Navigating a high-net-worth divorce

Dividing the assets of a marriage can be a challenge, even when a separation or divorce is relatively straightforward. But when there is a large variety of assets worth millions of dollars at stake, the process can get a lot more complicated — even acrimonious, says Toronto family lawyer Gary Gottlieb.

That’s what happened in the 2018 divorce of American billionaires Harry and Linda Macklowe. By all accounts, the division of property was contentious. In addition to their other substantial assets, including the General Motors Building in Manhattan, the couple had acquired a huge collection of blue-chip works of art over more than five decades of marriage.

Splitting vacation homes, art collections

The art, including pieces by renowned artists Jackson Pollock, Andy Warhol and Mark Rothko, made up about 75 percent of their total assets. Half of the couple’s collection ended up being sold at a Sotheby’s auction in November 2021 for a record-breaking US$676 million. Journalist Vicky Ward told the New York Post that Linda had wanted to keep the collection together but since she had forced Harry to sell the GM Building, selling off the art was considered “the ultimate tit for tat.”

Closer to home, former Shark Tank star Robert Herjavec and his ex-wife Diane Plese were embroiled in a high-profile court battle over several of the family’s real estate assets, including ski chalets and a Florida vacation home. After a long and complex trial involving testimony from business valuators and real estate appraisers, Herjavec was ordered to pay Plese $125,000 a month in support and a total of $25 million, representing her share in the family property.

Of course, most divorcing couples won’t have to deal with dividing up such a massive accumulation of wealth or have such an acrimonious split. But for those with significant financial assets, divorce or separation can be complex and they will need help to navigate the process.

A network of trusted professionals

Gottlieb says it’s important to have legal counsel with access to a network of trusted professionals who can help in handling the assessment and division of marital assets and other financial concerns. High-net-worth divorces — typically worth more than $3 million — often involve multijurisdictional assets around the world, including:

· Real estate

· Business Ownership

· Investments

· Pensions

· Trust funds

· Fine art or antiques

· Executive bonus packages

· Books of business

“Our firm has developed an extensive network of business valuators, real estate appraisers, forensic accountants, and other professionals who we trust to serve our clients’ needs,” Gottlieb says.

Determining child/spousal support

Toronto family lawyer Gary Gottlieb says the main issue in high-net-worth divorce cases is how to value the multifaceted assets, many of which are held by corporations, that can make such divorces so complicated.

“Usually, I work with lawyers in foreign jurisdictions to ensure that I have the proper values for the assets and any rules and regulations of that particular jurisdiction that I need to be aware of,” he says.

Gottlieb’s professional network also includes business valuators and forensic accountants who work with high-net-worth clients to ascertain the value of business assets. Sometimes a spouse won’t know about certain assets or assets may be hidden, which can further complicate the process, he explains.

“High-net-worth people are used to working with professionals, so they tend to expect very good customer service, including fast turnaround on the response time and being available for their questions when they want information,” says Gottlieb.

Determining child and spousal support in these cases can be a challenge since some high-net-worth clients are not necessarily drawing a salary.

“These are people who are getting dividends or who are managing what has remained in the company and what draws they take,” says Gottlieb, so it can be difficult to determine their true income. He relies on the means-and-needs test to determine what the monthly support payments should be.

“It goes back to calculating what their true ability to pay is, what their true lifestyle is, and what the family has gotten used to as their lifestyle.”

That can include plenty of expensive activities, such as horseback riding, skiing lessons, country club memberships, and high-end skating competitions.

Hiding assets?

Parties in a high-net-worth divorce may be tempted to try to hide their assets but Gottlieb says it’s important that everything is disclosed when a property is being divided.

“Any attempt to hide or conceal assets can destroy a spouse’s credibility in court,” he says.

Since judges don’t take kindly to a lack of transparency and honesty, Gottlieb says he encourages clients to be completely honest and transparent about all their assets.

There can be “obfuscation, evasion, or avoidance and so, while it is open for people to interpret things in different ways, it’s not open for them to lie,” says Gottlieb. “When people are found to be liars, there’s no way of getting out of that quagmire.”

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Five benefits of settling your divorce outside of court

In a high-profile divorce case from several years ago, an Ontario couple spent four and a half years — and more than $2 million in legal and expert fees — in litigation before the court awarded the wife $10.6 million in spousal support, equalization payment and the proceeds of a life insurance policy.

