If you own significant assets, generate substantial income, and are facing divorce, the following article could salvage a large portion of your net worth.
In divorce, the more you make, the more you have at stake. Unless you have an ironclad prenuptial agreement, up to 50% of any net worth accumulated during your marriage could belong to your spouse – and maybe more.
The following eight tips will help you understand how to protect yourself through the divorce process.
1. Use valuation specialists if necessary. If you own a business, your business could be an asset subject to division upon divorce. This means you will have to determine the value, which likely includes the blood, sweat, and tears (aka goodwill) you’ve poured into it over time. Never enter into settlement negotiations for divorce without first knowing the actual value of assets like a business, professional practice or real estate.
2. Consider a forensic accountant. In many cases, spouses comingle funds or assets, which can give those assets a mixed characterization and make pinpointing the source difficult. Using a forensic account to trace funds and assets may be necessary.
3. Evaluate the strength of your prenuptial or postnuptial agreement. If you plan to handle your divorce as outlined in a prenuptial agreement, be sure it is well-drafted. If you’ve failed to disclose any assets or failed to have your prenuptial agreement executed under the proper conditions, your prenuptial agreement could be invalidated along with its terms.
4. Consider the tax consequences of your divorce. Transferring assets by way of divorce almost always involves significant tax consequences for high net worth individuals. Your divorce attorney should collaborate with your accountant to ensure any asset transfers as a result of your divorce are structured to mitigate as much tax liability as possible.
5. Understand your potential alimony obligation. If you generate substantially more income than your spouse, and your spouse needs financial support, you could end up with a significant alimony obligation. Alimony payments have tax implications for both the receiving and paying spouse so you want to be sure you can negotiation an alimony agreement that will be favorable to your overall financial picture.
6. Understand the implications of marital waste. Since your marriage has been on the rocks, is your spouse suddenly spending more? Is your spouse funneling marital assets into accounts for which you don’t have access?
It is not uncommon for high net worth individuals to experience this type of behavior from their spouse, or even be tempted to do the same. Thankfully, the law doesn’t allow the waste of marital resources to go unaccounted for, and with the proper guidance of a family law attorney you can take appropriate steps to prevent the unnecessary loss of assets and income.
7. Consider the cost of attorney’s fees (for you and your spouse). If your spouse has little to no income, and your income is substantial, you can expect to pay some amount of their attorney’s fees if you are the spouse seeking the divorce. Treat your divorce like a business decision. Plan how much you are willing to spend to get a reasonable divorce settlement and stick to that decision. Your net worth will thank you.
8. Calculate the cost of your divorce. Would you spend $20 on a $21 dispute? Of course not. Know the value of your fight. Do you want to spend tens of thousands of dollar (or more) on a dispute you could settle for the same amount? You’ll end up spending double what you’d pay, just to fight over the value. While it may be difficult to put your emotions aside and compromise, considering settlement could save you tens of thousands of dollars.
To learn more about how you can reduce the risk of diminishing your net worth as a result of divorce, click here to request a consultation or call 407-872-3161 to speak with one of our Orlando Divorce Attorneys today.