The divorce rate in the USA is somewhere around 50% and more than a third of those are due to financial factors. Unfortunately, being affluent doesn’t protect you from divorce. Understanding how to handle a high net worth divorce is crucial to streamlining the process and lessening the impact on your life.
What is a High Net Worth Divorce?
High net worth divorces, or high asset divorces, generally involve more than $1 million in liquid assets. Often, these assets take on multiple forms and can consist of property, overseas assets, business shares and more. The higher the values involved, the greater the complexity of the divorce. A high net worth divorce can quickly become difficult. That’s why it is important to have a competent, experienced team of financial advisors to help you. Here are some things to consider about a high net worth divorce.
A High Net Worth Divorce is More Expensive
Due to the complexities involved, a high net worth divorce typically costs more. You may need to hire multiple professionals to deal with the assets involved. For instance, you will need an accountant who specializes in high net worth divorce. You may also want to hire a forensic accountant.
Trying to skimp on these costs can sabotage your divorce and end up costing you much more in the long run. From the start, you need to be willing to invest a certain amount of money into your high net worth divorce. This will give you the best chance at a fair outcome.
It Takes More Time
In most cases, high net worth divorces take much longer. Often, people undergoing a high net worth divorce will cease negotiating in hopes of settling sooner. However, this is a huge mistake. Not only does it NOT guarantee a faster settlement, but it may also rob you of assets that are rightfully yours. Have patience.
[Related: Retirement and Divorce]
Divorce is about more than just dividing assets and high net worth divorce is no different. It will impact all areas of your finances. There are tax implications to consider, and your divorce will set the foundation for your future financial responsibilities.
Furthermore, the more assets there are in a divorce, the higher the potential of it affecting other areas. For example, if you and your spouse own several real estate properties that have appreciated over time, disposing of these, and splitting the proceeds can trigger large capital gains. You would then be responsible for the capital gains tax on your share of the proceeds. Be sure to speak to your financial advisor and prepare for these impacts.
List Your Assets ASAP
Waiting until the last minute to list your assets is a big mistake. List them as soon as possible because, during the divorce proceeding, you will likely lose access to certain documents and records. Ideally, you should have copies of all applicable paperwork at the beginning of your divorce.
Managing Your Spending
Some people think that higher levels of spending will garner them a larger divorce settlement. This is incorrect. In truth, unnecessary high spending may be viewed by the court as lavish wasting of assets and can count negatively against you. It is best to regulate your spending until your high net worth divorce proceedings are finalized.
Tax Implications of a High Net Worth Divorce
No matter how the assets are divided, there will be tax implications during a high net worth divorce. There are some ways to reduce this burden, but it requires planning. Speaking to your financial advisor team will ensure that you can implement strategies that will minimize your tax burden.
Determining spousal support varies by state but some of the considerations that the court will factor in include:
- Length of the marriage
- Each spouse’s earning potential
- Each spouse’s current income
- Relative assets and liabilities
- Tax consequences
- Each spouse’s contributions to the marriage
Financial Implications of a High Net Worth Divorce
If you are facing a high net worth divorce, it’s important that start planning for the financial implications as soon as possible. An experienced, knowledgeable financial advisor can help you achieve the most optimal outcome. If you would like to learn more, please attend one of our Second Saturday or Done with Divorce seminars. Contact Argent Bridge Advisors today to learn more.