TL;DR: Going through a high net worth divorce requires careful planning, emotional control, and expert financial guidance. This blog explains the complexities of dividing substantial assets and outlines key mistakes to avoid when protecting your wealth.
Main points:
- What qualifies as a high net worth divorce and the types of assets commonly involved (businesses, investments, international holdings).
- How emotional decision-making can sabotage financial outcomes.
- Why long-term financial planning is essential for post-divorce stability.
- The serious legal and financial risks of hiding assets.
- How taxes can significantly impact asset division and settlement value.
Going through a divorce is challenging, especially when substantial wealth, complex investments, or family businesses are involved. Unlike a typical divorce, a high asset divorce includes significant property, business ownership stakes, and international holdings. If you’re navigating this process, understanding common pitfalls and smart strategies is essential to protecting your wealth and securing a favorable settlement.
Having a solid divorce strategy is crucial to dividing luxury properties, business interests, or extensive investment portfolios. This blog will explore common pitfalls to avoid during high-net-worth divorce. Grasping the nuances of high-net-worth divorces protects your assets and position you for a stability.
What Is a High Net Worth Divorce? Definition, Examples, and Asset Types
High net-worth divorces deal with much more money and complex property than most divorces. Typically, these involve individuals whose total net worth is over a million dollars. In ultra-high net worth divorces, this amount is much higher, sometimes reaching into the hundreds of millions.
In both cases, the assets up for division can include:
- businesses and shares in companies
- stocks and large investment portfolios
- bank accounts
- expensive items like yachts, artwork, and collectibles
- assets in other countries and international investments
- royalties and rights to inventions or creative works
High net-worth divorces demand precision. One misstep can cost or save millions. Accurate asset valuation and deliberate planning aren’t optional—they decide the outcome.
Identifying every asset early builds the foundation for a strong divorce strategy. It prepares you for the challenges ahead in negotiation and court.
Top Mistakes to Avoid in a High Net Worth Divorce (and How to Protect Your Assets)
Now that you know what is considered a high-asset divorce, you can try to avoid these mistakes.
1. Making Emotional Decisions Instead of Strategic Ones
A divorce can be stressful and emotionally charged, regardless of your net worth. Because there's a lot at stake, emotions like anger, sadness, or frustration can easily cloud your judgment. If you let these emotions cloud your judgment, you could end up with a settlement that isn’t fair.
For example, some people insist on “winning” the divorce at all costs — even if it means accepting a financially unfavorable settlement. Others hold on to certain assets out of spite, only to discover they’re costly or burdensome in the long run.
These are some smart strategy tips for a complex asset divorce:
- Focus on long-term goals, not short-term victories.
- Maintain calm, constructive communication with your ex-partner to reduce conflict.
- Consider working with a financial advisor who can offer objective guidance and help you make rational decisions.
It’s always best to work with a professional. A financial advisor can help you make financial decisions about your assets because they objectively view your situation. This can make the entire divorce process smoother and more constructive.
2. Failing to Plan for the Long-Term Financial Impact of a High Net Worth Divorce
Your financial life will look very different after a high net worth divorce. It’s not just about dividing assets; it’s about planning for a new future. Too often, people focus solely on immediate needs without considering how today’s decisions will affect their wealth decades from now.
Think about key questions like:
- How will this settlement impact my retirement savings?
- Can I afford to keep the family home, or would selling it be wiser?
- How will future expenses, like college tuition or healthcare, fit into my new budget?
This includes retirement planning, major expenses like your children's education, and lifestyle needs.
Don't try to do it all on your own. Financial planners and advisors offer valuable insights and help you create a plan that fits your new post-divorce financial circumstances. Sometimes, taking a lump sum might seem attractive, but regular payments or retaining specific assets could be more beneficial in the long run.
3. Hiding Your Assets
In a high net-worth divorce, it might be tempting to hide your assets to avoid losing them. Not only is this illegal, but it can also severely damage your case. Your ex-partner’s legal team could uncover this and leverage it to get even more than what they are entitled to.
If the court discovers hidden assets:
- You may face steep financial penalties or even jail time.
- Your credibility can be destroyed, making judges skeptical of everything you say.
- Your ex-partner could be awarded a larger share of the marital estate.
If your high net worth divorce settlement is based on false information because assets were hidden, the settlement can be reopened and changed. This means you could end up losing more than you initially tried to hide.
4. Overlooking the Tax Implications
You could hire the best legal team for your divorce, but a lawyer isn’t an expert in your finances. Each asset class has its own tax consequences, and failing to plan for them can reduce the true value of your settlement.
Consider these high net worth divorce tips for taxes:
- Selling investments like stocks could trigger capital gains taxes.
- Retirement accounts require a Qualified Domestic Relations Order (QDRO) to avoid penalties when dividing them.
- Certain assets, such as business interests, may have ongoing tax obligations you’ll need to account for.
Dividing retirement accounts isn't straightforward. You might need a special court order: This order helps to split these accounts without triggering taxes or early withdrawal penalties. You should have access to a tax professional to help you make the best decisions. Taxes have major implications on retirement accounts, as I explained in episode #6 of the Asset Preservation Hour:
Start Your Divorce Planning Today
Let the team at Asset Preservation Wealth and Tax help you move forward post-divorce. Our financial experts work with an experienced team of tax professionals and accountants to give you a 360-degree view of your finances. This holistic approach allows us to see the bigger picture and adjust for your needs.
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Stewart Willis is the founder and president of Asset Preservation Wealth & Tax, a financial planning firm in Phoenix, Arizona. Investment advisory services offered through Foundations Investment Advisors, LLC, an SEC registered investment adviser.
The commentary on this blog reflects the personal opinions, viewpoints and analyses of the author, Stewart Willis, providing such comments, and should not be regarded as a description of advisory services provided by Foundations Investment Advisors, LLC (“Foundations”), an SEC registered investment adviser or performance returns of any Foundations client. The views reflected in the commentary are subject to change at any time without notice. Nothing on this website constitutes investment, legal or tax advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Personal investment advice can only be rendered after the engagement of Foundations for services, execution of required documentation, including receipt of required disclosures. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Foundations manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Any statistical data or information obtained from or prepared by third party sources that Foundations deems reliable but in no way does Foundations guarantee the accuracy or completeness. Investments in securities involve the risk of loss. Any past performance is no guarantee of future results. Advisory services are only offered to clients or prospective clients where Foundations and its advisors are properly licensed or exempted. For more information, please go to https://adviserinfo.sec.gov and search by our firm name or by our CRD # 175083.
