The High Net Worth Guide To Divorce
This is part 1 of a 7-part guide for affluent and high net worth individuals considering divorce. In this section, we review the overall things you should do BEFORE talking to your spouse.
Jurnex is an independent registered investment advisor that specializes in supporting women going through divorce. If you’re ready to take the next step with your separation, contact us for a free consultation today.
What to do BEFORE talking to your spouse
When it comes to affluent and high network couples, divorce can be very complex. In this comprehensive seven-part guide, we review the seven major steps that you should take when considering divorce from your spouse. While financial wealth can bring peace and comfort, it can also bring additional complications. Small mistakes in regular divorces can become magnified when larger sums of money are involved. Even a divergence of 1% of assets can mean the difference of millions of dollars down the road.
Here, we cover the seven steps you need to take for your separation.
1. Don’t tell your husband (or wife) … just yet.
The single biggest mistake that high network divorcing couples make is to jump the gun until their spouse that they want a divorce before they are absolutely sure and have made the correct preparations. Once you tell your spouse you want a divorce, that marks the beginning of the separation process. You can’t take something like that back easily. That is why it is so important to make the necessary preparations.
It is both natural and human to want to be open with your spouse. You married them in the first place out of dear love. Believing that the two of you would be together for the rest of your lives. However, the moment you tell your spouse you want a divorce, you have shown all your cards. Make sure you protect yourself first.
1. Make sure this is what you want
As obvious as it sounds, you should first make sure you absolutely want a divorce. In our experience, the majority of people who initiate a divorce are conflicted. Even if divorce is the right thing, people still often feel a sense of guilt or uncertainty. After all, a divorce is an incredibly significant life changing event. It is not a decision anyone takes lightly.
We find a lot of clients second-guess themselves. “I feel like I’m *done* with the relationship, but is divorce the right decision for me? Can we still work on it? Is this just me being weak or selfish?” Don’t talk yourself out of making the right decision.
You should ask yourself these sensitive questions, but you must become comfortable with your ultimate decision. Talking to a trusted friend can help you explore all angles. Look for someone who can give honest feedback and not just “feel-good” advice. They should be willing to tell you when you’re right, but they also must be willing to call out thinking that don’t make sense. For many people, the fear of being alone, or being poor will keep them in unsuitable relationships. These relationships are detrimental to the individual’s well-being. It is a truly toxic situation for both couples to have someone in the relationship who does not want to be there.
That is why, for the majority of people who truly want a divorce, we find that it is the absolute right decision. To reach the point of seriously considering a divorce, there must be something deeply broken about your relationship. We find that the majority of our clients have spent years unsuccessfully trying to fix their marriage. That they have lived in unhappiness for a significant amount of time.
Only you can determine whether divorce is right for you. But once you make the decision, make sure that you are confident in the face of all adversity. There should be no need to second guess yourself over and over once you have made your decision. That will only lead to more uncertainty and suffering on your part.
2. Find the time to prepare yourself mentally
Once you have decided that you do want a divorce, make sure you take the time to prepare yourself mentally. Remember that most divorces take eight months or longer to complete. In the case of high net worth and affluent clients, the process can take multiple years to settle. Even though the legal part of the divorce should be finalized within 12 months, the number of outstanding financial issues can take significantly longer complete. Selling a private company, for instance, can often take years.
That is why it’s important to prepare yourself mentally. Find a free weekend just for yourself. A time where you can retreat from the day-to-day and find time to relax. Visit a day spa, a retreat, or somewhere meaningful that you can quietly reflect. Remember the times of your life where you were independent. Before you were married. Think of the good times and how being single didn’t mean self-misery at all. Your single years were some of the best, most adventurous years of your life. Make sure you remember that.
3. Find a friend or advisor to support you through the process
Because divorces are so emotionally draining, it is extremely important that you find a good advisor who will stay with you through the entire process. If you have a close friend or family member who you trust, make sure they are aware that you are looking for their full and unconditional support through the entire process. Not just for one-off pieces of advice.
Seeking a professional consultant is also a good option. Marriage counselors are an excellent source of unbiased advice. They can help you see issues from new perspectives. Financial advisors specializing in divorce like us can also be an extremely good option. For affluent and high net worth couples considering divorce, we find it helps to have a knowledgeable financial counselor. The majority of concerns often focus on financial issues. Having a person you can count on can make an incredible difference.
Can Jurnex Help?
If you’re thinking of divorce and want clarity in your decision-making, consider reaching out to us at Jurnex. We’re an independent registered financial advisor specializing in helping women navigate divorce. We’re also not your typical financial advisor. We care about you first and foremost. So whether financial questions or personal life ones, we’re here to help you come to the right decisions for your life.
2. Protect yourself
Note: We cover this section in greater detail in part 2 of our divorce guide: protecting yourself in divorce
Once you have prepared yourself mentally, it is time to prepare yourself from the financial and legal sides. This is the stage where you make sure that you are physically safe from harm, that you have all your financial needs met, and that you are legally protected. Make sure you have your own bank account with enough liquidity for at least 12 months. You need to make sure you have enough money to survive a protracted divorce. Divorces can drag on, and we have seen instances of spouses using their control over family finances to exert control over their departing spouse.
