The homes. The boat. The investment accounts. During a high-net-worth divorce, the disposition of these and other assets (and debts) may be one of the most significant reasons underlying the contention between you and your soon-to-be-ex, making these types of divorces complicated and costly.
High-net-worth divorces can encompass a lot: real estate investment properties, business investments, stocks, bonds, and other investment vehicles, intellectual property, including patents, trademarks, and copyrights, digital assets, including cybercurrency, websites, and blogs, and rare collections, including coins, art, cars, antiques, or wine. Many of these assets will need to be valued as well as classified as separate or community property. Discussion of them may also raise privacy concerns.
Because of their complexity, high-net-worth divorces can become even more complicated and costly if you make certain mistakes during the divorce process. Whether you are focused on protecting your interests or want to make sure you receive your fair share, here are seven mistakes to avoid in your high-net-worth divorce.
1. Not doing your due diligence.
“Due diligence” is a phrase used in business and law to refer to the reasonable steps a person should take to investigate, appraise, and total the values and risks associated with a project in order to avoid an adverse outcome. In this instance, the “project” is the division of your assets and debts. Engaging in due diligence will make a divorce run more smoothly, particularly a high-net-worth divorce where there are more and many moving parts.
Doing your due diligence includes reporting all of your assets and debts. Because all property, both separate and community, is before the court for allocation, this likely includes property that you don’t believe the other party should share.
Property acquired during the marriage and with community funds or income is considered “community property.” Property acquired before marriage, with traceable separate funds, by gift or inheritance is considered “separate property.”
While the court commonly divides community property between spouses in some fashion and awards separate property to the spouse who owns it, it has the authority to divide property in a manner that makes an overall equitable division. Therefore, it is essential that you disclose all assets because otherwise undisclosed property will become jointly owned by you and your spouse by operation of law — even if it is likely the court would have awarded it to you in the divorce.
Another aspect of due diligence involves obtaining current and accurate values for assets of significance or that are in dispute. For example, many couples have much of their community estate in the form of real estate, commonly the family home. Short-cutting the evaluation process by using the tax assessed value or a realtor’s proposed listing price may “save” money in the short term but cost you many tens of thousands of dollars in the long term when your share is calculated on an inaccurate value.
Another example comes in the form of retirement accounts. The value to which you are entitled may not be accurately reflected by simply looking at its current account statement. Some retirement accounts are a combination of separate and community components. An experienced attorney will know what to look for and can obtain an analysis to determine what portions should be shared.
The state of Washington requires full financial disclosure in divorce cases. Therefore, hiding or otherwise not disclosing relevant financial information can also unnecessarily complicate and lengthen the divorce process. If you suspect your spouse is not forthcoming with information, your high-net-worth lawyer may suggest you enlist the help of a forensic accountant.
A forensic accountant will know what information to look for from your spouse as well as how to analyze it. A forensic accountant can likewise assist you in your own search for relevant documents, directing you toward what you may need.
2. Comparing your divorce to others’ divorces.
Every divorce is unique. Although comparing your divorce to or soliciting advice from others who have gone through the divorce process may seem helpful, comforting, or informative, it could have a negative impact. That is because not all information you receive will be accurate or apply to your circumstances.
Because you were not privy to the negotiations and discovery stage in others’ divorces, you may not understand the nuances of why they received the settlement they did, for instance. Not to mention, times and laws change. A well-experienced divorce attorney who is experienced in high-net-worth divorces will look at the specifics of your divorce in the timeframe in which you are getting divorced.
3. Wanting the process to be quick above all else.
The desire for your divorce process to end as soon as possible is entirely understandable. But rushing can also prevent you from receiving the best settlement possible, given your situation.
Rushing the process can cause you to overlook important details that can impact your case. You may not realize the harmful impact of a decision if you hurry through the process without thought.
Attempting to speed up the process can also hinder due diligence that needs to occur. Collecting documents — yours and your spouse’s — and then providing ample time for your lawyer and forensic accountant, if you have one on your legal team, to analyze them is a critical part of the divorce process.
It can take many months to create a full financial picture, enabling you to enter negotiations in an informed and as strong a position as possible. Although it may feel frustrating, time is necessary to assemble a complete picture and advance your interests.
4. Not considering the long-term consequences.
In a similar vein, not considering the long-term impact of your divorce settlement can be harmful as well. Tax implications, for example, are especially relevant in high-net-worth divorces. The structure of your divorce settlement will, therefore, matter not just now but for years to come.
Another area of contention in high-asset cases may surround spousal support and how to potentially offset it with assets. To calculate spousal support, your attorney will need to do an in-depth analysis of all financials pertaining to the marriage in addition to evaluating other factors that the court considers relevant.
A high-net-worth divorce can likewise raise estate planning concerns, both during the divorce and after it. Our Seattle estate planning team is ready to assess your existing estate plan at these strategic times or create a new one for you.
5. Not keeping the process amicable.
Divorce can be a stressful process, whether your marriage has been leading up to it for several years or you were blindsided by divorce. Making every effort to remain amicable with your spouse can serve to protect your assets in numerous ways. For example, acrimonious divorces generally cost a lot of money and can deplete marital funds by slowing down the divorce process.
Although we want our clients to remain amicable with their spouses, we do not want clients to try and “work with” their spouses, meaning negotiating on their own without going through counsel, continuing to talk with their spouse about financial matters and sharing information they don’t realize undermines their interests, giving their spouses documents, property, or money instead of going through their attorney, and a myriad of other actions. With high-net-worth divorce clients, it is generally best not to talk with your spouse about anything other than what is required to facilitate co-parenting.
Abiding by deadlines and cooperating during discovery can likewise positively affect your physical and emotional health and well-being during a high-net-worth divorce. If you are a business owner, for example, it is important you are able to continue management of your business affairs without becoming distracted by the divorce process, a circumstance that could potentially affect the running of your business and, ultimately, your bottom line.
Very often, businesses or livelihoods suffer during a high-net-worth divorce because of the emotional toll they take. Better to treat the divorce process and your spouse with respect, even if they may not be doing so, and strive to take emotion out of the equation.
6. Letting your emotions control the process.
Speaking of emotions, just as you should do your best to be civil and unemotional with your spouse, you should not let emotions control your decisions. The marital home is often a place where divorcing emotions tend to let emotions dictate decisions about whether to keep it or sell.
Even in high-net-worth cases, one spouse may not be in the financial position post-divorce to support the marital home. On the other hand, it could be the reason why one spouse is unable to move forward emotionally following their divorce.
Feelings such as anger, guilt, resentment, and fear, among others, may be hard to rid yourself of altogether, but approaching your high-net-worth divorce with a clear mind and a logical, rational plan can help you walk away with a fair settlement. An experienced high-net-worth divorce attorney can help guide you through the legal process.
7. Hiring the wrong high-asset attorney.
Family law attorneys have varying philosophies, personalities, and approaches as to how they handle high-net-worth divorces. Not every divorce lawyer is experienced in high-net-worth cases either. Therefore, if you are a high-asset client, it is crucial you vet your lawyer before moving forward with them, just as you would any other professional.
If you are unhappy with your current family lawyer, the good news is that it is not too late to hire someone new. At Elise Buie Family Law, our team of high-net-worth divorce and estate planning attorneys will be happy to discuss your matter regardless of the stage you are at now in your divorce proceeding.
Hire a Seattle high-net-worth attorney.
At Elise Buie Family Law Group, our team of high-net-worth divorce lawyers has decades of cumulative experience in high-net-worth divorce cases. We understand how important it is to negotiate a settlement that will afford you security in the future. Call us today.