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Connecticut’s equitable distribution property statutes present challenges. Build an experienced team of legal, tax, and valuation experts with Needle Cuda.
Most divorces involve division of marital assets, either by agreement or by a judge’s order. How the assets are divided is based upon equitable distribution. Equitable distribution and division apply to all assets such as real estate, bank and brokerage accounts, retirement accounts and personal property. Property division can be challenging in high-net-worth divorces, which may involve lucrative executive compensation packages and unusual investments owned by either spouse.
These assets present significant issues, both in valuation and in distribution. In Connecticut, the title of ownership is generally irrelevant in a divorce when it comes to property division. Likewise, it is not dispositive whether an asset was acquired before or during the marriage when it comes to property division. Many factors need to be evaluated and considered prior to a determination of how a particular asset or the asset’s value will be split in a divorce.
Highly compensated spouses often have complex investments and compensation packages that include unique vehicles, such as deferred compensation plans, which require careful and accurate valuations during a high-net-worth divorce. Here are three examples:
Partners in a private equity or venture capital fund are entitled to a share of profits made from the sale of a portfolio investment. If a fund performs well, it can generate substantial distributions and dividends, which are known as carried interest. Valuation of such assets can be complicated by a fund’s future capital commitments. These assets can be valued in different ways such as the present value of cash received or the value or expected distributions over the life of the fund.
A form of deferred executive compensation, RSUs are company shares given to employees based on length of employment or achievement of performance goals. However, employees do not receive their shares immediately. Rather, they are subject to a vesting schedule. Since stock prices are constantly fluctuating, there is no definitive value until the restrictions lapse on the RSUs and the employee cashes out. In a divorce, RSUs can be divided in several ways depending on the terms of the company stock plan but typically division is deferred until vesting.
A limited partnership interest is a spouse’s ownership share in a business entity. In many cases, a partnership agreement will place restrictions on transferring the interest, in whole or in part, to a partner’s spouse in a divorce. This may force a sale of the interest in order to divide it. The partnership agreement may allow the other partners the right to buy out the divorcing partner’s interest. A forensic accountant may be needed to value the spouse’s interest in the partnership so that even if the partnership can be divided, the value can be ascertained and included in equitable distribution.
As with all property in equitable distribution, a court will divide these assets in a manner that is fair but not necessarily equal. This could mean a husband keeps full ownership of certain assets, offset by other property he cedes entirely to his wife. This is why careful and thorough valuation is critical.
The attorneys at Needle | Cuda have extensive experience representing clients in Connecticut high-net-worth divorces and obtaining favorable results. Call 203-429-4151 or contact us online to schedule a consultation at our Westport office.