidentiality. This includes the benefit of choosing a mediator who would understand the complexities of asset division. While this may not seem like much of a revelation, mediation plays a key role in divorces with significant assets.

In short, yes, I handle high asset divorces.  And, yes, I encourage potential clients to do their homework on their lawyers and their philosophies. The divorce process is never pleasant, but smart planning and the right approach can make all the difference.

Leslie Satterlee is a 3rd generation Divorce attorney who practices in Phoenix.   She is married to an attorney (fortunately not another divorce lawyer) and spends her free time exploring the great outdoors and reading.

Gregg Woodnick has been practicing law in Arizona for over 20 years. He is a former adjunct law professor and has lectured for Yale University, Midwestern College of Osteopathic Medicine, Arizona State University and Northern Arizona University.

[1] https://work.chron.com/annual-salary-judges-9479.html

[2] https://ballotpedia.org/Arizona_court_salaries_and_budgets


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