Property Division in High-Net-Worth Divorces in Vancouver
Vancouver is home to many industrial and business leaders who have become wealthy through their hard work and business acumen. If their marriages end in divorce, property division can be particularly complex. That is because it often involves the distribution of significant assets, investments, business interests, and international holdings.
In British Columbia, property division in a divorce falls under the B.C. Family Law Act. It mandates that couples generally share any property acquired during their relationship equally, while the property they brought into the relationship is usually excluded.
For couples with a variety of valuable assets and investments, those simple guidelines may not be applicable. That is why anyone in Vancouver going through a high-net-worth divorce needs the advice of an experienced family lawyer to ensure they are treated equitably in the process. Here's a breakdown of the key principles and challenges in high-net-worth divorce cases.
Identifying and Classifying Assets in High-Net-Worth Divorces
With any high-net-worth divorce, it is essential to classify all assets, distinguishing between marital (family) property and separate property.
Under the Family Law Act, marital property includes the family home, financial investments, pensions, bank account holdings, vehicles, and valuable personal possessions acquired during the relationship.
Separate property refers to assets each spouse brought into the marriage, as well as inheritances and gifts received by one spouse during the marriage. However, any increase in the value of separate property during the marriage is considered family property and subject to division. In addition, factors such as financial contributions can significantly influence the division of assets.
Tackling the Complexities of Asset Valuation
A generally accepted definition of a high-net-worth divorce is one that involves one or both partners with at least $1 million in liquid assets, though a more realistic cut-off may be as high as $5 million. These assets often include commercial and residential real estate, private business interests, stock options, pensions, executive bonus packages, and offshore accounts or trusts.
Family-owned businesses or partnerships may require unique valuation methods. Determining the actual value of these assets can be challenging, which is why your family lawyer may recommend retaining forensic accountants or other financial experts on your behalf.
If there is a trust or an offshore account, additional legal and financial scrutiny will be required to determine their value and whether they should be considered marital or separate property. Jurisdictional issues with offshore accounts, tax considerations, and cross-border regulations may also arise. In some cases, Canadian lawyers may need to consult with legal experts in other countries about these accounts.
The Role of Pre and Postnuptial Agreements in Asset Division
Before entering into marriage, high-net-worth individuals are encouraged to have their partner sign a prenuptial agreement that outlines how assets will be divided in case of divorce. In Canada, such agreements are generally enforceable, provided they were entered into voluntarily, with full financial disclosure, and are deemed “fair and reasonable.”
The court can override parts of these agreements if they are determined to be grossly unfair or if circumstances have significantly changed since the document was agreed upon. If you have a prenuptial agreement but feel it is now unfair, the Mills Family Law team can analyze its enforceability.
Some couples may have signed a postnuptial agreement after marriage. These documents address changes in financial status or new assets acquired during the marriage. They can ensure certain assets are set aside for children from a previous relationship or assign responsibility for specific debts. If the postnuptial agreement no longer fairly represents your interests, it can also be analyzed for enforceability.
Spousal Support and Lifestyle Considerations in High-Net-Worth Cases
In high-net-worth divorces, the lifestyle of both parties is a significant factor in spousal support decisions. Support is usually determined by following the Federal Child Support Guidelines and the Spousal Support Advisory Guidelines. However, in cases with substantial financial assets, B.C. courts also consider the standard of living each spouse enjoyed during the marriage.
Family court judges have more discretion in these cases and may deviate from the guidelines. Mills Family Law team members can advise on expected outcomes and work with the other side to reach a fair agreement. In some cases, it may be advantageous to negotiate a lump-sum spousal support payment.
Navigating Tax Implications in Property Division
Asset division in high-net-worth divorces often comes with significant tax implications, particularly for real estate, stock portfolios, or retirement accounts. Capital gains tax, income tax on withdrawals from registered plans (RRSPs, RRIFs), and tax consequences for foreign assets must all be considered.
Crafting a tax-efficient property division strategy can minimize tax liability for both parties. Your lawyer may enlist the help of financial and tax advisors to develop a strategy tailored to your circumstances.
Ensuring Honest Financial Disclosure
Honest disclosure is critical for a fair division of assets and liabilities. Both partners must provide supporting documents, including income tax returns, recent pay stubs, proof of income, and bank statements.
Financial disclosures must also include information about personal debts and business-related liabilities. If one partner manages the finances, the other may worry about hidden assets or financial investments. Mills Family Law can analyze financial disclosures, identify potential red flags, and involve financial experts to uncover any deception if necessary.
Contact Mills Family Law for Expert Guidance
High-income individuals value their privacy and confidentiality, but high-net-worth divorces are often complex and require input from legal, financial, and tax professionals. The team at Mills Family Law has extensive experience helping wealthy individuals navigate their divorce proceedings. We ensure clients’ financial information is handled with discretion and work to achieve a fair and equitable division of property. Contact us today for a free consultation.
