5 practical things to consider so you can protect your wealth in divorce

Your divorce settlement may not be as expensive as Bill and Melinda Gates’ was, but that doesn’t change the need to protect your wealth.

Divorce can be emotionally and financially draining. But planning for all eventualities will give you the best chance of protecting your money. So, it’s important to start thinking about the possible outcomes early in the separation.

Plan ahead with cashflow modelling

Cashflow modelling is a great way to work out what money you have and how much you need to afford the lifestyle you desire.

“It’s almost like a rehearsal for the future where you visualise how much money you’re going to need to do everything that you want in your lifetime. And that helps with decisions.” – Robert Schwarz

Questions you need to ask when you’re facing a divorce will depend on whether you’re the one petitioning for the divorce.

If you’re looking for a settlement, your overarching question will be “how much do I need as a settlement?”

If, however, you’re on the other side of the table, the question will be “how much can I afford to give away?”

Whichever side you’re approaching things, cashflow modelling is a great way to understand what you have and what you need to gain or retain after your divorce.

Maintain and protect your business

For business owners, divorce means there’s also a company to consider. While you may want to keep and maintain your company, your soon-to-be-ex might feel they’re entitled to claim a share of the business and its earnings.

We recently worked with an entrepreneur whose most valuable asset was his business. When he needed to decide on how much to settle, we used cashflow modelling to help him get a clear vision of what income the business could produce and what that meant for his personal finances.

We did some modelling around how much his business would need to grow to provide him with adequate income. The exercise gave our client the peace of mind to have an open conversation with his wife about their options.

Although the agreement saw him relinquish his pensions and most of the cash, savings, and investments they held, he retained 100% of the business. His ex-wife had no desire to be involved with the business, so they were both happy with the settlement.

Whatever your circumstances as you’re approaching divorce, wherever possible we’ll work with you to help you reach a fair result that safeguards your business without ceding too much of your personal wealth.

Surround yourself with the right advisers

We work closely with solicitors and, in the lead up to a divorce, we always encourage you to speak with a legal expert or mediator to have vital conversations surrounding your legal options.

If you have a prenuptial agreement in place, you may already have protected some of your wealth by ring-fencing certain assets. This is good planning and something we encourage.

If you’re our client and thinking of getting married, we’ll discuss setting up a prenuptial agreement to protect certain assets. This could cover things such as business assets, and family assets that you have inherited, or expect to inherit.

Sometimes this can involve setting up a trust arrangement, but it all depends on your unique situation.

Your finances after divorce

We rarely meet a new client during a divorce. Most often, they will come to us following the divorce settlement when they are considering the next phase in their life. If you were a wealthy couple, a big divorce settlement can feel a little like receiving an inheritance.

One of our clients received a considerable amount of money in her divorce settlement. She didn’t have a property or pensions and had no business assets, just a lot of cash in the bank.

We went back to basics and used cashflow modelling to help her visualise what sort of lifestyle she wished to lead. We discussed what sort of employment she could use to generate income, and how much income she was going to need to achieve her objectives.

Her largest financial aim was to buy her own home and regain a sense of security that she had lost during the divorce.

Cashflow modelling helped her understand how much she could realistically afford while leaving enough surplus cash to generate income to supplement her lifestyle.

Divorce sucks, but planning can give you peace of mind

How you feel on the other side of divorce really depends on how it came about. Some people emerge with a huge sense of relief.

“Some clients come out of a divorce feeling a weight has lifted off their shoulders. They might have a new purpose in life or a challenge to chase. Alternatively, it might have been a really messy divorce that they didn’t want, in which case, clients can be incredibly vulnerable.” – Robert Schwarz

When you turn to an expert for help, you want to be sure you’re getting the best possible advice. We take seriously our responsibility to make sure you protect your finances and your financial wellbeing.

Get in touch

If you’d like to learn more about how we can help you protect your financial interests before you divorce, or plan for a new future following separation, get in touch. Email hello@firstwealth.co.uk or call 020 7467 2700.

This document is marketing material for a retail audience and does not constitute advice or recommendations. Past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amount originally invested.

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