Why wealth planning is key in a high-net-worth divorce

WHY WEALTH PLANNING IS KEY IN A HIGH-NET-WORTH DIVORCE

No one expects to get divorced, yet marriage breakdown is surprisingly common. It’s a difficult and emotional time. With so much uncertainty about what’s ahead, finances may not feel like a priority.

Over the past 50 years, about a third (34.2%) of all marriages in England and Wales have ended in divorce.¹ The divorce rate has fallen a little since the Covid-19 pandemic,² but the chances of finding yourself in the turmoil of a marital split are still high.

For those going through a divorce, hiring a solicitor for legal expertise is your first step. But high-net-worth divorces also raise all sorts of complex financial issues – matters that demand expert advice from a wealth manager. After all, the settlement you reach and how you organise your wealth afterwards affects the rest of your life. The earlier you talk to a firm like Brown Shipley, the more we can support you.

The financial decisions and investment choices you make can have a positive effect on maintaining your lifestyle and attaining your lifetime goals. Of course, there’s no need to rush into any decisions. You should take your take your time and consider all your options. 

TAKING PRACTICAL STEPS 

So, in down-to-earth terms, what should you do? Beginning a relationship with Brown Shipley at an early stage will enable you to build trust and be reassured that you have the right people by your side. We begin by understanding and exploring your priorities. Will you need to buy a new property? What cash reserves should you hold? If you’re receiving a settlement, does it provide for your children? Are there family business assets to consider?

We can help you to answer these questions, as you decipher what’s important to you over the short, medium, and long term.

Once you’ve established your priorities, it’s time to get practical. Prior to receiving your settlement, you can start by opening a bank account with us, so that you’re ready for the day it arrives. You’ll be reassured to know your money is in a safe place, ready for your new start. Then, we’ll draw up a list of your assets and look at your income and expenditure.

A lot of our clients find cashflow modelling invaluable for understanding their financial position and options. It enables you to see how your assets could support your goals, priorities, and lifestyle.

THREE AREAS FOR DISCUSSION

We work with many people in the midst of and following divorce and find that most of them primarily want to discuss three key areas: cash management, pensions, and investments. 

Managing your cash reserves is a priority as you go through the uncertainty of a marital split. Whatever your needs, we help ensure that you’re in the best position before, during and after the separation process. If you don’t require funds immediately, you could be earning interest from day one whilst you take as much time as you need to consider your options. Alternatively, you may need to ensure you’ve got sufficient cash reserves for an emergency buffer. We can take away the hassle of managing your income by arranging a set sum to be paid into your account each month.

Looking to the longer term, pensions are a key consideration in divorce settlements. There are several options for splitting pensions. We can help you understand the implications of each, and to estimate the future value of your pension assets. 

Lastly, , It’s important to consider investment, as the right investment decisions make a difference to the rest of your life. Why invest instead of simply leaving your money in the bank? The answer is that investing can, potentially, deliver higher returns than savings. 

In short, investing aims to grow your money over time, helping your long-term financial goals. For sure, it involves some risk, but we take the time to understand you and the level of risk you feel comfortable with. That way, we can help you make informed decisions that feel right for you.

POSITIVE, EMPOWERED AND IN CONTROL

We help many people navigating the turbulence of divorce. Take one woman with two children who approached us for financial and investment advice ahead of receiving her divorce settlement. As she had never worried about finances during her marriage, the thought of receiving a large divorce settlement was daunting.

Her settlement was substantial. In approximate terms, she received a lump sum of £4 million, property of £1 million and a pension share of £400,000. She also received monthly maintenance of £6,500 for 12 months, and her husband agreed to pay the children’s school fees and other educational expenses.

We prepared a cashflow model which helped her visualise the money from her settlement and how this would provide for her during her lifetime. We advised her about how to structure her investments tax efficiently, as well as giving appropriate investment advice as she had no investment experience prior to becoming a Brown Shipley client.

Over time, we have built up her knowledge and understanding of what her money is invested in. Her confidence and understanding has grown and she feels reassured that her wealth can provide for her future.

For this lady, the upset and uncertainty of divorce has steadily diminished as she has worked her way through its practical and emotional issues. For all men and women getting divorced, we find that tackling the practical issues brings solace.  

Part of that comes down to tailoring a wealth plan that makes you feel positive, empowered and in control of your future. Let’s talk.

Download our Guide: The importance of wealth planning when going through divorce. 

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Or get in touch with a Brown Shipley Client Advisor to learn more.