When a marriage ends, people tend to adopt one of two mindsets: They either want to settle their divorce as quickly and painlessly as possible or they are primed for an epic battle. Those who are not vindictive usually want the most amicable resolution to salvage whatever decency exists between the former couple, especially when children are involved.

Frequently, the ones who come in with guns blazing, intent on getting their day in court, have fixed ideas about their rights and obligations in divorce, many of which are informed by anger and hurt.

While litigation is sometimes unavoidable, it’s almost always in the parties’ best interests to settle outside of court. It’s also important to note that the family judicial system is designed to help couples avoid court by resolving their differences through good-faith negotiations.

There are countless benefits to avoiding divorce litigation, but for the purposes of this post, I will highlight the top five, based on my more than 34 years of practice as a family law lawyer.

1. Less stress

If you’re in the middle of a divorce, you don’t need me to tell you how stressful the experience is. Even amicable splits are fraught with emotion. But a protracted divorce can exact a heavy toll on the parties’ emotional well-being.

The process can drag on for months — or years — effectively stalling spouses from moving forward with their lives. There’s also an added layer of stress that comes with the uncertainty around what a judge will decide for the family.

By contrast, couples who sort out their issues through mediation or collaborative negotiations usually find the process less stressful. It also helps to set the family up for success going forward by encouraging and enabling them to co-operate in resolving future disputes.

2. Lower legal costs (usually)

Litigation is an expensive process. Clients pay for the time a lawyer spends preparing their case for trial, and if their case is complex and involves expert testimony from business valuators, psychologists, social workers and the like, the expenses can add up quickly.

Most people underestimate the amount of time and effort it takes to prepare for litigation. Drafting court papers, collecting financial disclosure and co-ordinating other parties who may be involved are time-consuming undertakings that add to the cost of a case.

On top of that, the court imposes strict limits on the number of pages that can be included in conference briefs, which means lawyers need to spend time synthesizing the information so that a judge can easily glean the most important facts.

By contrast, a negotiated divorce settlement not only generates the best result for a family, it is often a more cost-effective road to resolution. Data from the Canadian Bar Association shows that settlements achieved through alternative dispute resolution serve clients’ best interests in about 90 per cent of cases, compared to around 30 per cent for litigation.

3. Control over the outcome

Asset division, parenting arrangements, child support and spousal support can all be negotiated through an alternative dispute resolution path, such as mediation, arbitration or collaborative negotiations.

People usually don’t recognize that when they ask a judge to decide the matters in dispute, they lose the ability to reach an agreement that will work best for their family. When you go to court, you’re essentially trusting a stranger to make the most important decisions for your family.

Family court judges are exceedingly busy, processing many cases every day. Each one comes with a small mountain of paperwork they must review to get up to speed on the case. While they do their best to understand the dynamics of your case, it is still just one person’s perception — and they could be getting it wrong.

4. Focus on the children’s best interests

Arguably, the most important reason to avoid a contentious divorce is your children.

Litigation creates a hostile environment that pits parents against each other. It’s easy to get caught up in the drama and forget that your children are also going through the most significant change in their lives.

Experts say that a child’s ability to recover from divorce depends to some degree on how parents handle the separation. When parents negotiate an agreement, it demonstrates to their children that they can co-operate in the midst of chaos, and they will have a much easier time adjusting to the changes that come from the divorce.

5. Faster resolution

The wheels of justice turn slowly, especially in COVID times when the courts are more backlogged than ever. Most clients are shocked to learn that getting to their first court date often takes six to eight months.

And long before a case ever gets to trial, spouses have to attend numerous mandatory settlement conferences in an attempt to help them resolve their dispute.

When negotiation won’t work

Of course, there are situations where a negotiated settlement will be unlikely, if not impossible. When one spouse is intent on getting more than their fair share of assets, is requesting unreasonable parenting arrangements or refuses to negotiate, it can stonewall any attempts to settle.

When one or both spouses have a high-conflict personality, a negotiated settlement can be difficult to achieve without highly skilled professional involvement. These types of cases inevitably involve prolonged court battles.

Spouses who can negotiate some or all the terms in their divorce will be in for a much smoother process than if one is determined to have their day in court from the outset.

