High-Net-Worth Divorce: Dos and Don’ts

Legally, a divorce is a divorce, regardless of the financial stakes involved. In practice, however, high-net-worth divorces are often far more complex than standard divorces. Divorce laws vary significantly from state to state, so while we’ll cover some general considerations, the specific rules may vary widely depending on your location. This is why it’s essential to consult an attorney to understand the divorce process in your particular jurisdiction. Here’s what you need to know about navigating the division of a multimillion-dollar household.

For help managing your finances during and after a divorce, consider working with a financial advisor.

What Is a High-Net-Worth Divorce?

There is no formal definition of a high-net-worth divorce. Historically, this has been defined as a split involving at least $1 million worth of assets, the same standard applied to an investor.

The definition has expanded in recent years, though, since a million dollars isn’t what it used to be. (With the median sale price for a house surpassing $400,000¹, and many retirement accounts holding six-figure sums, even a middle-income household may have at least $1 million in assets to resolve.

Today it’s more accurate to describe a high-net-worth divorce as one involving several million dollars’ worth of assets.

Why High-Net-Worth Divorces Get Complicated

Regardless of wealth, the fundamental rules of divorce generally apply to all. The typical process includes these key steps:

1. Identify and Value Assets: Take stock of all assets owned by each spouse individually and jointly.
2. Classify Assets: Determine the status of each asset, categorizing them as marital, separate (premarital) or otherwise.
3. Assess Third-Party Obligations: Identify any obligations to third parties, such as child support or overlapping claims on marital assets.
4. Divide Marital Assets: Equitably distribute assets to which both spouses have a valid claim.

This is a simplified overview and does not address non-financial matters, such as child custody, but outlines the essential steps in a divorce process.

For many people, this makes divorce at least theoretically simple. When there are only a couple of bank accounts, a retirement plan and a house to split up, it is fairly straightforward to add up the numbers and divide them in half. 

In these cases, the greater challenge is often not so much financial but rather, emotional. By definition, divorce tends to involve parties with strong feelings, and often, one or both parties will try to use the process to punish their soon-to-be ex.

However, high-net-worth divorce gets particularly complicated. This can happen for many reasons, but there are some common issues to specifically watch out for.

Breadth of Law

Because wealthy couples typically have several different types of assets, their divorces are often subject to greater legalities. 

For example, splitting a bank account, retirement account and single-family home might involve just one or two sections of the divorce code. Splitting up trusts, foreign holdings and numerous plots of land will involve nearly every section of the law – and this is before the enormous complexity you will have to navigate around third-party entities, such as businesses and charitable organizations.

Introducing more sections of the law makes a proceeding far more complicated for the parties involved.

Application of Law

Because wealthy couples often have more complicated finances, it can be more difficult to determine the exact requirements of divorce law. 

Assets may be harder to define, especially for tax purposes, or they may be harder to value. For example, couples may have assets like art and collectibles that can only be reliably valued at point of sale. When multiple sections of the divorce code apply, the process can quickly become more complex, as different rules interact in weird or contradictory ways.

The process gets complicated simply because there are so many different issues to resolve that can be governed by different rules.

Jurisdictional Questions

High-net-worth households tend to split assets across numerous jurisdictions. A wealthy couple will often own money, land and investments located in different states or even different countries. 

This creates problems because, again, divorce is highly specific to jurisdiction. Each new state and country potentially introduces an entirely new divorce code to the proceeding, further deepening the complexity of the case.

Third Parties

Wealthy families often share joint and generational financial interests. This is especially true when long-lived trusts or other sources of family wealth are involved.

It’s not uncommon for siblings, children and other relatives to have a direct financial stake in the outcome of someone’s divorce. Even worse, sometimes they have a direct legal claim to the disputed assets.

This can magnify the complexity of the matter by introducing new parties and new questions of ownership.

Acrimony

Because high-net-worth couples have more assets to divide, the process typically takes longer and involves more decisions than the standard divorce. Every day that a divorce continues, and every time the parties interact, it creates the opportunity for questions and conflict to arise, potentially lengthening the process.

