High-Net-Worth Divorce- Part 1: Starting the Process Off Right to Protect Your Wealth

A high-net-worth divorce in New York is a complex process. To protect your wealth, you need a strategic approach from the very beginning and throughout the process. Here’s a guide to help you manage and protect your assets effectively.

Start with the Right Legal Team

The first and most important step is hiring the right divorce team. Choose lawyers who have extensive experience working with high-net-worth clients and who are committed to keeping you out of court if possible. Litigation is expensive and time-consuming. An attorney committed to Collaborative Divorce and other non-adversarial negotiation processes can save you significant time, money, and stress.

Review Prenuptial and Postnuptial Agreements

If you have a prenuptial agreement or postnuptial agreement, disclose it to your attorney immediately. These agreements can significantly impact the division of assets and income. Make sure your attorney understands which assets you’ve defined as marital property or separate property, how you and your spouse agreed income would be shared, and whether you or your spouse is entitled to separate property credits related to jointly owned assets. Your attorney must understand all the terms of the agreements to ensure they are properly incorporated into your future separation agreement.

Identify and Value Your Assets and Liabilities

At the beginning of the process, it is essential to undertake a comprehensive inventory of your assets and liabilities. This includes all properties, businesses, stock options, investments, and any debts or financial obligations that you and your spouse each own or owe. You need to identify and understand the value of each asset and the extent of each liability accurately. This may require professional appraisals, especially for high-value assets such as properties, businesses, and works of art.

Make sure to gather all relevant information, such as acquisition dates and whether the assets were obtained before or during the marriage. Proper documentation and valuation are necessary for a fair division. Equally important is identifying all liabilities, including mortgages, loans, and other debts, as they will impact the overall financial settlement.

Understand What It Costs to Maintain Your Current Lifestyle

Before discussing property division, child support, and spousal support, you need a clear understanding of what you and your spouse are currently spending. This includes both discretionary and non-discretionary expenses such as the costs of maintaining your home(s), domestic services, vacations, out-of-pocket medical care, and recreational activities.

You also need a clear picture of what you are spending to provide your children with the lifestyle they have come to enjoy, such as their education costs, childcare costs, medical costs, and all of their activities. Hiring a Certified Divorce Financial Analyst (CDFA) can help ensure all financial details are thoroughly examined and correctly budgeted.

Uncover Hidden Assets

Sometimes, high-net-worth divorces involve assets that one spouse may not be aware of or fully comprehend, such as private investments or cryptocurrency accounts. There might be restricted stock, stock options, and other deferred compensation that is difficult to understand. It’s vital to have a professional review your financial documents and tax returns to determine exactly what exists and make sure everything is properly accounted for and valued.

Consider Tax Implications

Tax implications play a significant role in asset division. For instance, if you need to liquidate investments to provide a lump sum payment, or you plan to trade an asset in one financial category for another, such as trading a 401(k) for equity in a home, you must understand the tax consequences. Your financial professional can help you through these complexities and ensure you are aware of any tax liabilities that may arise.

Choose the Right Financial Professional

A CDFA can often handle most of the necessary tasks to obtain the analysis needed. However, if a business needs to be valued, a forensic analysis is needed, or there are very complicated tax issues involved in the evaluation or division of the assets, you may want to work with a CPA. In both cases, working with financial professionals who are trained to work with couples in a neutral capacity will help you and your spouse keep the process as non-adversarial as possible.

Your Divorce Team Should Coordinate with Your Existing Advisors

Your attorney and the rest of your divorce team will need to communicate with and coordinate with your existing financial advisors, tax professionals, and trust and estate attorneys. Effective communication among all parties involved is key to protecting your wealth. Make sure your current financial advisors are aware of the divorce and ready to assist in providing the necessary information.

Contact Vacca Family Law Group

Protecting your wealth in a high-net-worth divorce involves careful planning and collaboration with the right team of experienced professionals. By hiring the right legal team, thoroughly identifying and valuing your assets and liabilities, and understanding your overall financial situation, you can better protect your wealth.

It’s also important to address any tax implications and ensure that any prenuptial or postnuptial agreements are reviewed and implemented correctly. From hiring an experienced attorney to working with financial experts, each step is crucial for safeguarding your assets.

At Vacca Family Law Group, our team of Collaborative Divorce attorneys and Mediators specialize in helping clients navigate these complex processes. Call us at (646) 798-4603 or contact us online to schedule your free introductory call.

Vacca Family Law Group is located at One Grand Central Place, 60 E. 42nd St., Suite 764, New York, NY 10165.Top of Form