Divorce is rarely a simple affair, but for executives, entrepreneurs, or other high net worth individuals, a divorce can be an unusually complex knot to untie. While nothing can replace the personalized advice of a qualified and experienced family law attorney, this series of articles should provide a jumping-off point for planning your divorce, and illuminate some considerations specific to high net worth families.
In our previous post, we discussed planning for child custody and child support. Today, we’ll look at accounting and income concerns, as well as who should be on your speed-dial, other than your family law attorney.
Accounting and Income
As we discussed in our last post, high net worth individuals are more likely to have numerous income streams, rather than a single steady and predictable W2 paycheck. If you’re heading into a divorce — especially if child support is involved — a lot will be determined by your personal cash flow, after taxes and expenses. A good forensic accountant will be able to help you analyze your income, business valuations, and other assets, and help determine your controllable income, so you know exactly what is on the table.
For example, if you own a business, its value can be considered an asset for cash flow purposes, but how do you determine the value in the first place? This calculation involves more than the profitability of the business, and can include the type of business, its history, its success rate, and your role in the business. Even if you’ve built the whole enterprise from the ground up with your bare hands, your spouse’s attorney may very well try to claim a part of it as community property, just like everything else you own. Since you can’t cut the business in half, a forensic accountant can help you put a value on the business itself, and take that into account along with your other funds, assets, and liabilities.
Just like your family law attorney, you’ll want to find a good forensic CPA early in the process, and get them to work synthesizing your assets into controllable income, and hopefully keep you from overpaying support.
Other Professional Advice to Consider
It’s more than likely that your accounting isn’t the only complicated life issue that will come up in your divorce. Odds are good that at this point in your life, you’ve sought the services of estate planning, tax, and real estate professionals, and you may need their advice again if these complicated issues are affected by your divorce.
If you already have a stable of trusted professional advisors, then you’re one step ahead. If not, you should consider seeking out professionals in the following areas:
- Real Estate professionals – Do you own high value real estate? You probably do. Going into a divorce, a real estate appraiser can help you determine the exact value of your home, land and any commercial property. Beyond that, a mortgage broker or real estate attorney may be necessary if there are issues with refinancing or transactional issues.
- Estate Planning professional – Since a divorce is the end of your marriage, it changes how your family is recognized across all aspects of the law, including your estate plan or any living trusts. Your family law attorney can most likely provide a fair amount of insight here, but more complicated estates should be handled by a dedicated estate-planning attorney.
- Tax professional – As we discussed above, your multiple income streams and business holdings can make your case more complicated than the average middle-income family. More assets and income streams mean a more complicated tax situation, so you most likely already have a trusted tax professional nearby. But if you don’t, now is the time to speak with one, as your divorce is likely to shake up your entire tax situation.
A competent and experienced family law attorney should be able to recommend professionals for you to consider. Consulting these professionals early — i.e., before the need arises — can help you get out in front of any potential complications that may come up during your divorce. Our firm can refer you to professionals in each arena, if you don’t have them on hand already.