MIAMI, Florida. High net worth divorces raise unique concerns. While any divorce can be challenging, especially if both parties need to divide assets, debts, property, and develop a parenting plan regarding how time sharing with the children will be negotiated, high net worth divorces often involve more complex financial instruments. In high net worth divorce, the tax implications of divorce also need to be considered. For example, if one spouse will pay alimony to the other, the new tax law could have serious implications for alimony payers. Under the new tax law, starting next year, alimony payers will no longer be able to deduct alimony pre-tax. Prior to this, payers were permitted to deduct their alimony from their pre-tax income, often allowing the payer to enter a lower tax bracket or pay significantly less. Given this major change, couples who are considering divorce are wise to get divorced now to be grandfathered in under old tax code, or should speak to their lawyer.
In high net worth divorces, it is often wise for both parties to hire a forensic accountant. When couples are getting divorced, both have to account for their assets and liabilities. If you and your ex work salaried jobs, only have a mortgage and a few credit cards, this should be straightforward enough. But, if one or both of you owns a business, if one or both of you owns stock, or property in other states or countries, your divorce can get complicated. It is not unheard of for an ex to hide assets abroad or to create shell companies to hide assets from an ex. If you are not entirely certain about your family’s financial picture, hiring both a divorce lawyer and also a forensic accountant, might be a wise move. In fact, Forbes recommends that high net worth individuals seriously consider whether they need to hire a forensic accountant.
High net worth divorces can be more complex, because your lawyer may need to investigate any claims an ex makes. This may require the hiring of experts. However, protecting yourself can pay off. Your ex’s net worth will be considered when a judge makes a decision regarding alimony awards and regarding child support payments. These payments can add up over time.
According to CNN, one of the most important decisions you’ll need to make when getting divorced is deciding which lawyer to hire. A competent lawyer can help you move beyond any anger or animosity in your divorce and help you look at your financial picture objectively and fairly.
A mistake in your divorce can be costly. What are some common mistakes that high net-worth individuals make? Here are a few:
- Fast-tracking the divorce to reach a quick settlement. Yes, you are angry and sad and want to put an end to this chapter of your life as quickly as possible. However, fast-tracking your divorce can lead to errors and mistakes that can cost you. Take your time to investigate your ex’s finances. Speak to your family law attorney. Pay attention to the details.
- Failing to think about the tax consequences of your divorce. Given changes to the tax code, how alimony will impact your tax bill needs to be closely scrutinized when making a divorce settlement.
- Letting anger cloud your judgement. He or she cheated. He or she lied. Yet, if you try to use finances and your assets to punish your ex, it could end up costing you more down the line.
- Failing to transfer IRA or retirement money in accordance with the law. If you and your ex share an IRA or retirement account and this money needs to split, it is important that you follow the law when withdrawing money. Failing to put money in the right account or taking too long to deposit the money into another IRA account can result in a hefty, and avoidable, tax bill.
- Letting guilt affect your case. The division of finances doesn’t always consider how angry or sad or guilty one partner is. At the end of the day, the division of assets comes down to the law and your rights. Don’t let your guilt or sadness result in your waiving certain important rights.
- Hiding assets. Hiding assets is illegal and could cost you. Don’t do it.
- Agreeing to bad terms. Have a lawyer review your divorce settlement before you sign. Sometimes the spouse with more money makes an offer to the spouse with less money telling them that they can’t afford litigation or that if they fight, they will lose everything. Don’t be intimidated into settling for less than you may deserve.
- Hiring the wrong attorney. You need a high net worth divorce lawyer who understands the unique challenges individuals face in these situations. The Law Offices of Sandy B. Becher, P.A. can help.