It is no secret that the higher the account balance, and more diverse the assets inside a 401k, the harder the division is in a high-asset divorce. Recent changes to the law, as well as the interpretation of existing law, has fundamentally changed the way that these retirement accounts are valued and divided pursuant to a marriage dissolution action.

Valuation Methods

The traditional straightforward approach – account balance accumulated during the marriage divided by two – may be inappropriate for some complex property divisions in divorce actions, particularly if the account contains non-cash assets.

Two or three generations ago, divorce was not a realistic option for most people, due largely to moral, religious, and economic reasons. This was especially true for those over 50. Instead, many couples opted to lead separate lives, and perhaps even lived in separate households, but remained legally married.

However, divorce lost much of its moral stigma in the 1970s, through the advent of no-fault marriage dissolution laws. During roughly that same time, the earnings gap between men and women began to close. Although this gap still exists, it is nowhere near as yawning as it was in 1970. Finally, as for the religious objection, Pope Francis recently softened the Catholic Church's position on divorce.

Gray divorce is already twice as common today as it was in 1990. As we move further into the new millennium, couples over 50 may be going to divorce court in even larger numbers. These high-asset divorces are markedly different than actions between younger couples, and the distinction goes far beyond the numbers on a birth certificate.

When asked for a quick definition of collaborative law, many attorneys may say something like "ongoing mediation." Although this synonym is not entirely inaccurate, it does not capture the essence of collaborative law nor does it explain why it is a viable alternative, at least in many cases.

To briefly summarize, collaborative lawyers work with the parties to resolve property division in a high-asset divorce, complex custody disputes, and related matters.

Structure

All parents share a common goal: the best interests of the children. That being said, parents often have very different opinions of what is "best." Moreover, they often sharply disagree as to the methods used to achieve that common goal.

In terms of their approach, many lawyers are far too aggressive in child custody disputes. A court hearing is unlike some other forums, where the people with the loudest voices typically get their way. In fact, this approach often backfires. Many judges rightly believe that parents who recklessly attack the other side lack the co-parenting skills needed for a successful post-divorce parent-child relationship.

Controlled aggression, along with thorough preparation, often achieves the best results in complex custody actions. What evidence can support a party's arguments in court?

Collaborative law is quite common in certain areas of North America, including California and Canada, but it has not gained much traction in some areas of The Lone Star State. Is this model an option for your complex divorce or other family law issue?

The Collaborative Family Law Act outlines the procedure in Texas. In a nutshell, the process is somewhat similar to ongoing mediation, with a few important distinctive qualities. The mindset is different. In traditional mediation, it is "every man for himself." The lawyers are determined to walk away with the best deal possible for their respective clients, and they care little or nothing about anyone else's interests. In collaborative law, the parties remain cognizant of how the outcome may affect other people both directly and indirectly involved in their complex divorce.

There is also a structural difference. In traditional mediation, a third-party mediator does all the negotiating, and the parties are merely interested bystanders. However, in collaborative law, the parties themselves do the negotiating.

Section 6.711(a) of the Texas Family Code mandates that prior to entering a judgment that divides the estate of the parties," the court must enter affirmative, written findings regarding the value of the community estate's assets, as well as the value of separate assets. Subsequent case law has made it clear that there cannot be a just and right division of the estate if these findings are absent.

Real estate is difficult to value, especially in a high-asset divorce. The amount on the tax roll is usually inflated, so the taxing authority can collect additional revenue. There may be other issues as well. In some cases, the "property" may be an unimproved piece of land. Moreover, especially regarding income-producing property, the sales value may be too high or too low.

The Process

A retirement plan may be one of the largest assets in the marital estate, especially in a high asset divorce case when the parties have been married for a number of years. Section 7.003 of the Texas Family Code authorizes the judge "to determine the rights of both spouses" with regard to a defined benefit pension plan or a defined contribution retirement plan, such as a 401k or IRA.

Each plan is different and has its own rules. Some plans, most notably military retirement plans and some other accounts related to federal government employment, require a special Division Order, as opposed to a Qualified Domestic Relations Order (QDRO). It is important that the QDRO or other order be timely and accurate, or else the IRS may assess taxes and penalties against the Alternate Payee, or non-employee spouse.

Payment Options

Quite often, asset and property division involve complex accounting measures in high-asset divorce cases.

Assume that Husband owned an investment portfolio prior to the marriage. Initially, he only contributes funds from his separate bank account. As time passes, however, both Husband and Wife begin investing money, and sometimes these funds come from a Wife's separate bank account.

Also assume that Wife owned a rental house prior to the marriage. The couple subsequently elected to take out a second mortgage on the marital residence and use the proceeds to renovate the rental property. Before the renovations, the house was essentially un-rentable and borderline uninhabitable. Since the renovations, the house has been continually occupied by a responsible tenant who pays market-rate rent.