The Source of Wealth in a High Net Worth Divorce: How This Can Complicate Your Divorce

“It is a truth universally acknowledged that a single man in possession of a fortune, must be in want of a wife.”
Jane Austen, Pride and Prejudice.

The first line of Jane Austen’s classic novel, Pride and Prejudice, may seem old-fashioned and sexist two hundred years later. But her keen observations about the problems that arise when one partner has money and the other doesn’t, are still on point. In this series, we’re discussing the issues that can arise during a high net worth divorce with Michelle Smith, founder of Smith FSG in New York. Ms. Smith works with high net worth clients on a regular basis, guiding them through investing, philanthropic giving, and strategies for asset transfers. She is also a Certified Divorce Financial Planner and is one of the most sought-after divorce financial specialists in the country.

When I spoke with Ms. Smith about the issues unique to high net worth divorces, we discussed what can happen when one spouse’s wealth comes from family money or an inheritance. Ms. Smith pointed out that the source of a couple’s income or wealth can often be an emotional trigger during divorce:

So, when there's a divorce and maybe the life was created from one of the spouses having trust funds, inheritances, maybe not necessarily earned income, but generational wealth on one side. The trigger there for the person who inherited the money is that […] this ex-husband or ex-wife shouldn’t be entitled to any lifestyle that they had enjoyed maybe even for 20 years because it's not their money, right?

Ms. Smith went on to explain that if one spouse has generational or inherited money they can often feel like stewards of the money. As a steward of this wealth, they may feel that their job is to protect the money for the family. The spouse with inherited wealth may feel a sense of conflict between their family of origin and the spouse they’re now divorcing, with the family’s interest in protecting money for future generations outweighing the couple’s wishes about division of assets.

At the same time, the spouse who married into money may also feel some entitlement after having started a family, particularly if they’ve sacrificed a career to raise children or support their spouse. As Ms. Smith notes, “yes, you might have been part of this family for 15, 20 years and they might be on your side emotionally with how you were wronged, if you were wronged.  But when it comes down to maybe eight to 10 people behind this money, not just this couple, the family prevails.” It can be tricky to ensure that everyone’s needs are met in a divorce involving inherited wealth, particularly when children are involved. But it can be done so that children aren’t moving between two households with a huge disparity in wealth.

Be sure to follow along for the rest of this series with divorce financial specialist, Michelle Smith. If you’re considering divorce, but you’d like to try a more peaceful divorce process, contact my office for a confidential consultation.