Part 2: Protecting Yourself During Divorce
The High Net Worth Guide To Divorce
This is part 2 of a 7-part guide for affluent and high net worth individuals considering divorce. In this section, we cover how to protect yourself during a divorce.
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.
Now that you have decided to ask for a divorce, the next step is to understand how to protect yourself during a divorce. The three areas to protect yourself are:
1. Financial protection
As an affluent or high net worth individual, you need to protect yourself financially during a divorce. Legal protection is important too. But the right finances can always hire a good lawyer. (The reverse is not the case; good legal protection cannot ensure financial protection in the short-term). Courts may eventually order alimony a spouse to pay alimony. But the spouse who controls finances can exert serious pressure on the other spouse in the interim.
How much to set aside
Make sure you have access to sufficient capital to last through the divorce process. We recommend that you have a bank account in your own name with enough money to last through a protracted divorce. Even though a lawyer can order temporary maintenance through the courts, the timeline for payments can often be delayed.
If you do not earn income, you should set aside at least 12 months of expenses during a separation. If you do earn income, set aside at least 6 months. In most states, a period of 12-month separation is absolute grounds for a “no-fault” divorce. This means that if you and your spouse have lived apart for 12 months without interruption, most states will usually grant you a no-fault divorce.
Having an additional financial cushion will also help reduce stress. Knowing you can survive on your own for 12 months or longer will allow you to make better decisions during your divorce. We see many divorcing spouses feel rushed through their divorce negotiations because they are worried about getting access to money. Also, costs may run higher during a divorce. Additional expenses, such as legal fees and housing costs can add to regular day-to-day expenses.
In good news, you don’t need to hold the 12-month cushion in cash. You simply need access to cash that your spouse cannot take away. This can be in the form of credit cards, bank loans, loans from family, or rental income from a property in your name. Just beware of joint accounts. If both you and your spouse are signers on an account, your spouse may also have the ability to empty the account. A judge will probably reverse that action. Eventually. But the shortage of cash can cause great disruptions in the short term. In a divorce, don’t give your spouse leverage over your financial well-being.
What to expenses to consider
Make sure you account for everything when you’re determining your expenses. Major expenses can get missed because of the stress caused by a divorce.
Daily living expenses
Start by combing through your credit card and bank account statements. Find out which payments are yours and which ones are not. You are just looking for a general sense of your spending. Be aware, however, that this method can miss major expenses that are deducted on a monthly or yearly basis. This includes items like healthcare, insurance, car and rental payments. Make sure you write these expenses down as well.
- Major expenses like car/house payments
- Insurance expenses including car, renter/owner, life and health
- Transportation expenses including car, gas, and airfare
- Apparel, particularly clothing for work
- Grocery expenses, restaurant meals
- Computers/electronics that will need replacing
People often forget about childcare expenses when calculating expenses. The single largest overlooked expense? Education fees. These expenses can add up to the hundreds of thousands of dollars per year if you have several children going through private schools or college.
Make sure your children’s education has been funded for at least 12 months BEFORE you tell your husband you want to leave. We have seen instances of a husband refusing to pay for their child’s education in retribution for their wife asking to leave. It may seem unconscionable to use children as bargaining chips. But emotions can run very high during a divorce, and especially when large sums of money are at stake.
The second biggest expense for children of affluent and high net worth families is housing. This is driven mostly by the cost of an extra bedroom. If you plan on leaving with the children, make sure that your housing allowance includes the cost of housing your children too.
The third largest expense is childcare, which can cost $20,000 or more per year. This is followed by food, clothing, and entertainment. Make sure you factor all of these costs and that you have access to enough liquidity to provide for your children through divorce.
For wealthy and high net worth couples, housing can be another issue of contention. Make sure that your housing is covered for at least 12 months, if not longer. If you are not listed on the deed of your house or as an official renter (if you are renting), your spouse can technically evict you. You can find out whether you are on the house deed by doing an online municipal search. Most municipalities publish online records of all housing deeds in their area. Do a search on your house and make sure you’re on the deed.
If you are not listed on the deed or rental agreement, make sure you have housing secured for at least 12 months. This can be in the form of setting aside enough capital or having a family member or friend who will host you if your spouse threatens to evict you.
Regardless, if you feel physically unsafe in your own house, it is important that you seek alternative accommodations. If harm can be proved, law enforcement can issue a restraining order. But this can simply add to already tense emotions. So instead, we recommend having a back-up plan in case you have to move out.
Make sure you have enough money to cover legal fees. The best lawyers can charge $500-$1,000 an hour or more. They know their skills are valuable and in very high demand. So the best lawyers generally command a premium to the market. Be aware that the reverse is not always true: good lawyers are expensive, but expensive lawyers are not necessarily good.
Don’t count on your lawyer’s sense of charity. It is industry practice to prepay family lawyers for their work, so make sure you have at least $25,000 set aside for legal fees. (Only personal injury law commonly follows the practice of payment after settlement). If in doubt, ask your lawyer for an estimate. A good lawyer should be willing to give you a range on how much you can expect to pay. Just know that each case is different, so many lawyers may be hesitant to give you a very specific figure.
Who to contact for help
A financial advisor who specializes in divorce can help you navigate these pitfalls. It is our business at Jurnex among other firms to protect you as an individual first and foremost. Lawyers may be able to help with the legal side of divorce, but most lawyers are not numbers people. Most will need help from CPAs or financial advisors to correctly calculate and understand how much you will actually need to support yourself through the divorce process. Make sure you have the right support to protect yourself financially. If you want to learn more, book an initial consultation with Jurnex today.
