Cases involving individuals with a high net worth or a high value estate require an extra layer of experience that very few attorneys possess. At Clemens | Warren, LLP we have the unique and rare experience in working on cases with estates valued into the Billions of dollars.
A high net worth case often involves issues that are not as common in a more standard case. It is not uncommon for cases such cases to include ownership interest in a business, complex compensation packages and structure, mixed character assets, stock options and investment portfolios, complicated discovery issues and the need for in depth investigations – just to name a few examples.
One of the most important aspects of handling a high net worth case is the ability to work closely with experts. Any attorney who advises you that the use of experts in a high net worth case is not necessary, proceed with caution! At Clemens | Warren, LLP, having tried numerous high net worth cases, we are keenly aware the importance in working with the best experts available – and working with them effectively. We have close relationships with many of the top experts in California and throughout the United States. It is not uncommon in high net worth cases to prevail on an issue by virtue of working with a top expert and an attorney that knows how to properly present the case with the expert involved.
Below are some of the examples of situations that we often have handled in high net worth cases.
Often a high net worth case will involve an ownership interest in a business, both private and public. When these businesses are created prior to marriage the presumption is that the business is the separate property of the owner. However, the analysis doesn’t end there. In California, Family Code Section 760 defines community property as “…all property, real or personal, wherever situated, acquired by a married person during the marriage while domiciled in this state…” Included as community property, are earnings made during the marriage as well as the efforts of one spouse. In other words, everything you acquire, create, earn, and build during the marriage is presumed community property.
So what does this have to do with the business that was created before marriage, you just said that is my separate property?! While that is a separate property business, the efforts and time dedicated by either spouse during the marriage are community property. So when those efforts and time invested increase the value of the separate property, the community can share in the increase in value. (See Pereira v. Pereira (1909) 156 Cal.1 103.)
The analysis in cases involving this issue come down to proving what factors created the increase in value during the marriage. If the evidence indicates the increase in value was a result of the spouses efforts, the Court will likely order the community share in that increase. But in cases where other factors were the reason for the increase in value (i.e. market conditions, business model, management team, etc.), then the community would not likely share in any of the increased value and the next question would be to determine if the owner spouse was adequately compensated during the marriage. If not, the Court can order reimbursements subject to potential credits. (See Van Camp v. Van Camp (1921) 53 CA 17; also Beam v. Bank of America (1971) 6 Cal.3d 12.)
To make matters even more complicated, the Court is not bound by either of the methods described here. The Court is free to allocate ownership between community and separate property in whatever manner it finds appropriate in a given case. In a recent case, the trial court applied a hybrid approach, finding a portion of the increase in value of the asset was from community efforts but the later in time increase was not related to community efforts. (See Marriage of Brandes (2015) 239 Cal.App.4th 1461.) It is rare that a case would not apply either Pereira or Van Camp, but knowledgeable attorneys are aware that it can be done if the opportunity presents himself.
Clemens | Warren, LLP is one of the few law firms in San Diego that has worked on multiple cases with this issue and been part of multiple week trials on both sides (business owner and the spouse). If your case involves a business ownership, it is critical that you retain experienced and knowledgeable counsel. Contact us with questions or to setup a time to speak with one of our attorneys about your case.
Also commonly litigated in high net worth and high earner cases, are the issues of child and spousal support. As discussed on our Child and Spousal Support page, things can play out differently for a high-income earner.
For Child Support, California uses a child support guideline formula that is presumptively correct. However, there are special circumstances which could permit the Court to deviate from using the guideline formula. One such special circumstance is the case of a high-income earner. An inexperienced attorney might not be savvy enough to make the argument seeking a deviation, resulting in overpaying of Child Support by tens, possibly hundreds, of thousands of dollars per year. But recognizing the ability to seek a deviation is only the first step. More importantly is what comes next – proving to the Court that application of the guideline formula would be unjust and inappropriate, guideline child support would exceed the child’s reasonable needs, and a deviation would be in the child’s best interest. This requires experienced and effective counsel and often the use of various types of experts.
Our attorneys have handled multiple high-income earner child support cases involving deviation of child support. Contact us with questions or to setup a time to speak with one of our attorneys about your case.
Cases of high earners also often involve the determination of spousal support. You can read general information about spousal support awards on our Support page. But as it applies to cases of high-income earners, the analysis can become much more complicated. It is necessary to engage the services of an expert forensic accountant that is experienced in family law. The expert is going to be imperative in formulating argument and strategy around two main concepts, income available for support and marital standard of living. It is common that in the case of a high-income earner, income can come from multiple sources and is not as straight forward as someone who is a simple W-2 employee. Instead a forensic accountant must examine all sources of income and arrive at a final figure to be presented to the Court. You should expect your spouse to have a forensic accountant of his/her own as well and their conclusion to vary from your own accountant. Next, as referenced above, the second concept that must be addressed in a spousal support case of a high earner is a deep dive into the marital standard of living. Unlike standard cases, the lifestyle enjoyed by high-income earners requires much deeper analysis regarding how money was spent, what it was spent on, and even how money was saved and invested.
Those are but a couple of the examples of why it is so important that you are represented by experienced counsel and the best expert. Our attorney’s at Clemens | Warren, LLP routinely handle all support matters in cases involving high-income earners. Contact us with questions or to setup a time to speak with one of our attorneys about your case.
