Navigating Divorce at High Net Worth: Part 3
This is part three in our series on the unique challenges that arise when high net-worth individuals face a divorce. In our first post , we discussed planning for child custody and child support, while our second post covered accounting and income concerns, as well as various professionals you should consult in your planning process, other than your family law attorney.
In part three, we’ll discuss the disclosure process, and reaching smart settlement offers.
The Benefits of Settling
Hope for the best, but prepare for the worst. Up until this point, all of the preparation you and your legal team have done has hopefully readied you for a court battle, but if you’re lucky, it won’t come to that. If you and your spouse can reach an amicable settlement on child custody, child support, alimony, and property division — without going to court — you can save thousands in legal fees, as well as immeasurable emotional aggravation spread across your entire family.
Of course, reaching a settlement both parties can agree on is a best-case scenario, and may not be realistic in all cases. Your spouse may be trying to hide assets or income, or may be stubborn on child custody issues. In the worst-case scenario, one or more parties may see the divorce as a forum in which to punish their spouse for past transgressions, and hire a combative lawyer to reap their revenge. As we mentioned in part one, you need to use your business mind whenever possible, and keep emotion from seizing control. A court battle will drain substantial resources from both sides, and even if you are confident you can outspend your spouse, you may end up having to pay their legal fees if a judge punishes you with a monetary sanction.
Unless your spouse insists on making the divorce court a personal battleground, find a way to settle. Even if they hire a combative, borderline unethical attorney (and trust us, they’re out there), do not attempt to fight fire with fire. Seek a solution that will resolve as many issues as possible, and get you back to your lives.
Preparing a Disclosure
Before a settlement is reached, you’ll need to declare a disclosure, which outlines a schedule of assets and debts, as well as an income and expense declaration. In settlement negotiations, this disclosure will be handed over to your spouse’s attorney, and will be the basis for determining support payments, alimony, etc.
As we discussed in the previous two posts, your income, expenses, and assets will likely be exceedingly complicated, so be prepared to invest sufficient time with an accountant to ensure this information is accurate. Concealing or altering these numbers in any way can have severe legal consequences, and is never worth the risk.
Making a Settlement Offer
When it comes time to make an offer, it is important to document it appropriately, and have your lawyer send it to your spouse’s council. Going through proper channels is crucial, because a record of offers previously made can be pertinent later in the process. For example, say you make an offer that the other party rejects, and later a court makes orders that are similar to your initial offer. If you can show a record that you already made that offer previously, you may be able to protect yourself from paying the other party’s attorney’s fees. In some cases, you can even ask for your spouse to pay your fees, if the court finds that refusal of the previous offer was unreasonable.
Above all, remember to stay business minded, and be willing to compromise. If you receive a counter offer that seems unreasonable, remember that each back and forth means prolonging the process, spending more and more on fees, and spending more time away from your business. Sometimes taking the high road and accepting a less beneficial offer makes sense when it means putting the experience behind you, and getting back to your life.