Matrimonial Finance
How is Wealth Divided in a High Net Worth Divorce?
Succession Wealth analysed data from the Office of National Statistics’ Wealth and Assets Survey. The Survey looked at the number of divorces in England and Wales. It estimated the cost of assets of divorcing couples whose net wealth is £1 million or more. The survey found 550 couples with a net financial wealth of more than one million pounds or more will divorce each year. It estimates that collectively these individuals have around £1.91billion of net worth. This equates to an average of £3.48 million per couple.
The breakdown is:
Financial wealth represents 20% of the assets (worth on average £712,000.)
Financial wealth is any kind of cash, bank account or equity fund.
Property wealth represents 31% of assets (worth on average £1,075,000.)
Property wealth is any wealth tied up in assets like land and property.
Physical wealth represents 5% of assets (worth on average £186,000.)
Physical wealth is any wealth tied up in smaller assets such as jewellery, cars, clothing and accessories.
Private pension represents 43% of assets (worth on average about £1.5 million.)
Definition of ‘Needs’
What is the definition of needs in a divorce
When dealing with a spouse’s financial remedy application, the court’s objective is to always achieve the fairest result. The court will always try to meet both parties’ financial needs for them to live independently after the divorce. In the case of a high net worth divorce, when the family is used to a very high standard of living, as long as there are the financial resources available, their financial needs can be calculated at a large sum. As a result, the court can determine the spouses’ needs as a large amount of money, sometimes going into the many millions.
What Will Happen To My Personal Assets And Business Assets In A High Net Worth Divorce
In the case of a high net worth divorce, assets are often held in complex structures that present unique difficulties.Contact Pavidus Legal Consultancy in order to find a lawyer experienced in your area of business and expertise in divorce..
Personal Assets which will be Considered In A High Net Worth Divorce.
Savings and investments
Family homes and other property
Trust interests
Pensions
Considerations with Business Assets:Business Assets Considered In A High Net Worth Divorce.
What are the parties’ interests in the business?
What is the nature of the business?
Do you require a business valuation and on what basis?
Is there liquidity in the business?
What are the parties’ Trusts in High Net Worth Divorce
What is a Trust?
A trust is a legal relationship, created by a settlor when assets are placed under the control of a trustee for the benefit of a beneficiary, or for a specified purpose. The key characteristic of a trust is that it permits the separation of legal ownership and beneficial interest: the trustees become the owners, and the beneficiaries are entitled to expect that the trustees will manage the trust property for their benefit.
Read more about Trusts.
Managing Trusts in a High Net Worth Divorce?
Most high net worth divorces involve trusts. Significant amounts of the parties’ wealth can be tied up in trusts. As a result, how the trust assets are treated can have a significant impact on the outcome of the case. Attacking and defending both onshore and offshore trusts can be a difficult process.
If the trust is located in England and Wales, a request can be made to the trustees to provide documentation about the trust. This information can provide harder to obtain if the trust is located offshore.
What Happens to My Business in a High Net Worth Divorce?
Courts can be flexible when it comes to dividing business interests in a divorce. The court will prefer to give one partner a larger share of the other assets or a larger maintenance sum. This would be rather than forcing the other partner to sell off their business or divide the ownership between both parties.
A privately-owned business is the most significant asset in high net worth divorce. However, valuing a private business can be a difficult process. This can be made more complicated if the business is active and has assets around the world, all held in inter-related onshore and offshore corporate and trust structures.
Businesses can be difficult to distribute in a divorce. It may be impractical or impossible to sell the shares. The shares could be illiquid, or one party may wish to retain the shares. In either scenario, the spouse who will retain the shares may need to provide more of the parties’ liquid capital to the other spouse or raise the funds in another way. In a more extreme scenario, it may prove impossible to fund an award in any way other than by selling a business.
Companies and trustees of trusts, which may form the business or hold shares in it, can apply to be joined to divorce proceedings to best protect their own interests. Obtaining disclosure from these parties and the role that they play can complicate matters further.
Non-Matrimonial Property In A High Net Worth Divorce
High net worth divorces place higher stakes on finances and assets. Therefore, whether an asset is classified as matrimonial or non-matrimonial can hold a lot of weight.
Non-matrimonial assets can take many forms such as property acquired before the marriage that doesn’t become the other spouse’s home. Additionally, a non-matrimonial asset can be an asset acquired after the couples split.
In most cases, the court will rule that spouses do not share the non-matrimonial property. The rule to this exception is when the other spouse’s needs cannot be met from the matrimonial property alone.
If the wealth of a high net worth individual all comes from their family, the wealth can justify as a departure from equality. This is because the wealth is likely to be categorized as non-matrimonial property.
