Asset Protection Strategies For High-Net-Worth Divorce Cases

By: Gus Dimopoulos

As a longtime matrimonial attorney, I know that no divorce is simple – high-net-worth divorces least of all. Asset division is a complex process, filled with financial and emotional nuances. When I speak with clients about protecting their wealth during divorce, I always stress the importance of a comprehensive strategy. Collaboration between the client, their legal team, and their financial advisors is required to ensure all assets are properly safeguarded.

Each member of the team brings specific expertise and, conversely, has certain blind spots. By working together, legal and financial professionals can create a whole greater than the sum of its parts. Failure to collaborate effectively, however, can lead to significant financial loss. Here are five essential elements of a wealth protection strategy in a high-net-worth divorce:

Maximize collaboration during the discovery phase. Legal and financial representation should collaborate closely throughout the divorce process, with the discovery phase being especially critical. This is the period when financial documents and details are shared within and across the divorcing couple’s teams. In some cases, discovery alone can cost hundreds of thousands of dollars in legal fees due to the extensive documentation of assets and accounts involved. Miscommunication during this stage can increase costs even further. Financial advisors can provide valuable context: if a question arises about a past transaction, they may quickly clarify its purpose, saving valuable time and resources.

Taxes, taxes, taxes. Overlooking tax considerations during asset division can be costly, especially in high-net-worth divorces where the financial stakes are heightened. Divorce can impact tax responsibilities across a range of areas, from inheritance tax obligations to alimony payment tax treatments. Tax-related blind spots are common among legal professionals, making financial advisors an essential part of the conversation.

Navigating unique and complex assets. High-net-worth divorces often involve diverse assets beyond traditional holdings like real estate and retirement accounts. Nontraditional assets such as intellectual property, royalties, and patents require specialized knowledge to value and divide appropriately. Divorce attorneys and financial advisors may also need to enlist specialized valuation experts for assets such as intellectual property. In one recent case, for example, I worked with an author to determine how to address royalties from a best-selling book created during the marriage.

Set realistic expectations for “equitable” distribution. Successful settlements and protection of wealth start with realistic expectations. It’s important to understand the difference between “equitable” and “equal” – 50/50 likely isn’t how asset division will play out. There are countless nuances that factor into the equation, and each one must be considered on its merits.

Revisit beneficiary designations post-divorce. In addition to dividing assets in the present, clients and their advisors must plan for the future. How will assets be divided when the client passes? Outdated beneficiary designations could unintentionally benefit an ex-spouse if not updated following the divorce. Legal and financial teams should review all beneficiary designations post-settlement to ensure they align with the client’s wishes. It’s essential to wait until after the divorce concludes to make these updates, as New York’s Automatic Orders and similar regulations discourage changes during proceedings.

High-net-worth divorces present unique challenges due to the scale of assets, diversity of holdings, and emotional complexities. Legal and financial teams must work together, applying the strategies above to protect a client’s wealth. This approach allows clients to reach a favorable outcome and move forward with both their finances and their future.

Gus Dimopoulos, Esq. is managing partner of Dimopoulos Bruggemann P.C., a matrimonial and family law firm based in New York City and Westchester County, N.Y. that specializes in high-net-worth divorces. For more information, visit www.dimolaw.com.

This article was originally published in Financial Advisor magazine on November 14, 2024 and can be viewed here.