Marriage And The High Net Worth

Saying “I do” is perhaps the most rewarding and riskiest investment any individual can make, but according to experts, the stakes for high net worth clients can be exceptionally high, with millions of dollars of assets on the table.

From protecting wealth to combining legacies, the issues surrounding marriage for HNW individuals is a complex frontier, advisors must treat with special care, says Tony Maiorino, vice-president of wealth management services at RBC Wealth Management inToronto. “No one wants to see a family business or inheritance disappear, if the marriage doesn’t work out.”

Although high net worth individuals might be savvy in running their businesses, many go into marriage with their “eyes wide shut”, says Maneesha Mehra, a family law lawyer with Lenkinski Family Law & Mediation Professional Corp. based in Toronto: “There’s often a look of shock that comes over clients’ faces when they realize the rights and obligations that can arise from marriage and its breakdown.”

For advisors, educating HNW clients on the financial implications of marriage is an opportunity to not only help clients protect their assets, but to ensure they begin their marriages with the proper legal structures in place. From helping clients have a successful “money talk” to wills and estate planning, these are the issues you want to cover with HNW clients before they say ‘I do.’”

Recent research by BMO Wealth Planning Group shows that almost two-thirds of couples wish they had taken more time talking about their financial situations and goals for the future with their partner before getting married.

The “money talk” can be especially challenging for HNW individuals, where the process of drafting a marriage contract, may force them to reveal very intimate details of their family money matters.

Despite the difficulties of discussing finances prior to marriage, it’s best to be open from the beginning, says Cynthia Kett, financial planner and founder of Stewart & Kett Financial Advisors Inc., a fee-only practice inToronto. “The early stages of a relationship when people are most in love is the best time to talk openly about money, to prevent problems down the road.”

For a successful financial conversation, Maiorino suggests the initial “money talk” take place between the individuals privately, without the help of an advisor. And, is best done before the couple gets engaged, especially if there’s a looming marriage contract or pre-nuptial agreement involved.

“A client doesn’t want to propose or accept a proposal, knowing a marriage contract is hanging over his or her head,” adds Maiorino.

Couples should also carve out a special quiet time to have the “money talk,” rather than winging it over dinner or another activity, says Kett. “Each person has to be focused and present in order for the conversation to have the best outcome.”

Marriage contracts

In cases of HNW couples, the union of marriage becomes a complicated financial matter, especially, where a multitude of family assets are involved. For example, take Dr. Larson, a 40-year-old single physician, earning over $1 million in income, who recently got engaged to Mr. Smith, a teacher earning $50,000. She just recently inherited her grandparents $25 million dollar home, and this will become the couples’ primary residence or matrimonial home once they get married.

In the case of Dr. Larson, she may want her marriage contract to deal with the family property and not address support, says Mehra. “A marriage contract can be as broad or specific as the client needs it to be.” This is where consulting with a family law lawyer is important, so the client is fully educated about their options.According to a survey, millions of Britons in the UK experience this critical condition and struggle to find their sexual viagra canada cost identity. Sports Osteopaths are speofficial web-site cialis properients who help patients with physical limitations and difficulties due to a disability or injury. It increases the viagra for sale uk https://regencygrandenursing.com/long-term-care/stroke-care sexual appeal and also prolongs the sexual intercourse. To free Hcy in the assay, oxidized cialis without prescriptions Hcy is first reduced.

For a marital contract to be valid, both clients must provide full disclosure of their financial situations, as well as receive independent legal advice. “Disclosure is king in marriage contracts,” says Mehra. “Clients should be transparent about their financial circumstances when negotiating marriage contracts or enforceability may become an issue.”

Finally, the contract must be signed free of any duress, says Mehra. “I have a rule that I don’t draft marriage contracts unless the wedding is at least two months away.”

When clients are married, circumstances could change, which could leave their existing contract out of date. In the case of a newly wedded Dr. Larson and Mr. Smith, the couple may have children ten years into their marriage. This could change Mr. Smith’s entitlement to spousal support, as well as introduce child support into the mix.

Like the initial marriage contract, disclosure is king, adds Mehr. “ With full disclosure and independent legal advice, Mr. Smith and Dr. Larson are free to draft a new marriage contract that fits their new situation.”

The same principle applies to other life events, like inheriting a controlling interest in a family business. At these points, advisors should remind clients to review their marriage contracts and ensure they are up to date, says Maiorino. “Over the course of a marriage, a number of events can alter an individual’s wealth and the marriage contract should be amended for these circumstances.”

Legacy issues

Once a HNW client gets married, his or her obligations change, and an existing will can become null. This is why next to a marriage contract, wills and estate planning is top priority for these clients, says Maiorino. “More than retirement, high net worth clients are more concerned about the legacy they will be leaving behind.”

To help clients get started on their estate plans, it’s important for them to seek out advice from a specialized wills and estate lawyer, who can help draft a new will, as well as set-up a tax-efficient structure for their estate, says Mehra. “When it comes to the estates of the HNW, they can face large tax implications if their estate structures are not set-up correctly.”

Aside from tax efficiency, as more HNW individuals move into second and third marriages, they have come to treat their legacy as an individual choice, rather than a joint vision of the couple, according to Maiorino. “Conflict can often arise when one person wants to donate his or her wealth to charity, while the other wants to hand it down to the next generation.”

An advisor’s role should be to help clients meet their individual desires in the legacy, as well as help the couple find common ground. One way of doing this is through “estate equalization” where life insurance policies are used to offset competing interests.

For example, Mr. Jones wants his son to inherit the ownership stake of his business at $10 million, meanwhile Mrs. Jones wants to donate their legacy to charity. The couple can buy a $10 million life insurance policy with the charity as the beneficiary. This way the Jones’ son will inherit the business, and Mrs. Jones can fulfill her wish of leaving behind an individual legacy.