Issues facing high net worth individuals entering a divorce are often much different from the issues faced by lower/middle income individuals. As such, they must be planned for and approached in a manner befitting the unique issues that need to be addressed. There are simply more financial resources to fund, support and to share. Substantial business assets are often involved and extensive categories of personal expenses must be sorted out.
While this short list of Do’s and Don’ts should provide some guidance, consulting with an attorney to get legal advice is always best.
Enter a prenuptial agreement before the marriage or during: The reality is that many marriages end in divorce, and of those that don’t, 100% end in death. In either case, there are assets to be distributed. While it is certainly unromantic to discuss and negotiate a prenuptial agreement between the time of your engagement and the wedding, an agreement can save a lot of heartache and money when it comes time to distribute those assets. These agreements can address property division, spousal support and virtually every financial issue that may arise during a divorce. If there is no premarital agreement in place, a divorce may expose the family wealth to possible division.
Assess and quantify the financial lifestyle of the marriage: For a business owner, someone involved in a family business, or an individual with complex investments, this is even more important. Only with a complete picture and awareness of each asset and liability can your attorney effectively act to limit your exposure to asset division. It is critical to any divorce, but especially to a high net-worth divorce, to have a detailed understanding of the financial lifestyle of the marriage as well as the assets and liabilities of the marriage.
Identify assets and liabilities: At minimum, schedule a meeting with your accountant, attorney and financial planner. It will be important for you to have a complete understanding of what you have and what you owe. Another important step is analyzing the tax consequences related to methods of any distribution. With an understanding of what you have and owe, your attorney will be able to present your complex financial picture to the court in a succinct and clear way.
Comprehensive Business Planning: While it can be difficult to avoid involving the business in a messy divorce, it is possible to limit the exposure of the business to the interference of a non-titled spouse’s equitable claim for a piece of the business. If you are a business owner or have an interest in a closely held business, you need to take steps to protect the business and your interest in the business from the effects of the divorce process.
Forget to get professional help: If your wealth is related to a business, or other personal assets that must be valued, an expert opinion is often needed. The difference between achieving a satisfactory result and being led to an unreasonable settlement may come down to a battle of who has retained the most effective expert advisors to value and structure the division of assets.
Ignore the unfortunate fact that approximately 50% of all marriages end in divorce: Ignoring long-established statistics is unwise, yet that is exactly what many individuals do. Marriage is not only an interpersonal relationship but also a financial relationship.
Neglect asset protection preparations: There are strategies that can be used to protect against changes in control of a company that may arise from unexpected family dynamics, such as divorce or the introduction of a new spouse into a business. You should consult with an expert accountant and divorce attorney to review your business’s specific situation.
Ignore the tax consequences associated with support and asset division: Depending upon the type of assets or interests subject to distribution, there can be serious tax ramifications as a by-product of the distribution. You and your attorney should work closely with your accountant, or other financial professional, to work through and identify the tax implications of support payments and property distribution.
Few things in life are as traumatic, and potentially economically destructive, as divorce. For those facing divorce, fears abound regarding issues of the distribution of property, alimony and support, custody of children, and the maintenance of insurance, just to name a few.
Wilder, Mahood, McKinley & Oglesby is one of the oldest firms in Pittsburgh focusing on family law issues. Our founding partner, Joanne Ross Wilder, penned the handbook used across the state by practitioners and judges in the family law arena. Our attorneys, Brian E. McKinley ,Darren K. Oglesby and Bruce L. Wilder update the book annually to keep current with changes in the law and society. To consult with a Pittsburgh divorce attorney about your options in a divorce, contact us online or by calling 412-261-4040. We represent business and professional clients with family legal concerns across western Pennsylvania.