Marital vs. Separate Property: Key Considerations for High Net Worth Individuals
Divorce can be a complex and emotional process, especially for individuals with significant financial assets. One of the most critical aspects of any divorce is determining what constitutes marital versus separate property. Accurately categorizing assets can significantly impact the outcome of a divorce settlement. This guide outlines key considerations for high net worth individuals facing property division issues, with insights tailored to Wisconsin law.
Jump to article sections:
- The Basics of Marital and Separate Property
- Why Asset Classification Matters
- Wisconsin’s Community Property Rules
- Common Mistakes in Distinguishing Marital vs. Separate Property
- Prenuptial and Postnuptial Agreements
- Businesses and Professional Practices: Marital or Separate Property?
- Tracing and Protecting Separate Property in Divorce Cases
- The Role of Financial Experts in High Net Worth Divorces
- Hidden Assets and Preparing for Complex Financial Disclosures
- Why You Need a Divorce Attorney Specializing in High Net Worth Cases
1. The Basics of Marital and Separate Property
Marital property generally refers to assets acquired during the marriage, while separate property includes assets owned prior to the marriage or inherited during it. The distinction is crucial during divorce, as marital property is typically divided, whereas separate property remains with its original owner. However, the lines between these categories can sometimes blur, particularly when assets are combined or used in marital contexts.
2. Why Asset Classification Matters
For high net worth individuals, property classification can make or break financial stability post-divorce. With substantial wealth, such as business interests, real estate, or investments at stake, every asset counts. Misclassifying an asset as marital could lead to its division, even if it was intended to remain separate property. Proper classification protects personal wealth and ensures a fair settlement.
3. Wisconsin’s Community Property Rules
Wisconsin follows community property laws, meaning marital property is generally split 50/50 in a divorce. For individuals with high-value estates, this automatic division can lead to significant financial consequences. Determining which assets qualify as community property can become especially contentious when factors like shared accounts, mixed-use properties, or shared investments come into play.
4. Common Mistakes in Distinguishing Marital vs. Separate Property
One of the most frequent mistakes people make is commingling separate and marital assets. For example, adding an inheritance to a joint account or using premarital savings to purchase a jointly owned home can make these assets subject to division. Another mistake is failing to document the origin of separate assets, making it harder to prove their status during divorce.
Some other mistakes that are common include:
- Not keeping clear records of investments and property acquired before the marriage or received as gifts or inheritance.
- Mixing business or professional practice finances with marital funds, blurring the distinction between marital and separate ownership.
- Ignoring the impact of shared use on separate property, such as using a premarital home for joint purposes without clear agreements.
- Assuming that separate property will automatically remain untouched without taking legal steps to protect it.
- Overlooking contributions made by the other spouse, which might qualify otherwise separate assets for division.
The help of a skilled divorce attorney can prevent these and other common errors in asset classification.
5. Prenuptial and Postnuptial Agreements
For high net worth individuals, prenuptial and postnuptial agreements are powerful tools to clearly define property terms before conflicts arise. These agreements can outline what qualifies as separate or marital property, protect family businesses, and even establish guidelines for spousal support. When drafted carefully and mutually agreed upon, they reduce uncertainty and potential disputes.
6. Businesses and Professional Practices: Marital or Separate Property?
Determining whether a business or professional practice is marital or separate property can be particularly challenging. If a business was started before the marriage but grew significantly during it, the increased value may count as marital property. Similarly, if a spouse contributed directly or indirectly to the business’s success, part of it may be subject to division.
7. Tracing and Protecting Separate Property in Divorce Cases
The key to maintaining separate property is clear documentation. High net worth individuals should keep detailed records of inherited assets, gifts, and premarital property. Tracing the origin and use of these assets throughout the marriage ensures they are appropriately categorized. Without this evidence, the court may assume assets are marital.
8. The Role of Financial Experts in High Net Worth Divorces
Dividing high-value assets often involves more than legal expertise. Financial professionals, such as forensic accountants, can play a vital role in uncovering hidden assets, valuing businesses, and ensuring proper financial disclosures. Their insights help ensure transparency and provide fairer outcomes during property division. It’s common to work with a financial expert during high net worth divorce cases because of their complexity and the potential for hidden assets or financial discrepancies.
9. Hidden Assets and Preparing for Complex Financial Disclosures
High net worth individuals must be prepared for extensive financial disclosures during divorce proceedings. Hidden assets can become a major point of contention and may include undervalued investments, offshore accounts, or unreported income. Failing to disclose them can lead to legal repercussions and skew divorce settlements. Proper preparation and transparency are non-negotiable.
10. Why You Need a Divorce Attorney Specializing in High Net Worth Cases
When significant assets are on the line, working with an experienced divorce attorney is essential. At Ohiku Law in Milwaukee, we specialize in guiding high net worth individuals through the intricacies of property division. Our expertise in Wisconsin’s community property laws allows us to protect your interests and help you achieve a fair and equitable outcome.
Divorce is never easy, but with careful planning and the right legal support, you can safeguard your financial future. Contact Ohiku Law today to schedule a free consultation with one of our experienced Milwaukee divorce attorneys and learn how we can assist you.
By Attorney Odalo Ohiku, Owner of Ohiku Law Office
Attorney Odalo Ohiku is a dedicated and experienced lawyer who focuses on divorce law, family law, and custody and placement for high-net-worth individuals in the Greater Milwaukee area. A trained mediator and arbitrator, Attorney Ohiku has the skill set, experience, and perspective to help clients safeguard their interests while minimizing the stress, anxiety, and conflict that can come with divorce. Attorney Ohiku’s credentials are exemplary: he has been honored as a “Top 40 under 40” by both The American Society of Legal Advocates and The National Trial Lawyers, served as Chair of the Wisconsin State Bar Board of Governors, and earned the President Award from the Wisconsin State Bar. He is passionate about his work in safeguarding families, ensuring that they can maintain the lives they have worked hard to build.
