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Wealth Management During and After Divorce

Wealth Management During and After Divorce

The world's wealthiest couple, Amazon CEO Jeff Bezos and his wife MacKenzie, recently announced that they are divorcing — and will be splitting a combined fortune of $137 billion.

This story has generated a lot of interest in the business media and in the financial world. When the world's wealthiest couple decides to split up, their divorce is also going to be the most expensive in the world.

Most other divorcing couples — who don't have billions of dollars to divide — still have complicated decisions to make, such as who gets the house, who retains which share of which investment accounts, who gets spousal support (and how much), and other financial factors that can be full of emotional significance.

There are several key financial issues to keep in mind when going through a divorce, in order to manage your wealth, protect your family, and hopefully emerge from the process with a positive outcome for everyone involved.


Community Property vs. Equitable Distribution

Divorce is often an expensive proposition, no matter how much money you have. But the exact dissolution of your marital assets will depend in part upon which state you reside in. If you live in a "community property" state, the divorcing couple is typically required to split their marital assets — any wealth accrued during the marriage — in an even 50-50 split. (According to the IRS, the community properly states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin.)

Other states, known as "equitable distribution" states, require an equitable apportionment of the couple's assets based on a variety of factors, such as each spouse's earnings and future income potential, how long the marriage lasted, and others. The divorcing couple may divide their assets in a slightly different split — with one spouse keeping a larger share of one asset or another — depending on what the two parties agree to, and what the court will approve.

For example, if one spouse brought more wealth into the marriage, or was more directly responsible for earning income and creating wealth during the marriage, then that spouse may be able to request (and receive) a larger share of the marital assets.


Being Realistic About Financial Consequences

Rabbi Shlomo Slatkin is a Licensed Clinical Professional Counselor and Certified Imago Relationship Therapist in Baltimore, Maryland. He says that one big issue with divorce is that many people do not understand the full financial implications of divorce — whether it's the distribution of assets or the true cost of living for their new life as a single person.

"It often depends on who initiates the divorce. If the spouse who had more money did not want the divorce, he/she may be more likely to preserve his/her assets," Slatkin says.



“I would advise the one who initiates the divorce that their actions have consequences, one of them being financial.”
- Rabbi Shlomo Slatkin

Clinical Professional Counselor



Slatkin says, "If you don't want to stay together, you will have to come to terms with the fact that it will cost you."

Disputes about money and division of assets are especially top of mind for affluent divorcing couples where one spouse has built a successful business. "Some spouses feel they are owed half of everything, because they helped support their spouse's business," Slatkin says. "Others feel that they made the money, so they should not have to share beyond the basics."

In addition to dividing marital assets, there is the question of ongoing payments of child support, alimony, or spousal support. It is hard to generalize about these payments because the formulas and judicial decisions vary so much by state. However, in general, if one spouse is leaving the marriage with less wealth or lower income potential than the other, that lower-earning spouse will need to think carefully about how much money they need to live comfortably after divorce.

"People don't often know how much money they will realistically need to live the lifestyle they want. Sometimes it helps to go to a financial planner," Slatkin says. "If a spouse doesn't feel they need to pay so much to their ex and they realize how much they need to live, they may become a little more reasonable once a third party gives them evidence-based data, instead of just listening to the other spouse's lawyer."


Choosing Between Love and Money

Divorce can be a complicated and painful process because it involves so many primal human emotions related to love, family, financial security, and more — especially if the couple has children. Sometimes, no matter how much money a couple has, their divorce will be more painful if they get locked into a pattern of conflict and keep fighting through the process.

Chaim Steinberger is a mediator, negotiator, and divorce and family law attorney in New York City and the author of the article "Divorce Without Destruction." He says that divorcing couples — no matter their net worth — need to look past their anger and try to take a collaborative approach to the divorce process.

"Wealthy people are just like all other people, and get tunnel vision and stop seeing options when they're angry and feel threatened," Steinberger says. "The amount of money they have just means they can fight longer and harder, but it doesn't mean they will or should. Indeed, one of the longest-running, nastiest cases I had was one in which the parties did not have two matches to rub together."



Divorce is as much an emotional journey as a financial and legal process.



Many times, divorcing couples need to work through the emotional issues behind their divorce, and not try to replace lost love by clinging to money or prolonging a destructive conflict.

"The money is often just a symptom of an emotional battle," Slatkin says. "Someone could use their money as a weapon in the battle, but it is truly covering up for feelings of hurt and betrayal. This is why it is important to get closure on the relationship, so as to resolve outstanding emotional issues. Otherwise, the divorce will potentially be messy."

No matter how much money you have or what condition your relationship with your soon-to-be-ex-spouse may be in, self-awareness and acceptance are two keys to achieving an optimal result and a peaceful divorce.

Steinberger says, "With deeper understanding about ourselves and our partners, and recognizing that our partners are destined to be who they are — because, too often, 'character is destiny' — we can let go of anger and recriminations and accept the new reality, and then work constructively to get the best possible outcome that will serve us not only now but well into the future."


Whether you're going through a divorce, contemplating a divorce, or looking to strengthen your financial foundation at any stage of life, First Horizon Advisors can help — with investments, insurance, financial planning, trust services, and other specialty solutions to protect and manage your family's wealth and assets.


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