Make sure you keep an accurate record of how much you are currently spending. It is easy to overlook infrequent expenses such as healthcare, car loans and personal insurance when calculating expenses.
If you have kids, make sure you pre-fund their education for at least 12-months BEFORE you tell your husband you want to leave. You want to avoid allowing your spouse to use children’s expenses as a bargaining chip. You also want to make sure you have enough set aside for your children’s well-being.
If you don’t control family finances, make sure you have your housing covered for at least 12 months. If you are not on the deed of your house or listed on your lease (if you rent), your husband CAN technically evict you.
There is no way to sugarcoat this: divorces can be expensive. Make sure you set aside enough money for potential legal fees. The best lawyers can be expensive, but are often worth it. Make sure you have legal counsel that is highly experienced and is right for you.
3. Make a list of all your assets
Note: this is a summary of the third section of our divorce guide: Identifying Marital Assets.
It is extremely important to have a good sense of all your assets before moving forward and telling your husband that you want a divorce. The moment you tell your husband that you want a divorce, it becomes easier for him to hide assets.
In the technical sense, it is illegal for your spouse to hide assets. But the availability of offshore accounts and murky tax havens makes it relatively easy for motivated people to hide a substantial amount of wealth. Even without malicious intent, it is easy to overlook significant assets. Retirement assets, stock options, life insurance policies and even land titles can be forgotten during the divorce process. Make sure you account for all of it.
How to list your assets
1. Talk to your CPA
Your accountant is usually the best place to start when you’re looking through finances. HOWEVER, be sure you know who your accountant is working for. Unscrupulous accountants might notify your spouse that you’ve started digging around. If this is the case, then seriously consider hiring a third-party accountant and skip to part 2.
To form a full picture of your assets, your accountant will likely need additional documents, including W-2 forms. The regular 1099 tax filings will provide you only with information on annual income. It will not tell you about the assets themselves unless they have earned income during the year.
2. Check prior year tax returns
Despite their shortcomings, tax returns are still a good place to start when you are looking for clues on your financial situation. Check the additional schedules as well. You should gather at least three years of prior tax returns.
3. Make a list of other assets
When you are reviewing your families assets, there is no substitute to good common sense. Write down the list of all assets you can think of. This will include all real estate, investment properties, pension benefits, stock options and more. It is important that you start writing things down early and keep adding any assets you can think of as time goes on. Your accountant may understand your financial situation, but he or she will not have as clear of intuition into your finances as you.
4. Search for hidden assets
Note: this is a summary of the fourth section of our divorce guide: Finding Hidden Assets During Divorce.
For affluent and high net worth families, a significant portion of assets is often stored overseas, particularly in tax havens. This is often done for perfectly legal tax avoidance reasons, not necessarily tax evasion. However this also creates the opportunity to hide significant assets. Once you start hiding assets from the US tax authorities, it becomes very easy to hide it from your spouse as well.
This is one of the key reasons why you should do your homework before telling your spouse that you want to file for divorce. You should have a solid understanding of where your financial wealth is located. Once you have established a baseline, it becomes much easier to track missing assets.
There are two key ways to find hidden assets
1. Follow the money
This is also known as tracking fund flows. Generally, when income is earned in the United States, it will reach a tax haven by some kind of transfer. This will typically be done through a bank or other financial institution. To follow these fund flows, make a list of all banks you and your spouse have used in the past. After that, if you have power of attorney, ask them for wire transfer records.
The Bank Secrecy Act / Anti-Money Laundering (BSA) requires financial institutions to maintain most records for at least five years in accordance with 31 CFR 1020.410(a). This can be a very good source in understanding how much money has been remitted abroad. If you do not have power of attorney over all accounts, this step will have to be taken during the official divorce process.
2. Follow the incentives
Often, however, money does not have to be transferred out of the United States in order to reach a tax haven. Often, wealthy individuals can use some form of swap that allows a transfer of wealth without money getting remitted abroad. This is often done with a third party (i.e. when a foreign buyer purchases US goods or services, the buyer could deposit money into a foreign account rather than sending it to a US one). Much illegal activity can happen this way. But indirect transfers are also often done over the course of legitimate business. If you or your family does a lot of international work, it often makes sense to maintain overseas bank accounts. But these can be sources of hidden wealth too.
5. Consider alternatives to divorce
Note: this is a summary of the fifth section of our divorce guide: Considering Alternatives to Divorce
The moment is here. It is time to talk to your spouse about getting a divorce. But can things still be worked out? Often, bringing up the topic of getting a divorce will be a surprise to your spouse. He often will have no idea that you have been so unhappy in the relationship!
This can also be a time for second-guessing yourself. When analyzing his response, there are two things that you should do.
A. See whether things can be fixed
Marriage counseling can be a great way to help your spouse examine whether the relationship will work in the long-run. The job of a good marriage counselor isn’t to keep you together. It’s to determine whether the marriage is good for both parties involved. It takes two to tango.
