Financial Transparency is the Best Solution During a High Net Worth Divorce
Creating the Ground Rules for Financial Transparency
“Taking a thing apart is always faster than putting something together. This is true of everything except marriage.”
Joe Hill, 20th Century Marriage
In divorce, and in marriage, honesty is usually the best policy. This also applies to your finances. If you and your spouse are discussing divorce, it’s best to set up the ground rules for financial transparency from the beginning, regardless of your income level. In fact, if you’re contemplating marriage, it’s also a good idea to set these ground rules before you walk down the aisle. Being transparent can ensure there are no feelings of betrayal when a financial surprise pops up.
For this series on the challenges of high net worth divorce, I sat down with Michelle Smith, owner of Smith FSG in New York City. Ms. Smith is a Certified Divorce Financial Planner and a highly sought-after divorce financial specialist. She often works with high net worth couples, offering guidance on investment decisions, philanthropic giving, and transfer strategies. As a divorce financial planner, she offers valuation of assets, property, divorce payments, and the future value of retirement and pension accounts. In this article, I’m sharing Ms. Smith’s advice on setting ground rules for transparency during your high net worth divorce. Smith advises:
- Come clean, be transparent, and disclose. Eventually it will all come out anyway.
- A financial surprise at the beginning of the process can derail everything. It feels like a betrayal. It’s better to make sure everyone knows what to expect, right from the start.
- You’ll have to fill out a net worth statement. This is a document given under oath to the court regarding your bank accounts, credit cards, retirement accounts, property, other assets, detailed expenses, and debts and income.
- You’ll need to turn over documents backing up your financial statement. This will include income tax returns, credit reports, detailed expenses and income, bank statements, credit card statements, and other account statements. This isn’t something you can hide from the court or your spouse.
- Withholding information is never good. In fact, withholding or obscuring financial information will cost you more in the long run. Your divorce will take longer, you may need expert witnesses, and you’ll run up attorney fees. If you want an efficient divorce and an easier way forward, disclose everything right away.
As Ms. Smith reminds us:
“You’re going to have to do this. So, the earlier that you’re transparent, the better. There’s more trust that way. If there’s not an element of a surprise — I find that that when there’s an economic or a financial surprise at the beginning of a divorce process, it could completely derail the entire rest of the process because immediately it’s just clouded. It feels like a lie and a betrayal.”
In the end, Smith’s best advice regarding finances during a high net worth divorce is to, “come clean, be transparent, and disclose.”
If you’re considering a divorce, but you’d like to find a more peaceful way through the process of divorce, contact my office for a free and confidential consultation.