By the time Bill and Melinda Gates announced their divorce, they had already agreed to a separation agreement. High net worth couples often navigate their divorce without filing in court until the end. This helps with privacy, cost, eliminating public notice and court-required status updates.
No matter how many zeros are in your bank account, start with this pre-divorce checklist and execute well on these five critical divorce steps to allow you to retain as many of your hard-earned dollars as possible with the least amount of drama.
Focus On What You Really, Really, Really Want
Juggling their divorce along with their philanthropic initiatives, high profiles and real estate, Bill and Melinda Gates have made it clear in the press they are focused on creating an amicable split and future. A smart move that will reap many benefits for each of them and their three adult children. While theirs is extreme in terms of notoriety and dollar signs, most divorces include similar themes of all these dynamics within their own community.
What are your top priorities? No one gets everything they want in divorce. Most divorced individuals would say they only got a few things they really, really wanted at best.
As difficult as it was to navigate demanding career(s) and a family while married, divorce will increase it exponentially. Being laser focused on the healthiest restructuring of your family while maintaining excellent performance at work is a winning strategy for both spouses. Be proactive; make sure you control the message and announce your new direction in the appropriate forums.
Limit the impact of divorce at work by avoiding legal papers being served at the office or creating any watercooler talk at events.
Try to maintain business as usual in your social life and community involvement. If you and your soon-to-be former spouse can avoid negative talk about the divorce and each other, those around you will as well. If you both attend school, work and social functions without conflict, you and your children will remain on preferred guest lists.
Picture the life you want, be diligent in your execution to reach it and flexible as life evolves.
Assemble The Right Support Team
Regardless of your professional profile and net worth, you will be making some of the most difficult and important financial decisions of your life during an emotionally chaotic time. You need a team of professionals to help you balance the legal, tax and financial aspects with the emotional and family dynamics.
Hire an attorney who specializes in family law with experience in the specific issues your family has. If you need to split business interests, real estate, stock options, insurance, charitable trusts or any other complex investments, it’s critically important to hire an attorney with excellent track record of settling high net worth cases. The American Association of Matrimonial Lawyers is an excellent source to start your search and here is list of questions to ask.
Your attorney will help you decide which process you will use to get divorced. There are three primary processes: mediation, collaborative or traditional litigation. Each has its benefits and drawbacks and selecting the right fit for your family’s unique interests could result in an enormous savings in the amount of time, cost, conflict and collateral damage involved – as well as privacy.
You will need experts to guide you through the financial, tax and emotional aspects of divorce. You will likely need a CPA, Certified Divorce Financial Analyst, estate planning attorney, business valuation expert, therapist and potentially a child specialist, and/or forensic accountant. It is critical that you become the CEO of this process – having the vision, hiring the best-fit team, creating the strategy, then letting them do their job.
Remember, You Are In A Law Suit
The day you married your spouse you were likely focused on your feelings, family and the celebration. What most grooms and brides don’t think of however, is on your wedding day you also entered into a binding contract. You are now entering into a lawsuit to terminate that contract.
It’s important to acknowledge the emotions, but not make emotional decisions.
Divorce laws differ from state to state and, sometimes, are even implemented differently by various county judges. That is why it is imperative you understand and protect your rights, then try do negotiate with your spouse what’s best overall for your family’s unique situation.
Many high-net worth couples execute prenuptial or postnuptual agreements, but they are often challenged in divorce so they by no means guarantee a clean breakup. Bill and Melinda apparently didn’t have one, but that doesn’t mean that the $1 billion of assets Bill came to the marriage with won’t stay his own – if he always kept them separate and didn’t co-mingle them with marital assets, they will likely remain non-marital. While the dollar value may not mean anything to Bill and Melinda, there are often emotional triggers tied to the early earnings of successful business owners.
Get educated on your state law if you or your spouse brought assets to your marriage.
Know When It’s Time To Settle
Divorce laws differ from state to state and sometimes are even implemented differently by various county judges. Be aware of the law and know what a court might do.
Focus on creating settlement negotiations in the way that will get you your top divorce priorities with as much grace and dignity as you can. Any overlap in reasonable ranges is a good place to end up. Focusing on arriving at an agreement you can both live with is important as it will significantly reduce the chance you will be back in court for post-divorce issues and maintain your privacy.
Your list of what you must have versus things that are nice to have will help. Understanding what those must-haves are for your spouse will assist you and your attorney in your negotiations as well. Have a solid and realistic settlement range in mind.
Over time, you each will likely have a range you could live with. If your ranges overlap – even if it is a slight overlap – it’s most likely time to settle. Be aware that over 95% of divorces settle out of court because trials are public, very expensive and judges’ rulings are extremely unpredictable.
Own Your Future
While the Gates’ financial complexities are mind-numbing, navigating the ripple effect of divorce with three adult children will be heart-wrenching at times. Don’t underestimate the impact divorce has on children of all ages, as well as extended family members.
Remember that your parenting and Marital Settlement Agreement (MSA) documents are only as good as they are legally enforceable. You want to make sure you fully understand what you are agreeing to, and that your settlement is livable and practical to implement. At some point, final decisions will have to be agreed upon and the way you handle yourself during this time will influence whether you set yourself up for a successful finish.
How you co-parent and your integrity overall through the process will also send a powerful message to your children, influencing their values and whether you are invited to their wedding and your grandchildren’s births.
The entire world may not be scrutinizing you like it is Bill and Melinda, but it’s guaranteed that YOUR entire world is watching you. Your ultimate goal is to be able to put your divorce decree away and move on to create a wonderful next chapter.
No representation is being made that any strategy shown will or is likely to achieve results similar to those shown in this presentation. BDF does not provide legal, tax, insurance, social security, or accounting advice. The information herein is provided solely to educate on a variety of topics, including wealth planning, tax considerations, insurance, estate, gift, and philanthropic planning.