Money is an issue in almost any divorce -- but when a wealthy couple gets divorced, money issues take on an extra layer of complexity, say divorce planning specialists.
"High-net-worth clients will likely have more complicated assets, such as venture capital funds, hedge funds or partnership interest if they own business," says Justin Reckers, a divorce specialist and the director of financial planning at Pacific Wealth Management in San Diego.
And a lot of those assets don't split nicely down the middle, he adds -- especially when they are illiquid.
In one instance, where two divorcing clients owned a biotech company together, Reckers created a plan to determine the amount of shares both individuals would hold in the company.
"A judge would just say the husband owes the wife money over time," says Reckers -- but a solution like that would create an unequal settlement if the company were to become very successful or, at the other end of the spectrum, declare bankruptcy.
HIDING THE ASSETS
Advisors need to dig deeply into the assets of a divorcing couple, because some high-net-worth individuals will likely try to hide assets.
"Hiding assets doesn't mean looking for wires to the Cayman Islands," says Michelle Smith, member of the Institute for Divorce Financial Analysts and a divorce mediator. But people who "try to suppress information and things that may not show up in certain documents," she explains.
Look for things like interest-free loans to family members, Smith says. Or for a soon-to-be ex-spouse who has convinced a family member to make a large purchase with the divorcing spouse's money -- a way to move assets during a divorce.
Once all the assets are out in the open, a planner can help ensure that they are distributed fairly.
Smith says she makes herself a financial record-keeper for both members of the divorcing couple.
"We can say, if he has to hold [an investment], that I get named in an agreement [so] that any document has to flow through me," she says. That helps protect clients by ensuring that -- even with assets that are illiquid or otherwise can't be split -- that neither member of the couple is leaving money on the table.