High Net Worth Pensions In A High Net Worth Divorce
There are three common ways you can divide a high net worth pension. These are, offsetting against other assets, pension sharing orders, and pension attachment orders.
Offsetting Pensions
Offsetting pensions involves the spouse with the pension keeping it. The other spouse receives compensation in the form of a greater share of the other assets.
Pension Sharing
Pension sharing means transferring a sum of the pension from one spouse’s pension to a pension in the name of the other spouse.
Attachment Orders
Pension attachment orders redirect all or part of the pension benefits to the other spouse when the pension comes into payment.
Our solicitors can help you decide which of these options is the right one for you.
What is Special Contribution of Divorce?
When regarding an ultra-high net worth divorce the spouse may argue not to order the equality division of the matrimonial capital. The division allows for an equal split between assets. The spouse may not want this if they made an unmatched financial contribution to the marriage.
This is a changing area of law and can be complex. It is difficult to prove to the court that one party has provided a significant contribution. However, even though the court does not often grant a special contribution, it’s still incredibly important that the other party forms a strong defense for a special contribution argument. In an ultra-high divorce case, you can lose or gain millions with a departure from equality.
Disclosure Request in High Net Worth Divorce
The trustee of an offshore trust may respond in several ways when receiving a disclosure request. Firstly, they may respond with the information you requested. Alternatively, they could decide to seek the advice of their home court before deciding whether to disclose the information. In some instances, the trustee may not respond at all. The court may make an application for disclosure. This would be in the English court for onshore and the jurisdiction’s court for offshore. Alternatively, you may need to ask the English court to come to a conclusion about the nature and scale of the trust.
The issues facing a high net worth spouse seeking either to gain access to or protect trust assets depend on the type of trust they are dealing with. For example, if a spouse is a potential beneficiary under a valid discretionary trust, the court cannot force the trustees to make any dispositions to the same spouse. At most, the court can request and provide encouragement that trustees act a certain way.
It can be difficult to achieve your desired result in this situation where the same trustees refuse to comply with an order of the English court. Therefore, it may be necessary to apply to the offshore court for a direction, that the trustees comply with the English court’s order. There are no hard and fast rules about how to access or how to resist attempts of access to trust assets during a divorce. As a result, our experienced divorce solicitors can help navigate you through this complex area of law.
Emergency Remedies for Financial Non-Disclosure In High Net Worth Divorce
Some spouses may refuse to provide all the information about their financial position. This is in an effort to gain a financial advantage over the other spouse.
Non-disclosure comes in many forms. In the simplest case, a non-discloser may transfer funds from their disclosed bank accounts into their non-disclosed bank accounts. Non-disclosers may move their wealth offshore into a series of interlinked corporate and trust structures to prevent it from being distributed in the divorce.
If needed, our solicitors can help you can apply to the court for emergency remedies. For example:
Obtain a Search Order
You can obtain a search order which allows the legal team to enter the premises owned by the respondent spouse. This is in an effort to uncover important documentation.
Imposing Sanction for Non-Disclosing Spouse
Where you suspect that your spouse may not disclose their assets fully, it is best to issue proceedings so that you have the ability to ask the Court to impose sanctions for non-disclosure.
Freezing Order
If recent undisclosed assets have been discovered but there is a risk that the spouse might hide them again, you can apply for a freezing order to protect the assets.
What if a Trial Cannot Uncover my Spouses’ Non-Disclosure In A High Net Worth Divorce ?
Occasionally the trial will not be able to uncover a spouse’s non-disclosure. Therefore, it may be necessary to request the court to draw adverse influences against the non-disclosing spouse to present their true wealth.
Will a Prenup Help a High Net Worth Divorce?
Having a prenuptial agreement in place can help with a high net worth divorce. Agreeing on the division of assets before the marriage can serve to resolve disputes that may otherwise arise.
On the other hand, you may deem the prenuptial agreement unfair around the time of separation. If this is the case our recommendations of expert solicitors can advise you as to what terms you can challenge.
How a High Net Worth Divorce Solicitor Can Help
How can our recommended and specialised high net worth divorce lawyers help you?
A divorce can be a difficult process to navigate through which is why we want to make the process easier and straightforward for you, with the help of our expert family law solicitors.
In most cases, court proceedings aren’t necessary as long as negotiations are handled with care and understanding. Our high net worth divorce solicitors can help you during each step of the divorce process, whilst focusing on getting the best result for you.
We Source you family law solicitors who have helped many clients through their divorce and separation proceedings, including financial settlement hearings and children disputes. Our black book of recommended lawyers have a long history of finding compromises that work for everyone.
Contact Pavidus today for expert help and advice.
