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Securing Your Financial Future after High-Net-Worth Divorce

Many clients facing divorce, including wealthy clients in high-asset divorce cases, wait too long to begin planning their financial future beyond divorce. Our clients, like many facing divorces, initially focus on emotion and child custody alone. However, it is important to your financial security and the security of your children, that you develop and follow a plan for financial security in your divorce.

This 9-Step Plan for Financial Security in your high-asset divorce is an important tool on your journey to financial freedom and prosperity after divorce.

1. MEET WITH EXPERTS TO PLAN FOR FINANCIAL SECURITY

Knowledge is power, which holds true in preparing for a high-asset divorce. The first step you should take in preparing for your high net-worth divorce is meeting with experts, such as your financial planner, CPA or tax advisor, and your bank, along with an experienced Maryland divorce lawyer. Financial advisors and tax advisors can explain the following to you:

Tax consequences of divorce, such as capital gains, capital loss, available deductions related to alimony or child support, and the best time for your divorce
The costs and benefits of settlement or disbursement of your marital and separate assets, prior to initiating the divorce process
Financial planning for your business and investment interests that will be impacted by your divorce
Avenues to seek increased income, which will be your separate property after the date of separation in your divorce, i.e. prior to your divorce being finalized
How you can protect your separate assets through tracing in your Maryland high net-worth divorce

2. UNDERSTAND YOUR LIQUIDITY

Before filing for divorce, consider how your lifestyle will change during and after the process. Find ways to boost your finances before starting the divorce. High-net-worth divorces can be costly, with two households to maintain and income disruptions. This can quickly deplete your funds. A more conservative budget might help protect your finances during the divorce.

3. THE RIGHT DIVORCE TEAM IS AN INVESTMENT

Many people with substantial assets try to save money by hiring cheaper divorce attorneys, tax advisors, or financial planners. Choosing the lowest-cost options can be a risky strategy.

The initial investment to work with the Right Divorce Team to provide you with experience and proven advice during your divorce may be an investment that pays dividends for the rest of your life.

Hiring the top divorce team helps you handle your marital estate division and create a solid financial plan for the future. Experienced and satisfied clients show that investing in the best Maryland divorce lawyer can protect your financial future and is worth the cost in the long run.

4. PAY YOUR BILLS

Divorce is a highly emotional and stressful process, even when you work with the best divorce lawyers. Many clients facing divorce will become consumed by the divorce process at one point or another. Sometimes the stress of the divorce process leads to divorce clients forgetting to pay their bills or the spouse that was responsible for physically paying the bills no longer lives in the same home.

Failing to remember to pay your bills during divorce can negatively impact your credit. However, there are tools and tricks to help protect you from forgetting to make payments. You should establish auto-payment on at least the following accounts to ensure you do not miss payments:

Mortgage Payment
Credit Card Payment
Vehicle Loan Payment
Utility Bills
Tuition
Other essential routine payments

You should continue reviewing your monthly payments each month for budgeting and accuracy; however, by establishing automatic payments, of at least the minimum balance, you will avoid a collection action or worse a negative impact on your credit score. During your financial planning and strategizing for your high net-worth divorce, ensure you have a plan for ensuring payments of essential bills continue.

5. TRUST YOUR DIVORCE ATTORNEY FOR PLAN FOR FINANCIAL SECURITY

Never accept a divorce settlement offer without speaking with an experienced divorce attorney. Additionally, if you are wealthy and/or have diverse assets, it is important to meet with an experienced high-net-worth attorney, tax advisor, and financial planner. A settlement of your divorce and division of marital assets today may have huge financial and tax implications down the road. Alternative dispositions of transfers of marital assets may protect your estate from capital gains tax and other negative consequences. Some settlements of your finances and divorce may seem financially beneficial today; however, you need to consider the advice of an experienced divorce attorney, future tax implications, income potential, depreciation and appreciation, retirement assets, and your financial flexibility or desire for liquidity. The advice of experienced financial advisors and high-net-worth divorce attorneys may protect you from threats you have not even considered.

6. UNDERSTAND YOUR DIFFERENT FINANCIAL ASSETS

Before determining an equitable distribution of marital assets, understand your different financial assets. We use our experience, along with financial advisors and appraisers, to help clients fairly divide their assets. Appraisals aren’t always needed, but they can be useful for finding the fair value of assets when dividing marital property.

