The more money people have, the more resources they have to fight in a divorce scenario. This week, we’re tackling the topic of high-asset divorces and the unique issues that arise. We delve into the complexity of asset valuation, the question of generational wealth, property allocation, and tax implications, as well as the complications of calculating alimony according to income! Tune in to find out more about the intricacies of dealing with a high-asset divorce, including the unique parenting disputes that arise, the multitude of experts involved, and so much more!
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What is Divorce at Altitude?
Ryan Kalamaya and Amy Goscha provide tips and recommendations on issues related to divorce, separation, and co-parenting in Colorado. Ryan and Amy are the founding partners of an innovative and ambitious law firm, Kalamaya | Goscha, that pushes the boundaries to discover new frontiers in family law, personal injuries, and criminal defense in Colorado.
DISCLAIMER: THE COMMENTARY AND OPINIONS ON THIS PODCAST IS FOR ENTERTAINMENT AND INFORMATIONAL PURPOSES AND NOT FOR THE PURPOSE OF PROVIDING LEGAL ADVICE. CONTACT AN ATTORNEY IN YOUR STATE OR AREA TO OBTAIN LEGAL ADVICE ON ANY OF THESE ISSUES.
Ryan Kalamaya (4s):
I'm Ryan Kalamaya
Amy Goscha (6s):
And Amy, Goscha
Ryan Kalamaya (8s):
Welcome to Divorce at Altitude, a podcast on Colorado family law.
Amy Goscha (13s):
The force is not easy. It really sucks. Trust me. I know, besides being an experienced divorce attorney, I'm also a divorce client,
Ryan Kalamaya (21s):
Whether you are someone considering divorce or a fellow family law attorney listening for weekly tips and insight into topics related to divorce, toe parenting and separation in Colorado. Welcome back to another episode of Divorce at Altitude. I am Ryan Kalamaya this week, we're talking about money and specifically we were talking about High Asset Divorces. This is something that we've kind of touched on and you know, our firm's well-known for, but I am joined by my esteemed co-host Amy. What's going on
Amy Goscha (58s):
Not much Ryan, but you're right. We do talk about and handle High Asset Divorces. So can you tell me when you think about High Asset Divorces? Like, what are we talking about?
Ryan Kalamaya (1m 9s):
Well, in my mind, we're probably talking about something in the neighborhood of a cutoff of $5 million. I mean, there's no bright line rule that anytime you're dealing with something in excess of 5 million, I mean, when I talk about High Asset Divorces can be 10 million, 20 million, 30, you know, a hundred million dollars, but anything in that range, you're dealing with some particular issues or unique issues that are a little bit different than something below 5 million. And, you know, you gotta think about the house. I mean, property prices in Colorado, Amy, I mean, they've just gone through the roof.
Ryan Kalamaya (1m 49s):
So it used to be that it was probably 2 million, but just with real estate prices, I would put that cutoff at probably $5 million when I'm talking about a High Asset divorce and probably more like 10 or 20 million, which is allow money for people.
Amy Goscha (2m 3s):
Right. We're seeing that there's a lot of people out there with a lot of money and issues with going through divorce. So when you think about High Asset cases, are there some unique issues that come up?
Ryan Kalamaya (2m 15s):
Well, the first thing that comes to mind for me is complex valuation. So that 5 million number 10 million, whatever it is, what goes into that. And that would be, I mentioned property prices or real estate, but oftentimes when you're dealing with high asset divorces, you're discussing closely held businesses. So it's private business. I mean, as we're recording this, Elon Musk has gone under contract to purchase Twitter. So he's taking a public company private, and whenever you're talking about private company, you're dealing with valuation. I mean, right now Twitter is trading publicly.
Ryan Kalamaya (2m 56s):
So we can value that company and in a divorce, I mean, we've had divorces involving $20 million and they were fairly easy because it was just all in publicly traded stocks and bonds, but that's more of the exception to the rule. So Amy, anything in addition to closely held businesses that you can think of with valuations in High Asset divorce?
Amy Goscha (3m 20s):
Yeah. I mean, what I see a lot is, I mean, when you have High Asset individuals, you know, they probably have done some sort of Estate planning or maybe it's generational wealth. So there's gonna be some kind of Estate planning, such as Trust interests. There might be, you know, an irrevocable life insurance trust. So I've seen those issues come up a lot in my higher asset divorces recently. And there's valuation issues related to that. What's marital at separate. We also have foreign assets. Like how do you find if there are foreign assets, how do you value them? What are the tax implications related to various holdings? So it can get complicated because people who have more money, there's probably a lot more going on with what types of assets and holdings that they have.