If you are facing a separation or divorce and would like to understand your options, call us to schedule a consultation. We would be happy to help you.

Five strategies to find the right family lawyer

Choosing a family lawyer for your separation or divorce is an important decision, and one you should thoroughly research before signing a retainer agreement, says Toronto family lawyer Mira Pilch.

Pilch, an associate lawyer with Gottlieb Law Firm in Toronto, says the average divorce case runs anywhere from nine to 12 months, which means it’s vital to work with a family law lawyer whose thinking aligns with yours.

“You get a good gut instinct from a first in-person meeting. Talk to several lawyers before deciding. You want a lawyer who agrees with your philosophy about what’s important and one who will work within your financial constraints,” she says.

Experience matters

During the initial consultation, Pilch suggests asking lawyer candidates about their experience working on similar files. For example, if the main area you and your spouse can’t agree on relates to your children — such as how they will split their time between parents — she says it makes sense to ask the lawyer how often they handle similar cases and what the outcome has been.

“With experience comes a level of confidence and assuredness that your lawyer will get you to the other side. You want to feel well taken care of and that the lawyer understands your goals in the case,” she says.

Familiarity with the various court systems in Ontario is another important consideration for people shopping for a lawyer, Pilch adds.

“In family law, many things are at the judge’s discretion, so you want a lawyer who knows the community, as well as the court services and resources that are available in the area. An experienced lawyer will bring in the right resources for your case, including community-based parenting coordinators, home valuators, social workers and financial planners.”

Litigation ready, if necessary

If you feel your case is going to end up in court — or is currently in litigation — make sure you ask how often the lawyer is in court and how many trials they have conducted, Pilch says.

“People should never feel intimidated to ask about the lawyer’s experience,” she says. “Some lawyers prefer not to go to court, and that’s a better fit for some clients. But if you or your former partner aren’t collaborative and your case is highly adversarial, you want a lawyer who is confident taking that approach.”

People often have pre-conceived notions about winning in divorce, but Pilch says when you hire a lawyer, it’s important to remember that you’re investing in their experience. Clients benefit from a family lawyer who is frank about the details of their case and how the law applies to their situation.

“A lawyer who cautions you against taking a position that is not in your best interests or who can explain why your expectations aren’t realistic” is important because it means they are focused on resolving your matter efficiently,” she says.

Ask about legal fees

Before you hire a lawyer, Pilch says it’s important to have a clear idea of their legal fees and what they include.

“Ask about their hourly rate and what you can do to keep costs down. Carefully review the retainer agreement before you sign it because there’s a lot of fine print that binds you to the contract. If your lawyer can’t answer your questions about the retainer agreement, find another lawyer.”

At Gottlieb Law Firm, Pilch says legal fees are based on the amount of work on each case, not on the overhead or the fancy artwork hanging on the walls.

“We have four family law lawyers who work collaboratively to support our clients. That means if I’m in court and my client calls the office, one of our other lawyers will be able to help them,” she says.

Watch for red flags

The initial consultation with a lawyer gives clients important insights into what the relationship might look like as the case unfolds.

“Just like any professional, you want a lawyer who shows up on time and listens to you. If they’re multi-tasking or preoccupied during the meeting, they may not be a good fit,” Pilch says.

Ask how the lawyer will update you as your case progresses and what’s expected from you regarding communication of relevant information, she adds.

“Setting expectations early in the client-lawyer relationship will ensure everyone is on the same page, Pilch says. “At our firm, we generally ask clients to pull together all their questions and email them once a week, unless it’s an emergency. That keeps your legal costs under control.”

While litigation is sometimes unavoidable in family law matters, Pilch says, in general, a collaborative approach is the most cost-effective route to resolution.

“You don’t want a lawyer who goes in guns blazing at the outset of a new case, especially when children are involved. Even if there’s a great deal of acrimony, you will have to see each other after your divorce. The scorched-earth policy is difficult, and sometimes it must happen, but you don’t want to start there.”

Empathy counts

Finally, Pilch says to look for a lawyer who can empathize with your situation.

“While this is a job for us, we are very much aware this is likely the biggest thing in your life. It’s not just another day at the office. These cases are emotional, and we recognize that.”

If you are facing a separation or divorce and need help understanding your options, book a consultation with a family law lawyer at Gottlieb Law Firm here.