The terms “mistresses” and “toy boys” tend to have negative connotations as they refer to out-of-marriage emotional and/or sexual relationships. Wealthy individuals with a mistress or toy boy potentially open themselves up to very messy and costly situations. It's rare that not all family relationships are impacted; the matter of what assets becomes the property of the mistress or toy-boy can be especially problematic if certain wealth planning strategies are not implemented.
Extramarital affairs range from insignificant flings to lifelong relationships. The longer the relationship, the more likely the paramour will have or believe to have rights to certain assets or a certain percentage of the affluent individual’s net worth.
Clarity about the financial aspects of the relationship supported by legal documentation and legal structures can be very beneficial. The aim is to cover all considerations, from promises made and gifts given to prospective inheritances. The aim is to make sure the wishes of the wealth holder are achieved, to the extent possible.
When the wealth planning is forward thinking and based on bright-line transactions, there is likely to be many fewer legal challenges. For example, irrevocable trusts, with carefully constructed contingencies where the paramour is the beneficiary, can be very effective in ensuring the person is taken care of and making certain disenchanted family members cannot upset the arrangement.
When the relationship between the wealthy individual and the paramour fizzles out, resulting in a new paramour, there is the potential for significant difficulties. Blackmail by the first paramour, for example, can easily cause tremendous and expensive conflicts. Jilting a lover can easily lead to that person to seek some form of revenge. The easiest way to extract concessions is to threaten to expose the affluent individual’s secrets.
Defusing these situations takes a very delicate touch, where it is important that all the parties do not damage each other or themselves. For example, astute wealth planning and carefully worded nondisclosure agreements with substantial legal penalties can be very effective in ensuring the potential blackmailer does not become a significant problem.
There are also often problems when long-term extramarital affairs become known after the death of the wealthy individual. This can dramatically and traumatically impact family members. In one situation, when the children first become aware of a mistress after the death of their father, the wealth planning that was done using trusts or other entities avoided costly and often fruitless legal battles.
It is important to note that out-of-marriage relationships are not in any way restricted to the wealthy. However, when it comes to the wealthy, there are regularly a lot more assets to fight over. People will fight unless the wealth holders make fighting near impossible or too painful. These confrontations, aside from possibly being psychologically devastating, can take adversely impact the wealth of all involved. Astute wealth planning can therefore be very useful in mitigating—if not eliminating—these conflicts.