Ryan Kalamaya (4m 7s):
Yeah. And I think for listeners, I mean they know that we've got our hypothetical divorce client, their favorite Eric Wolf. And if Eric, if his dad has a fair amount of money, then usually families, the way that they transfer wealth from one generation to the other kind of boils down into two camps, one is they'll push it up so that they will do limited partnerships or they'll do gifting and really kind of front load that transfer of wealth. And when you have that, you have marital versus separate, which we'll talk about next, but, or Eric's dad will hold back. And as soon as Eric's dad passes away, then Eric oftentimes will receive money.
Ryan Kalamaya (4m 50s):
And that's usually in the form of trusts. And so the way that families do that can really be important when you're dealing with a High Asset divorce, but you also, you've got some valuation and liquidity issues. So if Eric has a billion dollar shaft wear company, that might be all well and good, but if he doesn't have sufficient liquidity to buy out Melanie, then you're going to have a liquidity issue. But oftentimes when you are dealing with high asset divorces, you're dealing with more than just one asset because you've got diversification where people are acquiring second home, so they could buy a place in Southern France or somewhere else.
Ryan Kalamaya (5m 38s):
And then you've got different investments. People often will invest in private investments. So hedge funds, Bitcoin, other alternative investment vehicles. And I think it really is a challenge for an attorney to be organized and to systematically and surgically go through each valuation issue or asset and figure out what is going to make a difference because you could spend $10,000 to do a real estate appraisal on a minority interest in a commercial building in Puerto Rico.
Ryan Kalamaya (6m 18s):
But is that the cost benefit analysis, is that really worth it? And those are the kinds of issues that people going through a High Asset divorce often have to confront.
Amy Goscha (6m 29s):
Yeah. And also it can just get complicated. I was thinking about the commercial real estate, because I have several cases now where the individual owns various percentage interest amount. And how do you value those? And sometimes it's like the actual real estate, but then it's held by an LLC and then there's a percentage. So it just can get complicated pretty quick.
Ryan Kalamaya (6m 48s):
Yeah. The liquidity and the difficult to value assets. I mean, you can have, certainly we've done divorces where we've divided it in kind so that you have a division whenever it hits, like for example, a marital trust. If our client is the beneficiary of a marital trust, Eric, his dad gets remarried and he provides for his second wife and then he passes away. His dad passes away. Well, Eric might not get the money that has been left over for the second wife for 10 years. And then you're dealing with what are the tax implications because taxes often can really impact High Asset Divorces in valuation.
Ryan Kalamaya (7m 32s):
So if you're dealing with sales and long-term investments, there can be some major tax implications that people just don't really take into consideration. So there's a variety of different issues with the assets themselves. But what else are we talking about with marital and separate property, Amy and you referenced estate planning. So whenever you're dealing with estate planning, you're oftentimes dealing with marital and separate property. Can you tell our listeners, why do we deal with marital and separate property more often in a high asset divorce?
Amy Goscha (8m 7s):
You usually find that because either a scenario is one party comes from a family that has money. So there's been a state planning, or even like a premarital agreement that has been entered. You know, the family wants to protect that money is there separate, but when you're looking at a divorce situation, the increase in value of separate property is subject to equitable division. So as the attorney, we're trying to figure out what's the value of that separate property. We'll first visit property second, what's the value of that property? And third, is it marital or separate? So there's those three things. You also have various trusts holdings such as, is it an irrevocable or irrevocable trust?
Amy Goscha (8m 49s):
If you have a life insurance trust what's in that life insurance trust, is it a new cities? You know, is that held by business? It gets really complicated because people who have high net worth are usually wanting to protect it. And so you have to figure out not only what there is, but what's considered separate property and marital property, subject to equitable division. And then you have the complication of well was their contribution or not. Should there be a disproportionate allocation of marital property? So
Ryan Kalamaya (9m 23s):
I had a conversation earlier this week with a real estate broker down in Telluride. And he, his observation, which has been consistent with mine is especially in our mountain communities. We're seeing a lot of people moving to the mountains from New York, Chicago, Houston, LA, and they certainly fall in the high asset divorce. And a lot of them are moving. They had issues in their marriage before. And then they think that moving to a little place called Aspen is going to somehow fix those problems, but it pours kind of gas on the fire. And whenever you're dealing with that, you know, moving results in transactions, they might be selling real estate and buying new real estate.