Be aware that marriage counseling comes with an undeserved stigma. People often see marriage counseling as a last resort; they worry it sends a signal that they are incapable of dealing with their own problems. That cannot be further from the truth. Seeking marriage counseling means that you are actually trying to work on your marriage. Not giving up on it.
Spending time apart
Spending time apart can be another good option for a couple considering divorce. The cool off time can generally be between two weeks and four months.
Most importantly, the cool off period lets you see how much you and your spouse can truly miss each other. If you have children, you have to be cognizant of their well-being too. Be open to them about spending time apart and make sure they understand it is for the benefit of the whole family. Having you miserable in a marriage does that absolutely no favors. They will grow up seeing that marriage is a painful thing. But correctly educate them about spending time apart, and they will learn that marriage is a fluid thing that must benefit everyone involved.
B. Seek alternative forms of divorce
Legal separation can be an option for some couples. This is also known as a limited divorce. In a legal separation, a couple can separate properties and lead separate lives, but still be legally married. Only the state of Texas does not recognize legal separation.
Legal separations can be a good option for a number of reasons
- Religious reasons: some religions frown on divorce
- Health insurance: a legal separation may allow the ex-spouse to remain on the working spouse’s health insurance
- Legal immigration status: for resident aliens married to a US citizen, a legal separation may offer a way to maintain US citizenship. Consult a lawyer before proceeding, however, because cases can vary.
- Not wishing to divorce: some couples do not want to live together, but also do not want a full divorce
6. Consider options for divorce
Note: this is a summary of the sixth section of our divorce guide: Deciding on a separation process.
Once you have made clear to your spouse that you desire a divorce, you will have to decide on the separation process. Each of these have costs and benefits. Which one you choose depends greatly on your situation.
A. Court-based divorce
In a court-based divorce, each spouse generally retains their own lawyer. Issues are resolved through the use of settlement letters between the lawyers. In the event where neither party can come to an agreement, a judge can make a final ruling. This is the most expensive and least flexible of the options. However, it can be the most appropriate path if there is ill-will among either party.
B. Mediation-based divorce
Mediation is a method where an independent third-party work with the couple to mediate the divorce settlement. It decreases the cost of divorce and has been shown to have a greater likelihood of creating an agreement that both parties will honor. Mediation can also be done in private, without the need to file court documents that would reveal personal wealth. This method of divorce has become increasingly popular with affluent and high net worth couples.
C. Collaborative divorce
Collaborative divorce uses a team-based approach. The divorcing couple seeks professional help from experts in the legal, financial, and mental health areas. Child experts can also be involved. Both parties agree to work together in good faith to find a “win-win” situation. No one may go to court or even threaten to do so. If that should happen, the collaborative divorce process terminates and both lawyers are disqualified from any further involvement.
D. Pro se divorce
A pro se divorce is where the parties direct the negotiation. There are no lawyers involved. This is usually done when the parties would rather handle their own divorce rather than hiring lawyers or other industry professionals to help. This form of divorce is uncommon among the affluent and rarely used in high net worth cases because of the taxation and legal issues that can be missed.
7. File for divorce
Note: this is a summary of the seventh section of our divorce guide: Divorce and Alimony.
Once you have decided on the method of divorce, take a deep breath. It’s time to file.
Start by finding out which state to file for divorce. Laws and regulations will vary greatly by state. However, most states follow the following process:
1. One spouse files a complaint with the State (plaintiff)
Once the complaint is filed, the state will print a summons. Generally, you must ask for alimony at this stage. States will generally not allow you to retroactively file for alimony.
2. The plaintiff spouse serves the summons to the other (defendant)
Most states allow 60 days to serve the summons. Each state has different requirements, but it must generally be done by a sheriff, lawyer, or certified mail. If sixty days lapse without serving the summons, you will have to refile your complaint.
3. The defendant spouse responds to the summons
Typically, the state will give your spouse 30 days to respond to the summons. If he or she does not respond in that time, the process can move forward without their participation.
4. The court schedules your case
On return of the summons, the court will generally set a scheduling conference. Both sides meet with a judge and a timeline is set. If a case is uncontested (where there are no disagreements between you and the other side) some courts will automatically schedule a hearing.
5. If the separation is contested, the courts will hold a hearing or trial
At a trial, you and your spouse will be given the opportunity to provide evidence and testify. When the hearing or trial is complete, the magistrate or judge will make a decision. The ruling may be made that day or sent in a written decision mailed to both sides on a later date.
If the separation is uncontested, a judge may simply review the proposed settlement and close the case.
Continue to Part 2: Protecting Yourself During Divorce
Can Jurnex help?
If you want to be in control of your financial well-being, consider Jurnex as your financial advisor and divorce mediator. If you are looking for a peaceful and equitable resolution to your separation, book an initial consultation with us to see how we can help.
This is a 7-part guide for high net worth individuals looking for a divorce. Read the next part here.
Or ready to take the next step? Contact us for a free consultation on how we can help you move forward in your divorce.