Use of Experts in ‘High Net Worth’ Family Law

There are three (3) basic rules in Alberta family law: Court Orders are to be followed; child support is the right of the child, and; full financial disclosure must be provided. But especially for ‘high net worth’ and high-income spouses going through separation and divorce, there should be a fourth rule: hire experts. Yes, separation and divorce can be difficult and can sometimes be expensive. However, it can also be even more difficult when significant wealth and incomes are to be taken into account when dealing with the family law issues of division of family property between spouses and financial (i.e. child and spousal) support for spouses and children. Hiring experts may just reduce the overall cost and complexity of resolving these issues.

As previously indicated, generally, “high net worth” couples are those whose net family property exceeds $1M. “Ultra high net worth” couples are those whose net family property exceeds $30M. But it isn’t just the total amount of property a couple may have acquired which distinguishes “high net worth” separations and divorce from others. ‘High net worth’ and high-income separations and divorces have a special set of rules when dealing with financial (child and spousal) support (see: “Alberta High Net-Worth Family Lawyers”), and sometimes involve a complex, often an inter-connected group of family (and non-family) property (including residential, rental and commercial real estate, businesses, investments, stock options, trusts, etc.) that must be dealt with in the division of property. These differences may often lead to a number of challenging and complex issues which have to be dealt with in “high net worth” and high-income separations and divorce, including:

Income Determination – child and spousal support is based on the parties’ net incomes (usually on Line 150 of each parties’ Income Tax Return). However, for many ‘high net worth’ or high-income couples, ‘Line 150 Income’ may not accurately reflect the true total income available for payment of such financial support, and such true income may need to be imputed;

Asset Valuation – asset valuation is necessary for an equitable sharing of property. While the current value of some assets (ie. stocks, bonds, rrsps, etc.) are readily available, some assets (ie. real estate, businesses, pensions, etc.) may need to be valued without having to sell that asset to determine its actual market value;

Hidden Assets – for property to be divided fairly and equitably, all assets need to be identified and valued. Unfortunately, sometimes, parties do not voluntarily disclose all their assets (or incomes), or may attempt to hide them. Sometimes, you have to go looking for hidden assets or incomes;

Tracing Assets – the value of property owned before the start of the relationship (non-family property) is generally not included in the division of property upon separation and divorce. However, this property is not always in the same form as prior to the relationship, and its value may need to be traced through the different forms of property it represented during the relationship.

Financial Expert Assistance

Accordingly, certain features may identify and also complicate ‘high net worth’ and high-income separations and divorce: substantial (yet uncertain) assets and income; complex financial structures, and; focus on achieving a fair and generous resolution of financial support and division of family property. To achieve the latter, ‘high net worth’ and high-income lawyers and clients should not attempt to do this in a vacuum but should consider retaining any number of financial experts to assist in resolving these issues, including:

Appraisers – the family home does not need to be sold to determine its value for the division of family property; appraisers can do this (relatively) quickly and inexpensively (especially considering it is usually most couples’ most valuable asset);

Certified Business Evaluators – businesses, on the other hand, are more difficult to value without selling them (both spouses often believe the business is worth more than it actually is). Business valuators give their opinion of the actual market value of the on-going business, often with expert knowledge of the particular operations and markets of the business;  

Income Analysts – similarly, income analysts look not only at a spouse’s Line 150 Income, but also income available from other sources (ie. a business) or similar occupations to impute a reasonable income for child and spousal support purposes;   

Budget Analysts – budgets (of both the payor and recipient) are looked at in spousal support claims in an attempt to determine a reasonable amount of monthly support. Particularly in ‘high net worth’ and high-income spousal support claims where the Courts look to set a monthly amount of spousal support which would allow the recipient spouse to “enjoy a lifestyle that is closer to her pre-separation lifestyle” (Sorenson v. Sorensen 2020 ABQB 737 at para. 135; (see article “High Income Child and Spousal Support”), an accurate and reasonable budget (particularly for the recipient spouse) can be critical in setting a realistic amount of support;  

Forensic Accountants – forensic accountants not only weed out undisclosed or hidden assets, but may also value complex holdings and determine whether a spouse has depleted assets through the course of or after the relationship.

Using experts in “high net worth” or high-income separation and divorce. Well worth the cost.

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