Going through the process of divorce is never easy, even if your marriage has ended on amicable terms. A high net worth divorce makes things even more complicated due to the assets you own and how it needs to be divided (good luck, Bill Gates).
While emotional stress can take its toll during the divorce process, you don’t want to let this cloud your reality and your decision-making ability. Especially if you are the spouse that has worked extremely hard for the assets you have.
Here’s what you need to know about the high net worth divorce process and the realities you could face.
The Process of High Net Worth Divorce
So, before you dive into this process, it’s wise to know exactly how it works, first. A high net worth divorce is defined by the assets you own, which make up your net worth.
Generally, this type of divorce involves $1 million or more in liquid assets. Your assets may include a number of different things, such as the properties and vehicles you own, business assets, business shares, international assets, etc.
The higher an individual’s net worth, the more complex high net worth divorces can be. The divorce process centers on four key components:
- Identifying all key assets
- Categorizing each asset according to whether you acquired it while married, or separate
- Tallying the value of marital assets
- Distributing marital assets equally between both parties
This sounds simple enough, but the process can be complicated based on identification, valuation, and fair distribution of all assets. Here are some realities you could face during the process:
1. A High Net Worth Divorce Takes Time
The reality is that these types of divorce cases are not stock-standard. This means that the process tends to be far longer and far more involved than divorces that involve fewer assets.
So, before you begin the divorce process you want to be fully aware that it might not go according to your ideal timeline. In fact, you’ll need to be far more flexible with your timeline than you planned. Patience is key to ensure you receive the rightful assets you deserve.
2. It’s More Expensive Than You Think
As mentioned, divorce is no walk in the park. But a high net worth divorce is even more stressful because of the costs involved. Why is it so expensive? Because of how much work it takes to break down your assets, and divide them equally.
You may need to enlist the help of skilled and experienced attorneys and build a legal team to help you through the process. Paying for these services is pricey on its own.
Then there’s also the chance you’ll need to hire outside experts, such as a forensic accountant. The last thing you want to do is go through a high net divorce and try to save money. It’s wise to accept the fact that it’s going to be expensive, but so worthwhile in the long run.
3. It Will Impact All Areas of Your Finances
While it may seem like a high net worth divorce centers on just your assets, this is not always the case. This type of divorce actually has an effect on all aspects of your financial standing. It also has tax implications and can even affect your future financial responsibilities.
The more assets involved in divorce proceedings, the greater the financial implications. This is especially true when it comes to property division. If you own multiple properties and they have increased in value of time, you may need to pay out large amounts of capital gains tax, for example.
You want to be prepared for all types of financial eventualities, and perhaps enlist the help/advice of an experienced financial advisor.
4. Be Upfront and List All Your Assets
Not being 100 percent upfront and honest about all the assets you own can actually do more damage than good in this type of divorce. Don’t make the mistake of holding back on assets. List them all, from the get-go, as soon divorce proceedings start.
During the divorce process, your attorneys will want access to documents and records. If you have not listed an asset, it’s likely that they will uncover them. You also want to make a copy of all important paperwork before it’s seized by your lawyers for their research.
Don’t forget to consider your inherited assets and make sure to mention those too.
5. Keep an Eye on Your Spending During Divorce Proceedings
The last thing you want to do is make a bad impression with the court when it comes time to divide your assets. For this reason, you want to be mindful of how you spend money during your divorce process.
In some cases, people have the impression that the more they spend during a divorce process, the greater their divorce settlement will be. But it just doesn’t work like that.
High levels of unnecessary spending will not look good on you. The court may view it as wasteful or lavish, which could negatively affect the outcome of your divorce settlement.
6. There Are Tax Implications To Consider
No matter the value of your assets, there’s always some form of tax implication to keep in mind in a high net worth divorce. And the greater number of assets you own, the more complicated these tax implications can be.
However, there are ways to lighten the tax burden with smart planning and some negotiation. This is why you want to hire a financial planner as well as a tax professional/attorney.
At the end of the day, they will have the best advice on how to minimize the tax burden you’ll have to face.
7. Spousal Support Is Complicated
While the process of settling on spousal support can differ from one state to the next, it’s always quite complicated in these types of divorces. Most of the time, the court will keep these factors in mind when outlining spousal support:
- What each spouse earns/earning potential
- How long the marriage lasted
- All relative assets and liabilities
- The tax implications you’ll have to face
- How much each spouse contributed to the marriage
While this is not the entire list of factors, these are the most common that the court takes into consideration. Finally, you also want to remember that the sooner you hire professional representation, the better. Especially with these types of complicated divorce cases.
A World of General Knowledge Awaits
A high net worth divorce is not something to fear or dread. Most of the time, settlements are as fair as possible considering the value of marital assets and who contributed what to the marriage. There is a reason they take so long too — to ensure fair and equal distribution.
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