‘It Happens More Than We Would Like’: What to Know About Divorce if You’re Wealthy (From Barron’s)
~ Wednesday, January 24, 2024 Blog Post ~
By Andrea Riquier, January 23, 2024
“I’ve got money to burn and for that there’s you to thank,” Norma Jean sang in her 1965 single, “I Cried All the Way to the Bank.”
Nearly 60 years later, not much has changed. When a marriage ends, the tears flow — even as the wealth is divided up. At the tail end of January, known as “divorce month” since the stress of the holidays is often too much for marriages to take, the New York-based multi-family office firm Geller & Co. has released a report with guidance on how wealthy couples should manage matrimony — with divorce in mind.
If it seems odd to manage a marriage, or to keep one eye on divorce even as you say “I do,” Scott Bush, chief client officer at Geller, begs to differ.
“We believe that if you’re thinking about getting married, you should think about it as if you’re starting a business,” Bush says. Couples should consider: “What are our goals, what are our strategies? Getting everyone to agree on the front end is really powerful. If you do that in a disciplined way, it starts to remove some of the fear that people might have about what happens if they disagree on things.”
From children to property, there are plenty of milestones that go into any marriage “business plan.” Those considerations may be even more complicated for wealthier couples.
Bush offers several premarital discussion points: How much money does each make — and how much wealth does each one have? Is there a trust supporting one or both of them, and if so, what rules govern it? How does their cash flow, and how much, if anything, will they borrow to finance their lifestyle?
For some couples, having open and honest planning conversations, with or without advisors, may be enough. But others may want to codify those discussions in prenuptial agreements.
In his years in practice, Bush often sees couples reluctant to sign an agreement. But “planning early and having adult conversations” can remove some of these objections, he says. At the very least, couples should be aware of the risks of not having a prenup.
Many advisors will acknowledge that prenups aren’t a silver bullet, however. These documents may serve as an excellent “snapshot in time,” Bush says, but the financial assumptions and expectations that exist during the engagement can change dramatically over time. That means any couple who decides to sign a prenup should be aware they may have to revisit it from time to time.
Trusts should be part of the marriage plan, and, similar to prenups, they may change over time. The Geller report examines how trusts may be treated in an agreement before marriage. It also says that couples should ensure that a prenup details that trusts are distinctly separate property “irrespective of how they were used or managed” throughout the duration of the marriage.
Another important consideration: Who is doing the couple’s financial planning? Often one party leaves the conversation about investments and finances to the other, Bush says. In some cases, one or both spouses don’t come completely clean about everything in their financial life to their partner. If that’s going on from the beginning of the marriage, “it’s often an indication that things are not getting off in the right direction.” It can make a bad situation even worse if a divorce bares secrets one spouse kept from the other.
For Bush, who often advises those about to separate, what’s most striking is “the irrational fear that sinks in about what happens on the other side.” People aren’t necessarily afraid of being left without enough to survive on, but a sense of being wronged.
They wonder, “am I going to get manipulated out of something I deserve?” Bush says. People often think about getting to a number rather than getting to a plan that they’re okay with.”
Though it’s always better to have had the conversations up front and at least the outline of a plan for when something goes wrong, if a divorce does take the couple by surprise, one particular consideration for wealthy families is trying to match liquid assets like cash to illiquid ones, like properties.
“Getting houses that can be beautiful and of trophy value to an individual isn’t very helpful if you’re not getting the resources you need to live,” Bush says.
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