High-Net Worth Divorce Mistakes
Divorces are often painful for anybody and can be one of life’s most challenging chapters. If you’re going through a divorce here are seven mistakes divorcing couples often make when the financial and emotional stakes are highest.
Hiding Your Assets
Hiding one’s assets is a bad idea generally, and particularly so in a divorce proceeding. It can be tempting to think you’re clever enough to get away with it, but you won’t, and when it’s uncovered that you’re acting in a deceptive manner, you will have lost credibility in the courtroom. Be transparent with your assets. Don’t become a DIY tax lawyer and attempt to shift assets to a third-party or business or family member who “knows how to take care of things.” It will come back to haunt you, and these actions will absolutely make an already difficult process even more difficult.
Sloppy Accounting for Assets
Speaking of your assets, make sure you focus while taking inventory of assets and debts. It is imperative that you, your attorney and your spouse have an accurate perspective of what you owe and own. Without taking time to account for these assets and debts you will undoubtedly end up owning a debt you didn’t need, or surrendering assets you could have retained.
Signing Docs Without Understanding
Do. Not. Sign. Anything. Without. Understanding. The. Document. Is that said clearly enough? There is an urge for a number of clients to want to “hurry up and just get through this divorce” and that is the wrong way to approach matters. The desire to “rip the Band-aid off” and get through this difficult chapter of life is normal, and completely understandable, but isn’t in your long-term best interest.
The documents that require signatures in the divorce process have long-lasting legal implications that will affect your life, and the life of your loved ones, and you must understand the details before your sign the bottom line. You hired your lawyer to guide you through this process, and it’s his/her job to explain details until you understand them. Do not allow yourself to feel rushed, and don’t sign documents hastily to try and speed up the process.
Guilt Shouldn’t Guide Decisions
Divorce is one of the most emotionally challenging processes anyone will go through, and the shockwaves affect every area of life. Particularly when a divorce is caused by one party’s poor actions, feelings of guilt can lead to bad financial decisions, and one party surrendering more rights or property than is necessary. Remember, once you and your spouse determine that divorce is the course of action, you have entered into a business decision, and you must proceed accordingly. Check your emotions and feelings of guilt at the door – you’re in a business transaction now.
Failure to Consider Tax Considerations
Talk with your attorney about taxes! Many people fail to consider that tax ramifications are part of your divorce, and the Gov’t. will get it’s share. There are specific steps that need to be taken in order to minimize tax implications, and based on your specific circumstances, your attorney should be your compass in these complicated decisions. Don’t hesitate to seek out an attorney who is savvy in the financial/tax implications of a high net worth divorce, and it would be wise to bring your CPA into the conversation sooner rather than later in the process.
Relying on Your Friends
Your friends want what’s best for you, so why wouldn’t you put stock in what they have to say? Well, every divorce is different and the facts surrounding your divorce are assuredly not the same as your friend who got divorced in the past. Avoid listening to your best friend’s anecdotal evidence about how well he/she came out of the divorce and applying that to steps you should take. Unless your best friend is your divorce attorney, thank them for the advice, but remember it’s worth what you paid for it.
Hiring the “Baddest” Lawyer
A divorce is a big deal, often with hundreds of thousands of dollars at stake, not to mention child custody implications and countless other ordeals that will be emotionally taxing. Frequently individuals who are facing the path to divorce think hiring the “toughest” lawyer will lead to an advantage as disputes unavoidably occur. This is not always the case, however, as there is a fine line between “tough” and beneficial. Instead of hire a lawyer who will serve as your advocate. Avoid the lawyer who will pick unnecessary fights, cause unneeded stress and focus on his/her bottom line ahead of yours.
Your choice in lawyer can dramatically alter your overall impression of the divorce process. Look closely at your attorney’s experience in matters of high-stakes divorce, and choose someone who has the legal and financial experience to guide you through this process.
Bruce Blumberg is a lawyer who focuses on high net worth divorce cases and is experienced helping clients through this difficult process. With a Masters degree in Taxation, L.L.M., he is uniquely qualified to provide legal and financial advice to clients with the goal of making your divorce case as strategically well planned as possible.