Ryan Kalamaya (10m 10s):
And whenever you're dealing with those kinds of transactions, you are the difference between separate marital property. But then also it brings up the fact that often someone will have some sort of connection, whether their family has historically gone to Aspen or Telluride. And that's why they have selected that particular place, which is one of those things where that generational wealth can really become an issue. But then you got the other flip of the coin is that there could be some substantial success in the form of money. They worked on wall street or they made a billion dollars in tech, in San Francisco, and then they just want to retire and move.
Ryan Kalamaya (10m 54s):
And then anytime you're dealing with that, you've certainly got contribution issues when it comes to marital property. But anytime you're dealing with that, you also are likely dealing with some sort of premarital or marital agreement. They're just becoming more and more common. And Amy, we've talked about this on other episodes with marital and premarital agreements. Anything that can be relevant specifically to High Asset Divorces when we're talking about premarital agreements.
Amy Goscha (11m 23s):
Yeah. Whenever there's a prenup you're or a marital agreement, you're going to look at the enforceability of it. And if, as the attorney, you want to try to challenge it or not, which just adds another layer of complication before you even get to hiring experts on valuing things, because that's super expensive. You might have a validity hearing on the enforceability of the premarital or marital agreement,
Ryan Kalamaya (11m 48s):
And you have a lot more to fight over because if you're dealing with high assets, then there's something worth over. But you know, in Colorado, even if the marital agreement is enforceable, they're still looking at potentially support or maintenance because pursuant to Colorado public policy, a maintenance waiver is not necessarily binding. And that can be complicated when you have people moving from New York, they have a premarital agreement that says that New York law applies or California, but even notwithstanding that issue, what are the complications when you're dealing with the High Asset divorce, when you're talking about alimony or child support Amy.
Amy Goscha (12m 26s):
Yeah. So I was going to mention income. We've talked a lot about assets and how to value them. What's marital. What's not, but the other piece is that with a High Asset case, usually there's going to be various forms of income. And you've got to figure that out. It's probably going to be variable. And what snapshot in time do you take to figure out what a client's income is? And what we're really looking at with income is what is a party's income when you're determining as spousal maintenance appropriate or what the child support is going to be. And like you and I have discussed in Colorado, we have a maintenance guideline. It is advisory, but there is a certain cap and people who are High Asset fall outside of that cap.
Amy Goscha (13m 10s):
And so the maintenance guideline might not even apply or advisory guidelines, same thing with the child support guideline. There's probably going to be a need to deviate from that guideline, you know, and also figuring out that just because you have a long-term marriage, if you have a lot of assets, you still need to prove whether or not there is a need for maintenance. So, you know, there's still as the threshold finding that the court has to make, or as an attorney, you need to assess whether or not there is, you know, maintenance is appropriate,
Ryan Kalamaya (13m 40s):
Right? And oftentimes people, they don't understand that those guidelines just don't apply to High Asset Divorces because the threshold. So for example, 14, 10, 1 14 for maintenance, it's $240,000, and that's not going to apply to someone oftentimes with a High Asset divorced, but you also need to look at what property is going to be allocated to a spouse after the divorce. And then you look at income. So if, for example, Melanie and her divorce with Eric gets property valued at $5 million.
Ryan Kalamaya (14m 20s):
Well, she could take that and invest it. And if you took a 5% rate of return and you can have these arguments with experts, which we'll talk about later, you know, a 5% rate of return, you're now generally not digging into your principal. That's $250,000 of income. And is Melanie going to be able to maintain her same lifestyle, or it certainly, it's going to be a factor when you are looking at child support and really what oftentimes it comes down to needs. And people, even with a hundred million dollars, people don't understand that people at a hundred million dollars, they spend money in their lifestyle. I mean, oftentimes people will spend more money and they don't realize it and they go through a divorce and they then have to cut back.
Ryan Kalamaya (15m 8s):
So instead of flying private, they have to go commercial. And that is something that people often don't understand and really make sure that you have a judge that appreciates that because it could just be throw up your hands and roll your eyes. Like really, are you complaining about flying private, but for people in that realm, it's a real issue. And it's something that can be and should be factored in, but the income really can matter because you're talking about needs. But more importantly in any divorce. I mean, anytime you're talking about 10, $20 million, that's important, but more important is oftentimes the kids. And so what are the issues in High Asset Divorces, Amy, you really kind of specialize in the high conflict parenting cases.
Ryan Kalamaya (15m 55s):
And so when you're dealing with a high asset divorce involving parenting disputes, what are the unique issues that come up?
