By: Liam Lee
High-net-worth individuals face unique challenges during divorce proceedings, and the stakes are incredibly high. Considering the division of multiple business assets or disputes over significant incomes, navigating these cases requires a deep understanding of family law and financial planning. Separating spouses can lose substantial amounts of money, time, and emotional well-being without the right approach.
In an age of increasing wealth, the role of family law continues to evolve. For the ultra-wealthy, divorce is no longer a personal matter but directly impacts their businesses, reputations, and sometimes, their financial legacy. Senior Portfolio Manager & Senior Wealth Advisor Thane Stenner, CIM®, FCSI® of Stenner Wealth Partners+ at CG Wealth Management Canada, explores the role family law plays for those facing high-net-worth divorces.
Unique Challenges Facing High-Net-Worth Families
High-net-worth divorces differ from average couples, primarily due to the nature and complexity of the assets involved. For most people, divorces center around standard personal assets such as houses, cars, and savings. The wealthy are juggling multi-million-dollar business ventures, complex investments, partnerships, and international properties.
Of primary concern for ultra-high-net-worth individuals is how to protect their business and professional reputation during divorce proceedings. There’s often a desire and need for discretion. When a business is involved, a messy, drawn-out public divorce can affect everyone, from investors to employees. Business owners often need to manage the fallout, ensuring the business continues to function while navigating through the financial and legal complexities of separation.
“High-net-worth cases typically involve more than just dividing assets,” says Thane Stenner. “These cases often require the need to address spousal support, child support, property division, and tax implications. If these are not handled properly, individuals could lose millions. Items like discretionary trust funds, corporate shares, stock portfolios, and other investments need special attention to avoid major financial repercussions.
The Spousal Support Factor
Spousal support plays a critical role in ultra-high-net-worth divorces. Unlike low or middle-income cases, where support may only need to cover basic living expenses, spousal support in high-net-worth cases can involve jaw-dropping amounts. For instance, it’s not uncommon to see monthly spousal support payments reaching six figures when a high-income earner is involved. The amount of support increases substantially when multiple children are involved or when divorcees are accustomed to a very high standard of living.
One major issue is determining the appropriate amount of spousal support based on a couple’s lifestyle and income disparities. In Canada, the Spousal Support Advisory Guidelines (SSAG) help determine a fair amount, but even these have limitations, especially when figures hit the upper end of the spectrum. Courts can award either lump-sum payments or monthly support agreements, often favoring lump sums for simplicity, as showcased in several high-profile cases.
Mistakes in Asset Valuation
Dividing assets in an ultra-high-net-worth divorce isn’t as simple as splitting a checking account. Many assets, be they stock portfolios or real estate, have tax consequences that could significantly impact their actual value. For example, a million-dollar primary residence carries tax advantages that a million-dollar business might not. This means that if each spouse were to receive one of these assets, the division could end up disproportionately favoring one side unless both are adjusted for their after-tax values.
Capital gains taxes, business valuations, and different tax treatments of assets create enormous complexity in ultra-high-net-worth divorces. Without adequate planning and legal advice, either party may end up on the losing side or, worse, face unexpected financial surprises after the fact.
Notes Stenner, “Understanding the fair market value of assets, minimizing tax liabilities, and ensuring a balanced distribution is key in a successful ultra-high-net-worth divorce. Simply put, knowledge is power in these cases. One mistake in the valuation of assets, or an overlooked taxable event, could strip away millions.”
The Importance of Full Financial Disclosure
Tensions can quickly rise when one spouse believes the other is hiding assets or misrepresenting financial information. In high-net-worth divorces, failing to disclose assets, intentionally or not fully, can lead to massive legal scrutiny, penalties, and more court battles.
One of the priorities in any high-net-worth divorce should be full transparency. Both parties should ensure they’ve accounted for all assets, liabilities, and sources of income. From overseas investments to family businesses, anything not disclosed can snowball into bigger problems.
When individuals try to hide assets, they risk facing court-imposed punishments. In some cases, courts may side entirely with the victimized spouse, awarding them a larger share of assets as a penalty for deceit. There’s little to gain and much to lose by trying to outmaneuver the system.
Pre-Nuptial and Post-Nuptial Agreements: Your First Line of Defense
For those entering a marriage with considerable assets, a prenuptial agreement can often save years of court battles down the road. These agreements set expectations about how assets will be divided in the event of a divorce. High-net-worth individuals, especially business owners and entrepreneurs, should seriously consider a prenup as one of their most important financial tools.
A post-nuptial agreement can offer similar protections if a prenup isn’t arranged. While not as common, postnups can be agreed upon after marriage and help clarify financial arrangements, especially when the couple’s financial situation changes significantly during the marriage.
Both prenups and postnups require full financial disclosure and legal advice for both parties to be enforceable in court. These agreements not only protect individuals but can also prevent ugly battles that result from misunderstandings about asset ownership and division.
Mediation vs. Litigation: Finding the Balance
The majority of high-net-worth divorces manage to stay out of court, with fewer than 5% heading to trial in Canada. When courtroom battles happen, costs skyrocket, privacy disappears, and emotional damage can last even longer than the legal process. Conversely, mediation allows couples to sit down with their lawyers and a neutral third-party mediator to hash out the details. This keeps things more private, less adversarial, and less expensive.
At the same time, mediation isn’t always a solution, particularly when one party tries to hide assets or is unwilling to cooperate. In such cases, it’s often ideal to proceed to court, where a judge can make the final determination. The key is finding a balanced approach right from the start so things don’t escalate to a point of no return.
High-net-worth divorces require more than splitting dollars and must focus on protecting one’s future, business, and family. For the ultra-wealthy, the stakes are incredibly high, and the complexities in these cases require knowledge and experience that go beyond traditional family law.
A seasoned family lawyer represents a client but must also protect, strategize, and ensure both parties move forward with as much dignity and fairness as possible. With the right legal and financial planning, a high-net-worth divorce doesn’t have to mean financial ruin or a long, drawn-out battle. It can be a transition handled with care, precision, and even a little bit of grace.
Thane Stenner, renowned for his experience in wealth management, has an impressive academic background that includes graduating with honors from Arizona State University and participating in Harvard Business School’s Executive Program. He is cross-border licensed with FINRA in the USA, and with CIRO in Canada, with clients based in San Francisco and the Bay Area as well as across Canada.
His professional journey has spanned several high-ranking positions at Morgan Stanley Wealth Management, including Managing Director and International Client Wealth Advisor, where he spearheaded portfolio management for ultra-high-net-worth clients. Stenner’s insights have been featured in multiple prestigious outlets, including the Globe & Mail, Canadian Family Offices, and BNN Bloomberg.
Published by: Josh Tatunay
