Every divorce poses particular challenges, but a high net worth divorce is especially risky. After working hard to build wealth in real estate, investment properties, a successful business, retirement savings or other assets, a divorce could cause a person to lose as much as half to their spouse in a divorce. When going through a high net worth divorce, protecting one’s finances is critical. Here is a look at some strategies for securing finances during a high net worth divorce.
Analyze Finances
When going through a divorce, it is important to know where you stand financially. This involves reviewing all bank accounts, investments, retirement accounts, savings plans and other forms of assets to determine the total amount of wealth. All forms of debt must also be accounted for, such as credit card debt, mortgages, vehicle loans, personal loans and business loans. After a person determines their net worth, income and expenses, they can analyze this data to determine how divorce may affect their finances in the future.
Never Hide Money
Some people may attempt to hide money or assets to preserve their wealth during a high net worth divorce. This is a major mistake that can have negative consequences, including unexpected fees and a loss of credibility in the court’s eyes. Always be upfront about all money, assets and debts so that the judge can make a fair decision based on the couple’s complete financial picture.
Establish Separate Bank Accounts
Once the divorce papers have been signed, consider opening separate bank accounts to deposit any income after this date. Having a separate checking and savings account can provide a person with peace of mind that their spouse will not withdraw all the money unexpectedly. It is important to be transparent when making decisions like separating bank accounts, so be sure to notify all parties, including the ex and attorney.
Build An Emergency Fund
Just because a person has a high net worth does not necessarily mean that they have an emergency fund. Some people put all their money into investments or accounts that cannot be easily liquidated. An emergency fund stored in a savings account where it can be accessed at any time can help a person retain their financial health and provide peace of mind that funds are available in case of an emergency.
Consult With A Divorce Attorney
Having an experienced divorce attorney is critical when going through a high net worth divorce. Even if spouses get along, an attorney can help ensure that the transaction is completed fairly, allowing both parties to walk away satisfied.
Divorce law can be complex and having a professional available to answer questions and provide guidance can help make the process as stress-free as possible. Hiring a divorce attorney is especially important when one spouse takes malicious actions, such as draining joint bank accounts or taking on significant debt.
Determine The Best Process For Your Divorce
There are many ways to start the divorce process after meeting with your divorce attorney. Should you file for divorce immediately? Should you seek a settlement with your spouse? Should you engage in mediation?
These are all important considerations, because they often lead to different outcomes. Highly experienced divorce attorneys understand what process you should engage in and at what point. For example, it may be in your best interest to work with the attorney for your spouse initially and prepare for mediation.
If there is a lack of trust, it may be in your best interest, especially in the high asset case, to file for divorce immediately and use the discovery process to learn about your spouse’s assets, some of which may be hidden or complex to analyze.
Work With A Forensic Accountant
In a regular divorce, a forensic accountant is usually not needed. However, high net worth divorces often require the services of a forensic accountant to gain a more in-depth look at all finances shared between a couple. A forensic accountant can uncover hidden assets and ensure that the court is aware of all money and property owned by one or both spouses.
Carefully Review Paperwork
A great deal of paperwork often accompanies high net worth divorces. Filling out this paperwork correctly and in detail is crucial. Share the names and current balances of all financial accounts, as well as any property owned, leased or mortgaged. If these documents are not filed properly, a person could risk losing the portion of the money they are entitled to under the divorce terms.
Modify Beneficiary Forms
A lot is on a person’s mind when going through a divorce, and naming beneficiaries is not usually one. However, if a person has a soon-to-be-ex named on a life insurance policy, they may want to consider changing it. Modifying these beneficiary forms ensures that the proper beneficiary, such as a child, sibling or parent, receives their benefits.
Consider Tax Implications
What assets a person is rewarded during a high net worth divorce can play a major role in the amount of taxes owed. Ideally, a person wants to avoid assets that have not been taxed as this can result in a financial burden later. Consult with a financial planner about what tax implications certain assets could have after a divorce.
Speak With An Experienced Divorce Attorney
It is normal to have concerns about how finances will be handled during a high net worth divorce. Fortunately, hiring a divorce attorney with experience handling high net worth divorces helps ensure that finances are secured. For more information or to speak with a qualified divorce attorney, contact Milstein Siegel.