As the second installment of an article we published earlier this month, here we offer our “what-not-to-do” advice for high-net-worth individuals who are about to enter the world of matrimony.
Do Not Ignore…
The stark divorce statistics out there: half of all marriages end in divorce.
When you’re about to marry, no one really wants to talk pre-nuptial agreements and thereby throw off the romance. But when you have a lot to lose as a high-net-worth individual, you have a lot to lose. Ignoring long-established marriage statistics would be unwise. Marriage is not only an interpersonal relationship but also a financial relationship. Taking steps to prepare against a possible divorce can protect both your interests and your husband, to ensure a fair divorce settlement.
The potentially hefty tax consequences associated with asset and support division.
The Internal Revenue Service and the great state of California are your chief financial partners in your divorce. The shifting of income from the spouse paying support to the receiving spouse can create significant additional cash flow to both spouses. Depending upon the type of assets subject to spousal division, there can be serious tax implications. Failure to work closely with your accountant and financial professional in tandem with your chosen divorce attorney could result in a significant loss of opportunity for maximizing after-tax cash-flow and asset values.
Do Not Neglect to…
Take the opportunity to prepare a fair and reasonable divorce settlement.
When lower-income and even middle-class couples face divorce, they can struggle to find the means to maintain two households, pay child support and alimony, provide for the kids’ college fund (if they can have one at all), and have something other than debt to mark the time they were married.
When a high-net-worth marriage breaks up, the couple is more than able to live beyond subsistence planning during their divorce, and they are rarely forced to incur legal fees to merely fight to survive financially. Therefore, there is almost always an opportunity to bend in settlement negotiations without financially risking your future or the future of your children.
Prepare and take the necessary steps to protect your business assets.
Sometimes in a high-net-worth marriage, couples fail to address the logistics of a family business or business interests in the event of a split. An asset protection trust can be used to protect against any changes in control of a company that may arise from unexpected family dynamics, such as a divorce or the introduction of a new spouse into a business. Placing ownership of the business into a trust will help keep it outside the scope of divorce litigation.
Hire experts and legal counsel.
Your net value—from business interests to personal assets—must be assessed, and expert opinions will be essential. A forensic accountant will likely be the primary expert involved in the process, and he will help determine the worth of personal property. The difference between achieving a satisfactory result or being subject to an unfair and unreasonable settlement may come down to who retained the most effective professional advisors to value and structure the division of your assets.
We Can Help You Identify and Measure Your Valued Assets and Options
If you’re facing a high-net-worth situation, we at the Law Offices of Paul H. Nathan can help you make all the right moves to prepare the right terms for your high-net-worth marriage or divorce. Contact us today if you have questions about your options and how to go about taking the steps necessary to protect yourself and your assets.