Not many people can argue that they are self-certified. Are your liquid assets worth $1 million or more? Do you receive an annual income of more than $100,000? If the answer is YES, then you are self-certified. In the world of economics, you belong to an elite group of people called High Net worth Individuals (HNWIs). In simple terms, you are rich.
The problem with being rich is that it is never easy when you have to deal with a divorce. A divorce not only affects personal assets but also business assets. From the legal consultations to the settlements, a lot of money is involved. So, the process is very expensive. The biggest challenge, however, is that you may not see some costs coming as they are normally hidden.
- Extra Taxes
When you have assets distributed in several places, you can be sure that the taxman will be on to you during a high net worth divorce. Tax complications exist when you have investments in real estate and when your business has entitlements or benefit plans. If you are not careful, you may end up overpaying your taxes, and this could impact your business negatively.
- Ownership Stake
This is normally the most contested cost during a high net worth divorce. If you and your partner have business assets that qualify as marital properties (assets acquired after marriage), you could be forced to share business ownership rights. In this case, both of you may enjoy 50% ownership rights. Not only cannot you make decisions without consulting your partner but you also have to settle with the idea of a part of the business dividends going to him or her.
- Child and Spousal Support
If the business assets in contention belong to a category often referred to as separate assets (assets obtained by before marriage), the court may decide to force you to pay child and spousal support. For your child or children, a part of the business dividends may be channeled towards paying for their education, nanny expenses, and upkeep.
- Forensic Accounting
Often, HNWIs are forced to do forensic accounting of their assets when facing a divorce to uncover hidden business assets. This comes at an extra cost since forensic accountants are highly-priced like most consultants. The advantage, however, is that you stand to track your lost assets at the end of the process.
- Business Valuation Complications
It is never easy to value a business when facing a high net worth divorce. You have to factor in things like account receivables, current stocks, high-value business assets, and vested interests. These factors require you to consult so many experts who are expensive to hire. The complications mostly arise when a spouse refuses to disclose the full details of offshore business assets. You need these experts to do the full evaluation.
Just as a divorce is expensive to a family, it is even more expensive to a business. This is if you consider the hidden costs that are involved. So, if you are an HNWI facing a divorce, you have to brace yourself for a costly process that is likely to impact your business assets. The secret, however, is to seek help from a legal expert and financial advisor.