Appraisals do not set the value of an asset unless the parties agree upon the appraised value of an asset. You can contest the identified value of an asset, either by an appraiser you hire or more likely by the appraisal done by the other party. Working with a Maryland divorce attorney experienced in high asset divorce and contested divorce cases will make you better prepared if you and your spouse cannot reach an agreement on the value of a marital asset during divorce.

Cash is king, i.e. liquid funds in bank accounts are often the most advantageous. However, other liquid assets with minimal tax consequences exist. In determining the complete picture of the value of an asset, i.e. a home, an investment, or a business, you should consider the following:

Taxes on the property, i.e. capital gains tax liability or capital loss, which can offset income tax
Transactional costs to convert an asset to a liquid asset, i.e. realtor fees or commissions for the sale of a business, real property, or a home
Net present value, which is often less than the appraisal value
Benefit of holding an asset until maturity of the asset or liquidating at the conclusion of your divorce

7. TAKE EMOTIONS OUT OF PROPERTY EVALUATION

You should not let your emotions interfere with your evaluation of assets. The true value of many marital assets in a divorce can be difficult to define; however, relying on your opinion alone is not a smart move. Experts exist to appraise and determine the value of almost any marital asset or type of property. Appraisers use objective analysis, i.e. not emotions, in determining the market value of an asset.

An appraisal might show a fair market value for an asset that may not match what you could actually sell it for. The liquidity of the asset can affect whether you accept its appraised value. This also applies to businesses, which have hard-to-quantify brand, reputation, and goodwill. Personal items like vehicles, boats, jewelry, and antiques are easier to appraise because they have fewer variables in the market.

Once you know the value of your marital assets, decide which ones you want to keep or convert to separate property and which ones to give to your spouse. Our experienced high-net-worth divorce attorneys will help you develop a strategy to retain your important assets and compensate your spouse with less valuable ones. Your desired level of liquidity after the divorce will shape our strategy for protecting your assets. We’ve helped many wealthy clients protect assets such as:

Boats
Businesses, both family businesses, and privately held businesses
Classic car collection
Deferred Compensation Plans
Diamonds and other Jewelry
Fine Art and coin collections
Inheritance and/or gifts from parents
Oriental Rugs
Property held Internationally
Rental or Investment Properties
Stocks
Vacation Homes

Assets you owned before marriage that became marital assets still retain their separate or premarital value. Identifying this value, which is excluded from the marital division, can be crucial. Hire experienced high-net-worth divorce lawyers to ensure you secure your financial future in the divorce.

8. THE STOCK MARKET IS NEVER CERTAIN

Current and projected values on stocks and other investment accounts are uncertain and volatile. Stocks and index funds may be worth far more or far less in the future and determining a strategy for the distribution of stocks is difficult in divorce. It is important to beware and proceed with caution when electing to keep or transfer stocks in your divorce. The value of investments can sometimes surpass that of tangible assets, and vice versa. When dividing stocks as marital assets, consider the tax implications, such as capital gains tax, if you choose to sell them.

9. INSURE ALIMONY AND CHILD SUPPORT OBLIGATIONS

In high net-worth divorce cases, alimony and child support can far exceed half a million dollars over time. You want to ensure you will continue to receive that substantial income stream if you are the spouse receiving the spousal support/support alimony. Conversely, you want to minimize your alimony liabilities, if you are the spouse responsible for the payment of support alimony. Maryland divorce courts allow the imposition of life insurance policies to protect the dependent spouse’s interest in alimony payments. Working with an experienced high-net-worth divorce attorney will provide you their experience and strategy in developing a plan to best address alimony and child support obligations for your interests.

This outline of the 9-Step Plan for Financial Security in High Net Worth Divorce helps you consider important financial issues. If you have significant assets or a high net worth, read our divorce guide and other resources. You deserve fair treatment and equity. Divorce With A Plan will work with you to create a strategy and protect your future.

CONTACT YOUR FIERCE ADVOCATES™ FOR THE 9-STEP PLAN FOR FINANCIAL SECURITY

Divorce is stressful, but you can ease the burden by choosing attorneys experienced with cases like yours. Divorce With A Plan has the expertise in high-net-worth divorces to help you get the best possible outcome.