Don’t wait until the last minute to plan for your financial security, especially if you think a divorce might be looming. People often get caught up in the emotional aspects of divorce, like custody of their children, but they may forget to plan for their financial future.
How Do I Prepare for a High Net Worth Divorce?
If you are a high income earner, own high value assets, or have a high net worth, (or the spouse of) you should consider these Tips for a High Net Worth Divorce as part of your Illinois divorce preparation.
- You need a team of experts. For a high net worth divorce you will likely need a financial planner, a tax advisor, business valuation experts, real estate and other appraisers, a pension valuation expert, and an experienced Illinois divorce attorney before you make a move. These experts can explain, among other things: (a) the tax consequences of a divorce, like capital gains and losses and the deductibility of alimony; (b) the potential costs and benefits of alternative divorce settlement and litigation strategies like mediation or colaborative divorce, and (c) restructuring your personal and/or business budgets for the changes ahead.
- Increase Your Cash Flow. Before you file for divorce, you should anticipate how your lifestlye may change during the divorce process and after your divorce becomes final. A good starting point is to increase your financial liquidity. The cost of litigation and increased living expenses from separated households may quickly drain your available financial resources.
- You Don’t Necessarily Get What You Pay For. Too often, people in a divorce try to “save” money on the cost of their divorce lawyer, tax advisor, financial planner or other expert. They just don’t see the benefit. Or they think they need to hire the most expensive divorce lawyer because that will ensure that they get the best results. Shopping for the cheapest hourly rate for an Illinois divorce attorney or the most expensive can be one of the more financially and emotionally expensive mistakes that you will ever make. You should hire the best divorce lawyer that you can afford, which does not mean the cheapest of the most expensive. I am the second attorney for many of my clients who hired the $500 an hour attorney first, then $30,000 later realized they are not getting any results and are not in the income bracket that can support sustained litigation at that rate. I am also the second attorney for many clients who hired the cheapest attorney first, only to find that they got poor service and bad advice. Remember, the $500 an hour has a fancy office and a nice car because YOU paid for it. They can afford to send their kids to college, but will you be able to after the divorce? Don’t make the mistake that some of my former clients made — hire me first and keep more money in your pocket.
- Dishonesty is Never the Best Policy. If you are the high net worth wage earner, you probably want to keep as much of your income and assets as possible. You may go to a lawyer who tells you that they can guarantee that you will not have to pay alimony, or that your spouse will get no part of your business. In essence, they will tell exactly what you want to hear to get your big retainer. However, concealing, transferring, or otherwise trying to prevent your spouse from finding out about assets and income only insures that the other side will hire its own experts to sleuth out your deception. If you are caught, it will damage your credibility in the eyes of the judge, which is something that a high net worth party wants to avoid. Full disclosure up front is to your benefit because it will save your money in the long run.
- Don’t Waste Money Fighting Over Objects. Many people become very attached to things. They are often willing to spend large sums of money, more than the value of the object, to make sure that the other party doesn’t get it. Who wins? The lawyers. If you purchased the item during the course of the marriage, it is more than likely marital property, meaning both of you have the right to ask for it. However, every dollar you spend fighting over an object is a dollar you could keep in your pocket. If you have an appraised value and the other party refuses to give it to you, the value goes into figuring out the final property settlement numbers.
- Consult With Your Experts When Evaluating a Settlement Offer. Before you make or accept a divorce settlement offer, you should discuss all of the pertinent issues with your divorce lawyer, financial planner, tax advisor, or other retained experts. They will offer an opinion as to the potential effect of the settlement offer on your current and future tax liabilities, income potential, retirement plans, ongoing obligations, financial flexibility, and other financial matters. For example, your assets may include stock options, one of the more difficult items to value. It may be worth little today, but may have a high value at a future date. Using experts can help you decide whether this is an asset that you want to retain or liquidate.
What Do I Need to Do Next?
If you are ready to get started exploring your options, you can call me now at 708-466-6912 or contact me online. I often meet clients in the evening and on weekends, and all clients get my personal mobile phone number.