Divorce is complicated, even when it is relatively amicable and you and your spouse aren’t squabbling over your money, possessions, and the divorce settlement terms. However, it can become exceptionally complicated when you, your spouse, or both of you have assets that are in another country. However, even those challenges can be resolved with the help of an experienced divorce attorney who is adept at handling what are known as foreign asset divorces.
Examples of Foreign Assets
Perhaps you live in New York and bought a vacation home in Canada, Mexico, or the Bahamas. Maybe you or your spouse have family in another country or used to live in a foreign country, and subsequently, you’ve acquired assets there. In the era of remote work, increasing numbers of Americans live in the U.S. but go across the border (either physically or via the internet) to do paid work – and may gain property or open bank accounts in that other country.
Often, people own investment property in another country that they purchased before moving to the U.S. or hold assets in foreign trust accounts. These are just some of the many examples of how foreign assets can wind up involved in a divorce settlement.
Complications and Creative Solutions
However, it is important to note that the courts in this country may not have jurisdiction to enforce domestic U.S. divorce laws in another nation. The courts in foreign countries may ignore your pleas to gain access to assets you’re entitled to according to local laws. It can also be harder to track down foreign assets, and if you do manage to find them, it may be a challenge to have them accurately appraised to know what they are currently worth.
However, a resourceful legal team adept at foreign asset divorce may be able to reach out to legal partners in that other country to facilitate the process. They may also have access to a network of appraisers who can provide valid appraisals. Then, the divorce court in the U.S. can factor in that value when dividing divorce assets. For example, they may not recover the foreign asset itself and have it delivered to you. But once they know its appraised value, they can deduct that value from your spouse's portion of the assets and give it to you, therefore fairly compensating you indirectly.
Hiding Foreign Assets
Both parties in a divorce are legally obligated to disclose their assets and other financial information. A Statement of Net Worth, which lists all of your financial information, is relied on by the divorce court to help ensure fairness and transparency. Strict laws like the U.S. Foreign Account Tax Compliance Act require taxpayers to report foreign assets to government agencies like the IRS. Failing to do so can result in serious fines, penalties, and even criminal prosecution.
Some spouses may try to hide their overseas assets despite the laws, especially during a divorce. That's why you should gather as much information about your spouse's foreign assets as possible before you get divorced Your attorney can also conduct research to find those, as part of the legal discovery process when you decide to divorce.
Tell your attorney if you have any reason to believe that your spouse may attempt to hide their foreign assets. They can work to uncover them and can also inform the judge overseeing your divorce case of your suspicions. Consulting a cross-border financial and tax advisor may help you lower or eliminate taxes on foreign assets transferred to you due to the divorce.
Equitable Division of Assets
Most states in the USA, including New York, abide by laws that call for the equitable distribution of assets as part of a divorce settlement. In other words, the court will strive to ensure that both parties receive their fair share. Unfortunately, people getting divorced do not always play fair, so experienced legal counsel can help ensure that you are not taken advantage of by your spouse.
A prenuptial agreement or prenup – which is a legal agreement you and your partner sign before you get married – can also help you sidestep much of the pain, stress, and fighting over assets that often occurs. The agreement can even cover foreign assets – although legal agreements based on U.S. law may not always be recognized and enforced by foreign courts. That is why foreign asset divorces typically require specialized divorce attorneys, even if you live in a place like New York, where the legal system supports equitable asset distribution.