Given that more than 50% of modern marriages end in divorce, you must understand how to ensure that you get a fair financial settlement if this happens to you. Getting divorced is a challenging enough situation on a personal level without the financial complications that goes with it.
In this article, we go over some important considerations that will ensure you can strike a fair financial settlement if you experience a divorce.
Though it is very hard to have a conversation about a prenuptial agreement at the start of a relationship, it is one of the most important things you can do for both of you. When you are in love and things are going well it is hard to ever fathom a situation whereby you may both hate each other and not be able to be in the same room as each other, but unfortunately, it is a possible outcome.
Based on statistics alone, regardless of how in love you feel. It is in your and your partner’s best interests to discuss a prenuptial agreement prior to your wedding or soon after your wedding.
A prenuptial agreement outlines what each person’s claim will be to your assets if your relationship does break down. They typically cover financial things such as money, property, and business interests.
Having a conversation about this before your relationship breaks down helps because once you are in the process of divorce, there are so many emotions involved that it can make constructive and fair conversations difficult.
So having this agreed to before you get married makes a big difference. A prenuptial agreement has often been regarded as a way to safeguard the assets of only one party in the event of a divorce. However, it is important to recognize that a well-crafted prenup protects both sides and ensures a fair financial settlement. By clearly outlining the division of assets and debts prior to marriage, couples can avoid bitter disagreements during divorce proceedings.
It is crucial for both individuals involved in the divorce to maintain open lines of communication throughout the process. Engaging in productive discussions regarding finances, assets, and debts can help both parties reach an agreement that feels fair and reasonable. This approach fosters an environment conducive to compromise and prevents any unnecessary animosity or resentment from clouding judgement.
GSRM.com are family law experts and can assist with a prenuptial agreement if needed.
However, a prenuptial agreement is only of use to you if you complete one before your relationship problems. If your relationship is already breaking down or has broken down and you need to find a way to achieve a fair settlement – the following points may be of more use.
If you go through a divorce while owning a business then one of the most important things you can do is to obtain a formal business evaluation. Your spouse may have an unrealistic expectation of what your family business is worth or what your shares of a business are worth, which could lead them to seek a settlement that is not financially fair.
Work with your lawyer and your ex-spouse’s lawyer to choose an accounting firm that specializes in business valuations and have them conduct a forensic analysis of your business to determine its assets and liabilities, validate cash flow, and determine the appropriate valuation.
Once you have that valuation, you will be able to have concrete and specific conversations about its worth and what is a fair way to separate the value of the business.
We must stress that it is critical. Choose an evaluator that your ex-spouse’s lawyer is also happy with. If you organize a valuation and then they reject the valuation because they did not agree with the accountant you chose, it’ll be a waste of time and money. So, when undertaking an evaluation make sure both parties agree on who will do the valuation so there can be no disagreements later.
Be Willing To Compromise
When processing a separation it is not uncommon for your strong feelings of emotional pain to cloud your judgment when advocating for yourself and discussing a fair distribution of financial assets.
If you are not careful you could easily waste large sums of money on legal fees going back and forth between you and your ex. If you make a clear commitment from the outset to be very willing to compromise and give up some things that are important to you in order to get clear ownership of other things, will not only help their negotiations be quicker and smoother, but you will end up with more money at the end of the day because of the legal fee savings.
It’s important to think about long-term and short-term consequences as well.
For example, retaining majority ownership of a business could give you a more significant financial return over five or ten years compared to maintaining majority ownership of a piece of real estate.
So think bigger and think about what is most important to you and whether that is in conflict with what is most important to your ex. There may be ways that you can both get what you want and move on with your life as quickly as possible without diluting your shared wealth by paying lots of money to lawyers.
The intense emotional pain of a divorce can easily be compounded by financial pain if you don’t strive for a quick and fair settlement of your economic affairs. By keeping the end goal in mind and not letting your emotions interfere with your decision-making, these tips will ensure that both you and your partner walk away from the marriage with maximum economic value in a fair and considerate way.