Most divorces involve common assets like a family home or a standard retirement account, such as a 401(k). However, high net worth cases often feature complex investments that you cannot simply split down the middle. Private equity interests are often the “hidden gems” of a marital estate, but they also create significant valuation challenges.
At the Law Offices of Forrest & Forrest, PLLC, our skilled lawyers help clients throughout Fort Lauderdale and Boca Raton manage the intersection of complex financial assets and Florida family law. Our attorneys understand how to identify these interests to ensure a fair distribution and a clear path forward for you.
What exactly are we counting?
Private equity assets are “illiquid,” meaning you cannot sell them on a public exchange like a stock. These investments often come with restrictions that prevent a simple transfer to a spouse. Several types of these assets may exist in a complex marital estate, including:
- Limited partnership interests in private funds
- Vested and unvested “carried interest,” which represents a share of profits
- Capital calls and future funding commitments
- Equity held in various portfolio companies
These assets often require a deep dive into complicated contracts. We work to demystify these financial terms so you understand exactly what is at stake.
The valuation game: How much is it worth?
Valuing these interests is a complex task because you can’t simply look up the price on a ticker tape. In Florida, the court’s goal is to determine the fair market value—essentially, what a hypothetical buyer would pay for your interest today if you chose to sell it.
To find this number, we bring in forensic accountants who look “under the hood” of the fund’s financial statements and tax returns. They analyze several factors to get an accurate picture:
- The fund’s historical performance and current “dry powder” (i.e., available cash)
- Whether your interest includes “personal goodwill,” which may be yours to keep
- Specific restrictions listed in the offering memorandum or partnership agreement
These financial professionals ensure that the valuation reflects reality rather than just a number on paper. Getting the math right at this stage is the only way to ensure your final settlement is truly equitable.
Splitting ‘unsplittable’ assets
Since you often cannot transfer private equity shares, we must find creative distribution strategies. One common method is a “buy-out,” in which one spouse retains the interest while the other receives an offsetting asset, such as the marital home.
Alternatively, we may use an “if, as, and when” approach, meaning the nonowning spouse receives a percentage only when a “liquidity event” occurs. You must also consider that a $1 million interest is not the same as $1 million in cash due to capital gains taxes. Proper planning prevents future financial surprises.
Why having a strong legal team matters
Managing private equity requires more than just a calculator. You need an attorney who understands the nuances of a high net worth lifestyle and the technicalities of Florida law. At the Law Offices of Forrest & Forrest, PLLC, we use a “friendly yet firm” approach to protect your financial future.
We focus on results without using unnecessary scorched-earth tactics that drain your time and resources. Complex assets should not stand in the way of a fair resolution. Contact us today by calling 954-859-1715 to schedule a consultation.