2. Legal protection
Finding yourself the right legal protection can be a complicated process. There is a great temptation to simply go with your family lawyer or with a friend’s recommendation. This is not the best approach. “Convenient” lawyers often don’t have the skills or experience in divorce law. Instead, we recommend you follow a three-step process when you select and retain a lawyer
A. Determine which jurisdiction you are filing for divorce
If you have recently moved or maintain more than one residence, you need to know which state you will file for divorce in. Divorce laws vary greatly between different states, and you need a lawyer who practices in the right jurisdiction. Some states require you live there a certain number of months before being able to file for divorce. Maryland, for example, requires 12 months residency. And in all states, one of the spouses must be a resident for a certain period of time before the court has jurisdiction and divorce proceedings can even begin. Typically this is about 90 days.
B. Determine what qualities you are looking for in a divorce lawyer
It is important to write down what qualities you are looking for before you start talking to lawyers. Lawyers may try convincing you of what you need. But if you have a pre-written list, it will be harder to sway you to make a rash decision.
Imagine buying a car. A car salesman may try selling vehicle add-ons that fall outside your budget. But with a pre-written list, you already know what you’re looking for. Having that list diminishes the temptation to buy unnecessary add-ons, regardless of how convincing that car salesman might sound.
Areas to consider include:
- Experience: have they covered cases like yours before?
- Background: do they have the right credentials for your case?
- Track Record: how successful have they been in the past? Can they provide references?
- Team: how much work is handed off to subordinates? What qualities should the team have?
- Special skills: do they need any special certifications for a case like yours?
- Fees: what are their fees and how are they structured?
C. Interview at least three lawyers
Once you have determined what qualities you are looking for in a lawyer, we recommend you interview at least three. There is a great temptation to go with the very first lawyer you find. But finding a good match of a lawyer is much like dating. You need to find one that best fits you. A lawyer that speaks on your level. One who understands and “gets” you as a person.
Finding the right lawyer can mean the difference between a smooth separation and a contentious one. Having an overly aggressive lawyer for the job can cause your spouse to become overly defensive. This can lead to unnecessary fighting. But if your spouse likes fighting back, you need a lawyer who has no problem with standing up to bullying.
Can I go with no lawyer?
It is tempting for people to go without a lawyer to save money. In fact, half of the divorces in the United States are pro se (where neither party uses a lawyer). For affluent and high net worth individuals, however, we do not recommend a pro se divorce. The stakes are simply too high. If you can afford it, having correct legal protection is well worth the money. Seemingly minor mistakes in divorce negotiations can lead to thousands or millions of dollars difference in settlements.
The amount you save in legal fees is also rarely worth the stress. In our experience people who find the right lawyer also find their divorce goes much more smoothly.
3. Emotional protection
Once you have protected yourself financially and legally, you have to protect yourself emotionally too during a divorce. Many divorce professionals will overlook giving this advice. Even the best family lawyers caught up in the day-to-day minutiae may occasionally forget to make sure you are doing well.
If you ever feel overwhelmed during the divorce process, remember these three things:
- The divorce is not your fault
- You are not alone
- You are in control of your emotions
The divorce is not your fault
Feelings of guilt often accompany those who file for divorce. Remember that separation is never anyone’s fault. It simply means that the time of your relationship has come to an end. Half of all US marriages end in a separation. In fact, two of the three happiest countries in the world, as ranked by the World Happiness Index, have divorce rates that are higher than those in the US. Finland and Denmark both have divorce rates of 56%. Norway (#2 happiest country) trails the US by just 4%. And some of the countries with the lowest divorce rates like India (13%) also are exceedingly unhappy (#133).
Remember, a divorce simply means that the time of your relationship has come to an end. You loved your spouse dearly to get married in the first place. But once you fall out of love, neither of you are doing any favors by staying together. Many couples will stay together “for the kids”. But children seeing their parents in a miserable marriage will simply learn that marriage is a miserable affair. Make sure you make a better example for them. Be confident when you know that your time with your spouse is up. And walk away strongly and proudly.
You are not alone
Many people feel trapped in their marriage because they are afraid of being alone. This is a very human concern. This is also a myth.
Think back to the time before you were married. Perhaps even before you were dating your current spouse. Sure, there were times of stress as well. But your younger years were probably some of the most adventurous, fun and amazing times of your life.
Being single or pursuing a new life does not mean you are alone. Far from it. You will be amazed at the support of friends and family who you will reconnect with. It may even surprise you which friends and advisors stick with you through your toughest times. These people are your biggest cheerleaders. And it is these people who will be the building blocks of your life to come. There is never a need to feel that you are alone.
You are in control of your emotions
Divorce can be an incredibly emotional and traumatic event. You may often feel that you are not in control of the process. And you would be right in certain cases: you simply cannot control what your spouse will do, nor how a judge will rule.
But remember that you can control your emotions. You are always in control of who you are and what you do.
There will be a temptation to give up during divorce negotiations. The process is emotionally and physically draining. But remember to be strong. Standing your ground and vocalizing your side of the story will help you get a better settlement in the long run. Remember that protecting yourself emotionally today will help you through the divorce process. It will also give you and everyone a better outcome in the end.
Continue to Part 3: Identifying Marital Assets
How to protect yourself during a divorce?
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.