Navigating Divorce at High Net Worth

For business executives, entrepreneurs, or other high net worth individuals that are primary earners in their relationships, a divorce can be a complex and high-risk legal quagmire, with stakes and complications far beyond those that are seen in middle-income families. This is the first in a three part series on divorce considerations specific for high net-worth individuals. Of course, nothing can replace the advice of a qualified attorney, but this article should give you an indication of what to consider and how to mitigate your risk.

In this first part, we’ll discuss a few important planning steps regarding child custody and child support.

Child Custody

At any economic level, child custody has the potential to be the most difficult element of a divorce. Usually, the case can go one of three ways: 1) It goes smoothly, and both parents easily agree on a parenting plan, 2) Some difficultly crops up in the beginning, leading to a possible court filing, but an eventual resolution, or 3) Differences in opinion lead to litigation, and the decision is left to the judge. With the exception of high conflict cases — involving allegations of abuse, parental gatekeeping, or alienation — it’s rarely a good idea to take the decision away from the parents and leave it to the court. Proper planning can go a long way towards minimizing the chances of a worse case scenario.

For high net worth individuals, there are often a myriad of factors that may complicate a custody battle. Travel schedules, private schools, and the unique time demands of executive positions can all be important factors in these decisions. Attempt to tackle these issues with your attorney, and if possible, try to get a custody and visitation stipulation order in place early in the process. Hopefully, you can find a solution that is in the best interest of the children, and prevent your spouse from using financial issues as leverage in child custody negotiations down the line.

Child Support and Alimony

At the middle-income level, child support and alimony calculations are fairly simple; a computer program assesses income and produces an appropriate payment amount. But if your income involves multiple revenue streams beyond a W2 paycheck, the process becomes more complicated.

To begin with, the base income alone may come in different forms, such as periodic draws, or an actual salary. Base income may be the most predicable element of your revenue stream, but it’s likely not the only one. Self-employed entrepreneurs may see additional income paid out through profit distribution at annual or semi-annual intervals, while high level corporate executives may receive bonuses tied to individual or company performance. Furthermore, company perks such as a car allowance or expense accounts may be seen as income, and interest or passive income from investment accounts, stocks, et cetera, may be on the table as well.

If all of these income streams are taken into account, traditional calculations may lead to a support order that is well beyond what the child needs, or what the spouse requires to maintain a status quo. This issue is complicated, and should be handled by an attorney adept at cases of this magnitude.

Navigating Emotion.

The welfare of the child should be the utmost priority in a divorce settlement, but it’s easy for a custody or support issue to become a proxy battleground between spouses when emotions are high. The key is remembering to stay child-focused, not self focused. Staying focused on the child’s needs may keep you from being upset or distracted by how your spouse is making you feel, and buoy you from drifting away from rational thought.

At the end of the day, you’re still businessperson outside of your divorce, and most likely got to where you are through a combination of tenacity, economic acumen, and common sense. Making decisions based on emotion is ill advised in business, and the same is true in family law. Consult a qualified attorney early in the process, and start drafting a plan that protects the interests of the child, and makes the most sense from an economic standpoint.

Irwin & Irwin is a full-service family law firm with offices in Fullerton, California and Newport Beach, California. For an initial consult contact us here.