For high-net-worth individuals, divorce isn’t just emotionally challenging but also a major financial turning point that can fundamentally reshape the trajectory of your long-term wealth strategy.
While every divorce is unique, there are common financial themes and best practices that apply in most cases, especially when significant assets are involved. I will walk you through some of these themes and best practices. But the first insight I want to give readers is arguably the most important one I can offer:
If you’re unsure how to begin planning for a divorce, your first step should be to surround yourself with a team of trusted professionals who are committed to working in your best interests. A divorce attorney, CPA and financial planner are key members of this team. When a divorce involves significant assets, business interests or complex tax situations, they can provide the guidance necessary to make sound, unemotional decisions.
This is especially important in divorces involving complex finances, where there is much more involved than just dividing bank accounts. Real estate, retirement plans, restricted stock, private investments, business interests, life insurance, trusts and liabilities all must be identified, valued and classified. Whether assets are marital or separate will influence how they’re divided, and those distinctions aren’t always straightforward, especially across jurisdictions or in the presence of prenuptial agreements.
It is important to note that dividing assets in a divorce doesn’t always mean a 50/50 split. In many states, courts aim for equitable distribution, which means a fair (though not necessarily equal) division of marital assets. Many of the illiquid assets listed above can complicate the process, as current and future valuations, liquidity and tax implications all factor into the decisions.
Taxes are a particularly crucial consideration, as they can significantly impact each person’s net outcome. Tax laws around property sales, alimony and asset transfers often change and may have different implications depending on marital status and timing. Understanding how you will file post-divorce and taking into consideration dependent children is another important point that should be addressed in the divorce agreement. It is important to consult with a qualified tax professional to understand the potential implications for your individual situation.
It’s a lot to keep track of and consider, and this is all before the proceedings even begin.
Your Post-Divorce Financial Life
After a divorce, your monthly cash flow may look very different. And your lifestyle costs, which include housing, health insurance, monthly subscriptions, memberships, food and entertainment, may be difficult to adjust for in the months following your divorce. This is especially true for those who previously shared income and financial responsibilities. Your fixed expenses may remain the same even as your income drops.
Additionally, if you’re paying or receiving child or spousal support, it’s important to forecast those changes and understand how long they will last. A clear post-divorce budget helps ensure you’re not overextending yourself or relying too heavily on one-time settlement proceeds. Think of it not as cutting back, but as realigning spending with your new goals and cash flow.
A common mistake in post-divorce is when a person rushes into large purchases (like a new home or car) in an attempt to start fresh. These decisions are often made during a time of emotional and financial adjustment and can reduce flexibility while compounding financial strain.
Even as you sort through immediate financial logistics, it’s important to keep an eye on the long term. Splitting retirement accounts, such as 401(k)s and IRAs, is not as simple as dividing a balance sheet. Specific tax and legal rules govern these assets, and mistakes can be costly. A Qualified Domestic Relations Order (QDRO) is often necessary to divide qualified retirement plans without triggering taxes or early withdrawal penalties.
Beyond the technical aspects, it’s important to consider how this division will affect your retirement timeline, income needs and long-term investment strategy. Rebuilding a post-divorce retirement plan may involve reevaluating your risk tolerance and realigning your financial goals to align with your new circumstances.
Lastly, divorce should trigger a full review of your estate plan and legacy intentions, ensuring they align with your current relationships and obligations. It is important to update powers of attorney, health care proxies and beneficiaries on retirement accounts or life insurance policies should all be updated as soon as possible after the divorce is finalized. Additionally, any joint trust with your former spouse will need to be amended or terminated.
Final Thoughts
Divorce is never easy, but it doesn’t have to disrupt your financial future. The key is to approach the process with a plan, a team and a mindset that prioritizes clarity over conflict. For individuals with significant assets, the risks and opportunities are heightened. With careful attention to detail and experienced guidance, however, you can avoid the most common pitfalls and preserve the financial foundation you’ve worked hard to build.
IMPORTANT DISCLOSURES:
The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment advice. In addition, information presented in this presentation is believed to be factual and up to date, but Newport Capital Group, LLC does not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed.
This presentation includes forward-looking statements and opinions, including descriptions of anticipated market changes and expectations of future activity. Forward-looking statements and opinions are inherently uncertain, and actual events or results may differ materially from those reflected in the forward-looking statements. In addition, all expressions of opinion are subject to change without notice in reaction to shifting market conditions. Therefore, undue reliance should not be placed on such forward-looking statements and opinions.
The tax and estate planning information offered by Newport Capital Group is general in nature. It is provided for informational purposes only and should not be construed as legal or tax advice. Always consult an attorney or tax professional regarding your specific legal or tax situation.
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