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.”

Photo Credit: Getty Images

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.

The high price of high-conflict separation and divorce

Ending a common law relationship or marriage is never easy, even when a couple has the best intentions to be amicable. Often, the process of separating amplifies the very conflicts that cracked the foundation of the union –– infidelity, differences in parenting styles, lack of intimacy, money management problems and mounting pressure from marital debt.

If you watched the Netflix movie Marriage Story, you will recall when Charlie and Nicole decided to call it quits. They were adamant about doing it in the friendliest way possible. They wanted to protect their eight-year-old son, Henry, from conflict.

They agreed to avoid lawyers. Their specific approach to resolution proved disastrous. The conflict escalated. Nicole hired a high-conflict litigator and Charlie had to follow suit. Before long, they were enmeshed in a bitter custody battle for their son.

The movie is, of course, dramatic fiction, yet high-conflict separation and divorce cases often involve character assassinations, relocation of children and the quest to “win” at all costs.

Separation and divorce ought never to be about winners and losers. It should be about negotiating a win-win scenario for both spouses, taking into consideration the best interests of the children. Sadly, however, too often this is simply not the case and not in the cases that come across my desk.

Signs your divorce may be high-conflict

When one party has a high-conflict personality, a negotiated settlement is extremely difficult to achieve without highly skilled professional involvement. These types of cases inevitably involve prolonged court battles. High-conflict people have great difficulty accepting and coping with a marriage breakup and will go to extreme lengths to stonewall the process.

People with high-conflict personalities have an ongoing pattern of all-or-nothing thinking, unmanaged emotions, extreme behaviour or threats, and a preoccupation with blaming others, says Bill Eddy, a lawyer, therapist, mediator and the co-founder of the High Conflict Institute.

“Splitting up with high-conflict people is often when you see the most extreme behavior of all,” he writes.

In the more than 33 years I’ve been practising family law, I can confidently assess within the first couple of minutes of taking on a new client, whether or not we’re in for a high-conflict scenario. Here’s an inexhaustive list of some of the signs:

· A history of emotional/physical abuse between the spouses;

· Financial control by one party over the other

· Claims of no income or low income by a party who’s living a middle-class to upper-class lifestyle

· The other party has hired a high-conflict lawyer

· One party has a mental health issue, such as a personality disorder

· Drug or alcohol abuse

· Overt and covert actions to alienate a child from the other parent.

The price of a bitter separation and divorce

Not only does a high-conflict separation divorce leave parties emotionally drained and psychologically scarred it can also take a huge financial toll. Some people spend years going in court, fighting over children, possessions, assets and debt.

There are a multitude of issues to be sorted out in divorce: determining custody of the children and visitation schedules, dividing assets the couple has accumulated throughout their union and figuring out what to do with the marital home, for example. In every instance where the parties can’t reach an agreement, lawyers will invariably have to spend more time working on the file, either in negotiation with the other side or in court, which is where legal costs can skyrocket.

In more complex cases, family law lawyers frequently enlist third-party experts, such as private investigators, accountants, mental health professionals and business valuators, all of which add to the tally. For example, in a high-conflict divorce where one spouse is suspected of hiding assets, a lawyer might recruit both an investigator and an accountant.

Enduring impact on children

Children are often the casualties of high-conflict separation and divorce. Social science literature has made it very clear that children do not emerge unscathed. They frequently have poor outcomes in their social connections, emotional problems, low self-esteem and an inability to trust and form meaningful relationships over the long-term.

In one study evaluating more than 30 years of research on the effect divorce has on children, researchers found children of divorce were less competent in multiple areas of life, including family relationships, education and future earning power.

Choose a lawyer with experience in high-conflict divorce

The majority of family law and divorce cases I’ve handled, fall into the high-conflict category. I know from experience that it’s critical to have strategies in place to move the process forward.

For example, the biggest mistake lawyers make when dealing with high-conflict parties on the other side is to proceed with the false hope that encouraging negotiations or inviting the other party to see reason are helpful. I usually make one, sometimes two attempts to ascertain if the other side wants to be reasonable. If not, we move straight to court. Otherwise, it’s a waste of time, energy and, most importantly, the client’s money.

The reality is that not every divorce is a candidate for a negotiated settlement. I often take over files where previous lawyers have spent months waiting for responses, thereby prolonging the entire ordeal, adding unnecessary legal costs and unnecessarily expending a client’s patience. From my perspective, it becomes evident rather quickly whether a file will require a court date or whether I have a bona fide opponent ready to negotiate.

It’s also crucial for lawyers to recognize when their own client is the high-conflict party. I see it a lot in my own practice. In some cases, these clients avoid following proper legal advice. They prefer to advance their own agenda of retribution. They prefer to litigate at all costs and lose all perspective in their determination to wreak havoc on their spouse to inflict pain. It requires a great deal of skill, patience and determination to refocus those clients on what is required and necessary for them to move on and for their victimized children. Thankfully, I am able to effectively rely on what I’ve learned through years of reading, research, mediation and arbitration training, and litigation expertise in order to help clients focus on the task at hand. I am well able to avoid their emotional triggers.

Identifying the potential for a high-conflict separation and divorce at an early stage is important. These cases cannot be managed through self-representation. It’s imperative to work with a lawyer who has the requisite experience and a successful track record in managing high-conflict cases. Failure to choose the right lawyers in such cases can lead to disastrous consequences.

Photo Credit: via ESS Global Corporation