Amy Goscha (16m 2s):
I mean, the unique issues, we feel a lot, our people travel a lot more with their children, so there's probably going to be fights over travel or their kids are going to be in private school boarding school as well. We feel a lot of that. How much is boarding school? What's the choice of the boarding school because under Colorado law, the court can't order parties to send their kids to private school. But if there is an agreement then that can be enforced and there's also a lot more extra ordinary expense issues, we've all seen the cases where we have kids highly involved in hockey, highly involved in gymnastics, like flying all over the country to participate in certain camps, even educational, like stem camps.
Amy Goscha (16m 44s):
I've had cases where kids go to these elite camps. So you just have more of those types of issues. And also people have money. You know, they might have deep pockets, like endless resources to just spend money, which sometimes can prolong the conflict.
Ryan Kalamaya (17m 3s):
Yeah. You often will have third parties such as nannies or pairs that are involved in, do they split the opere or the nanny? Does the nanny go from one household to the other or do each of them have a nanny, those sorts of factors. And I recall there was a, you know, just for the support and the parenting to kind of bring it together. I, I had a client that the husband, he invited the children to Manchester United a soccer game down in Denver. And it was during her parenting time and she couldn't afford to take them. And that is the nature of child support is to make sure that there's some equality.
Ryan Kalamaya (17m 46s):
So that one parent does not have an advantage because they have all the money regardless of the assets, even if there's a prenup involved. And that's why sometimes you hear these 20, $30,000 a month in child support. And it's to make sure that the child is provided for in both households and that no one has an advantage. And we hear about those situations, but really your point is made Amy. When people have money, they have the resources to fight. And so one of our jobs is to make sure that they're fighting the right battles and, you know, certainly they can have a Pirie and, you know, or CFI.
Ryan Kalamaya (18m 30s):
I mean, oftentimes we're talking about PRS in circumstances with high assets, but they can have different traditions that we need to be mindful of. Where if they have a history of going to Mexico and into their vacation home, it might be that they have sufficient resources where they can share that vacation home, because it's a common place that they break bread and really have a good time with their children. And so it's maintaining some normality and some consistency, but those are the kinds of the unique issues that we see with parenting in a High Asset divorce.
Amy Goscha (19m 8s):
I think also just some collateral experts. Like you see more, not necessarily more, but just the ability to have people that can serve as a therapist. There might be a re-integration type issue where you have a therapist that's doing that. Each kid has a therapist, the parents have a therapist, the parents have a parenting coach. So there's various tools where, because parties can afford that there might be more people involved, you know, experts.
Ryan Kalamaya (19m 36s):
Well, the other final point with parenting is that I don't know if it necessarily is increased, but anecdotally you are dealing with high conflict personalities. I would say more often in a High Asset divorce because unless they won the sperm lottery and they inherited a bunch of money, if it was self-made, then often times there's a personality that is at play there that, you know, they were successful and they were successful because they had a really driven personality they're used to winning and they want to win their divorce. And so they're not used to being told no.
Ryan Kalamaya (20m 16s):
And so clients in that realm that can really increase the conflict when it gets to parenting, but you know, it could even extend to the leather couch or the wine collection that they are fighting over. It's a proxy battle. And I think one of our jobs is to say, I know that this is important to you. I'm not trying to judge you I've seen this before, but you don't win your divorce. It's really a matter of what relationship are you going to with the other party in two to three years, because that's how I think people should view a success or a win and their divorce. And they're just not used to oftentimes in a high asset divorce thinking in those terms.
Amy Goscha (21m 1s):
Yeah. And I think the one thing I would highlight that we talk a lot about parenting is that conflict between parents is one of the worst things for kids, right? So our job is to remind them that their role is to try to minimize the impact on their children as well.
Ryan Kalamaya (21m 18s):
Right? Well, whenever we're talking about High Asset Divorces, we're certainly going to be talking about experts. We've had various expert witnesses or experts in respect to fields on the podcast. But Amy talked to me about what kind of experts are often involved in a high asset divorce.
Amy Goscha (21m 35s):
Yeah. So the kind of where we start from is that within 16 to which is a rule that we use for discovery, or just dealing with domestic relations cases, we're supposed to look at whether or not we use a joint expert versus your own expert, but a lot of times I see, and I'm sure you can attest to this. A lot of times you see, unless it's like a Pirie, a lot of times people will have their own expert. You need to agree on the scope of what the expert is doing. And if you represent someone who you're trying to show contribution, the other side might or tracing the other side might say, well, it's presumed marital. So I don't need to do a bunch of tracing.
