Although divorce may be relatively straightforward for most couples, it becomes very complicated for high net worth individuals. The more assets that are involved in a divorce, the greater the potential for conflict and problems. A divorce will have a substantial impact on your personal and economic future; therefore, wise choices must be made throughout the entire process. Here is a look at some of the financial mistakes to avoid in a high-asset divorce.
Allowing Your Emotions to Take Precedent Over Logic
Divorce is an emotional process, regardless of the reason behind the split. The complex range of feelings involved can make it difficult to think logically. However, it is essential to focus on your future and make rational decisions.
Sometimes, one party in a divorce may feel guilty about what is happening, but this should never guide the decision-making process. If you attempt to compensate for feelings of guilt by offering your spouse double what they are entitled to, for example, you may be compromising your own financial future.
Likewise, the court system is not the place to seek revenge against a spouse. If you feel that you have been wronged, using the legal system to retaliate will most likely backfire on you.
Making Rash Decisions
Once the decision to divorce has been made, you may want to finalize it as quickly as possible. As a result, you may make hasty decisions creating irreparable financial repercussions.
It is essential to take the time necessary to understand the repercussions of every decision, or you could end up jeopardizing your financial future.
Going Straight to Litigation
Divocrce is often a result of the inability to agree on certain matters, and the process of divorcing may be the same; there will likely be disagreements. However, this does not mean that you need to head straight to litigation in court. Divorce mediation is an efficient and cost-effective alternative that your attorney can guide you through to keep personal matters out of court.
Mediation allows you to solve a range of divorce-related issues, including your parenting plan and custody arrangements for your children. Mediation can also guide the divorcing spouses to arrangements for child support and alimony that they can both agree upon. It can also help determine an equitable division of the marital assets and liabilities
When these decisions are left to the court, you are at the mercy of the judge and have less control over the terms of your settlement. This often means that neither spouse is satisfied with the conclusion, and it makes it more likely that you will end up back in court to fight over post-divorce issues in the future.
Attempting to Hide Assets
All divorces require a process known as discovery, during which you and your spouse will disclose every aspect of your finances including income, debts and assets. In many cases, high net worth individuals believe that they can hide assets in some manner so that they will not be subject to the division of property.
You may be considering asking a family member to hold onto an expensive piece of jewelry or artwork collection until the divorce is over. In other cases, the primary earner may be in charge of the finances and the other spouse may not be fully aware of all of the assets that are considered marital property.
However, if your spouse or their attorney suspects that there are any hidden assets, they will most likely hire a forensic accountant who can uncover assets that were not disclosed voluntarily. They are experts at exposing the true financial picture of individuals, and there can be significant financial and legal consequences if you are found to be hiding assets.
Failing to Consider Tax Issues
Tax issues are relevant in all divorce cases, but in those involving high assets, matters of taxation often play an outsized role given the high value of the couple’s property and the complexities of their investments.
For example, if one spouse receives property in the settlement that is subject to capital gains tax, it could represent a significant tax liability. Withdrawals from retirement accounts are also subject to tax regulations, while spousal support is subject to unique tax laws that need to be understood before agreements are made.
Hiring the Wrong Divorce Attorney
When a high net worth individual goes through a divorce, it is essential to work with an experienced divorce attorney who special
izes in high asset divorces. This does not mean that you should look primarily for the toughest or most aggressive representation. Instead, you need a professional who knows how to protect your business and properties, and can help you work toward the right settlement for you.
Contact the Experienced High Asset Divorce Attorneys in Maryland
The Maryland family law attorneys at Milstein Siegel are known for their extensive experience in high-asset divorces and their ability to find favorable solutions to even the most challenging situations. Contact us today to request a consultation.