How to Manage a High-Net-Worth Divorce

Remember, it’s impossible for one article to advise you on how to handle a divorce, especially one concerning millions of dollars. However, there is some general guidance that’s applicable to high-net-worth divorces:

Seek Counsel Immediately

Consult a lawyer as soon as you begin considering a divorce. This is a complicated issue, and even the most amicable split will raise difficult questions of law and taxes. 

Find a lawyer with expertise in divorce and financial matters, and ask if they work with expert accountants to help minimize your tax liability. It is important that you understand exactly what you have and how the law applies. Doing this on your own might save money today, but it could set you up for more problems in the long run.

Get a Good Lawyer, Not a Combative One

There is a difference between a good lawyer and an aggressive one. Many lawyers like to advertise themselves as fighters or pit bulls, and there are certainly times when you do need someone who is ready to fight. 

However, your divorce is not one of those times. Find someone who is thoughtful, thorough and calm. It will save you trouble (and money) in the long run.

Do Not Forget About Debt

If you’re getting a divorce, no matter how much money you have, make sure to think about your household’s debt. 

Liabilities (the fancy term for debt) are assigned to married couples just like assets are. If your spouse brought their debt into the marriage (for example, say they had student loans), remember that you don’t owe that money. If you took on the loans while married (like credit card debt) remember that they do owe some of that.

Divide up debt just like you do assets, and make sure you only take your fair share.

Plan for the Future

When you divorce, you are not only dividing your assets as they are today. The decisions you make will affect your family’s financial future, so it is important to take a big-picture approach when planning for your future after divorce.. 

When determining how to divide your assets, be sure to consider the tax consequences. Begin by evaluating the potential long-term value of your assets and not just their current valuation. You will also need to make plans for any children you share. 

A strategic way to prepare for a high-net-worth divorce is to retain a divorce financial advisor. This professional has the experience to help you think about the long term, not just the next few months.

Don’t Get Back at Your Ex

A lawsuit is the wrong way to resolve a personal matter. Many people initiate a legal matter with the intention of seeking retribution against someone who has wronged them. However, it ends up a long, grinding affair that does anything but provide emotional closure. 

You may be tempted to use your divorce to punish your ex, but it is not worth it. It will only cost you more time, more trouble and much, much more money than it is worth, no matter how much they deserve it.

Tax and Estate Planning in High-Net-Worth Divorce

When a divorce involves assets worth several million dollars, the tax and estate planning consequences can be just as important as the property division itself. 

Splitting investment accounts, businesses or real estate often creates exposure to capital gains taxes. In some cases, the sale of highly appreciated assets may be necessary to divide value, which can trigger large tax bills. Decisions made during divorce can also impact how much of an estate is eventually subject to estate tax, especially if existing trusts or gifting strategies are disrupted.

Estate plans almost always require a full review after divorce. Wills, powers of attorney and healthcare directives often name the spouse as a beneficiary or decision-maker, but this may no longer be appropriate after divorce. 

Trusts created during the marriage can also create complications. Some may need to be dissolved or restructured, particularly if they were designed to pass wealth to heirs specifically during marriage.

For those with children from prior relationships, divorce raises additional questions about guardianship and inheritance. Updating beneficiary designations on retirement accounts, insurance policies and transfer-on-death accounts is an essential step. Overlooking these details can result in assets unintentionally going to an ex-spouse instead of children, grandchildren or other intended heirs.

Because these issues intersect law, finance and taxes, coordination is critical. Divorce attorneys, tax professionals and financial advisors should work together to anticipate the best path forward for you and your family. A settlement that looks fair on paper today could create unnecessary taxes or undermine wealth transfer goals if it is not structured with estate and tax planning in mind. 

Taking the extra step to align divorce terms with a comprehensive estate strategy helps preserve more wealth and provides stability for the next chapter of life.

Bottom Line

A high-net-worth divorce usually involves several million dollars in assets. These cases can get complicated because of tax and estate planning issues. You may want to work with a team of professionals, including a financial advisor, accountant and divorce attorney, when dealing with the financial aspects of divorce. Working with experienced professionals can help you avoid costly mistakes and focus on moving forward.

Divorce Financial Tips

• Divorce, from a lawyer’s point of view, is an entirely financial and legal matter. Whatever you choose to do with your personal life is your decision, just make sure you make the right plans for your finances once that tax status changes.
• Regardless of your marriage status, a financial advisor can be a tremendous help. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

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