Amy Goscha (22m 16s):
That's your burden to prove. So I see separate experts, especially on the financial issues, a lot in the higher asset cases.
Ryan Kalamaya (22m 24s):
Yeah. I think about our episode with Yvonne zebra, where she talks about trust and Eric and Melanie, they might have a billion dollars or $50 million, but if there's not any trust, then a joint expert is probably not a good idea, but even if there is trust, then Melanie and Eric, they might have a joint expert, but then they'll also have their own expert to make sure that mistakes are corrected and they understand that their questions are answered. And, you know, you've often said, and this has been, my experience is the most joint experts. They welcome those consulting experts, but it's really a matter of what the nature is.
Ryan Kalamaya (23m 5s):
If Eric has always had the money and he's controlled it, and Melanie thinks that he's been embezzling money or he's got offshore accounts, then you might be dealing with a forensic accounting, which is very expensive and can be very contentious. So it's really walking through those issues and those options and decision tree it out for a client. But another issue that we are dealing with, certainly, and it's our final issue is the privacy people. They don't want oftentimes to be subject to news reports and have their divorce. You know, we've talked about Dr. Dre and his premarital agreement. There's, there's a reason cause that was in the news. No one wants to be in the news about their divorce.
Ryan Kalamaya (23m 47s):
So Amy, what are the options for people in a high asset divorce for privacy?
Amy Goscha (23m 52s):
So what we're looking at a lot of times is do we want to hire a private judge, private mediator, private judge, private arbitrator. So that's what we're looking at. So people can, they have access to not only privacy, but also we can, as their lawyers determine the timeframe on things. Because when you have high asset divorces within certain jurisdictions, they want cases to move along at a certain pace. And frankly, sometimes the courts just don't have the bandwidth to deal with these High Asset cases. They'll appoint a special master, which is someone to figure out like a nuanced part of the case. So a lot of times it's better for the client to hire a private judge because you can set that timeframe.
Amy Goscha (24m 37s):
Like as far as how long is it going to take experts to do what they need to do to even be ready for trial if you have to get there.
Ryan Kalamaya (24m 43s):
Yeah. And when we talk about experts in private judges and arbitrators, people are saying, man, that's a lot of money. I mean, yeah, okay. Ryan, you're, you're throwing out billion numbers and $50 million, but everyone's worried about transaction costs. And if the lawyers are gonna run a buck, but I think that a lot of clients, whether High Asset or not, they don't understand that oftentimes they can save money with a private judge because instead of filing a motion, if there's a dispute of, are we going to produce this document, then you can reach out to a private judge in Amy. You had a great episode with Angie Arkin, judge Arcon about private judging, but reaching out to judge Arkin with an email and say, Hey, do you have 15 minutes?
Ryan Kalamaya (25m 24s):
We've got this dispute, but it could also be about a travel, you know, last minute travel issue. But I think another real important factor is the sophistication is that, you know, that this judge has seen something that they've seen a $50 million divorce. You could have a judge in Denver, Boulder, who they were a criminal defense attorney for 10 years before taking the bench. And you are their first divorce and both parties are incentivized to get a sophisticated judge. Who's dealt with these issues before, instead of a judge that you don't know what their docket is and how much time they're going to devote to it.
Ryan Kalamaya (26m 8s):
And so both parties usually will have an incentive to agree whether it be arbitration or a private judge. And they could section off a particular issue for arbitration that they can really know that they control the time as you said, they can keep costs down, but then they also get a well-thought judgment or result that is more likely to result in both parties being satisfied instead of being tied up in appeals. That is something that really, I think, is a risk for people in a divorce, not just only with the privacy, but other factors. So I think that that's a good overview, Amy, for people looking at High Asset Divorces, we've mentioned before there's specific topics that we address and hopefully this kind of ties it all together for people to really understand what unique issues oftentimes come with a high asset divorce.
Ryan Kalamaya (27m 5s):
But thanks for listening and you'll leave a review. And if anyone's going through a house, a divorce, certainly pass this episode along and any questions they can give us a call. Hey everyone, this is Ryan again. Thank you for joining us on Divorce at Altitude. If you found our tips, insight or discussion, helpful, please tell a friend about this podcast for show notes, additional resources or links mentioned on today's episode. Visit Divorce at Altitude dot com. Follow us on apple podcasts, Spotify, or wherever you listen to it. Many of our episodes are also posted on YouTube. You can also find me at Kalamaya dot law or 9 7 8 3 1 5 2 3 6 5 that's K a L a M a Y a.law.