In England and Wales, a high-net-worth divorce is typically one involving substantial assets, usually worth over £1 million. In the UK, there is though no strict definition of a high-net-worth divorce. High Net worth divorce does generally involve the divorce of individuals whose wealth, when shared, exceeds what is required to take care of each person’s needs. This means that the combined assets of both parties often total £1 million or more, regardless of whether both parties are high-net-worth individuals themselves.
The process for high-net-worth divorce or dissolution is the same as any other type of relationship breakdown but, due to the complex financial interests it is often the case that additional expertise and planning are needed.
Due to the nature of high-net-worth divorces, an early consultation with one of our trusted legal advisors in strongly advised.
Due to the value and nature of assets available for division when dealing with this type of divorce, negotiations are often complex; this is due in the main to the scale and volume of assets involved – such as business interests, additional (sometimes international) properties, luxury assets, trusts, and investment portfolios.
Business Interests
If you own a business or businesses, determining their value and how they will be treated in your divorce is critical, especially if you have built and developed the business yourself.
Options to divide business assets include:
- splitting ownership, which could lead to conflict if both of you retain shares
- buying the other person out, which may require you to liquidate assets or wind up / sell a business
- taking out business loans or alternative settlements to protect the company
A solicitor may refer you to a forensic accountant to help you accurately assess the value of your business and ensure that you receive a fair financial settlement.
Properties
If you are a high-net-worth individual, your housing needs may not be a primary concern, however, you may jointly own multiple properties and will require an accurate valuation for their potential sale or transfer.
To ensure a fair division, tax advice will need to be sought and factored into your negotiations. Any tax implications of proposed settlements should be fully understood and accounted for before entering into constructive negotiations.
Trusts and Investments
Trusts can add complexity to divorce proceedings. If trusts are a factor the courts will assess whether they:
- were used as a financial resource during the marriage
- were established in relation to the marriage, usually as part of prenuptial or postnuptial agreements
- can be adjusted in favour of the non-beneficiary spouse
Using a specialist high-net-worth solicitor will be essential for planning and understanding how trusts and other investments, such as bonds and shares, should be treated in the context of all the other marital assets.
Offshore trusts are a fairly common way for high-net-worth people to hold wealth and can be more complex to assess due to jurisdictional differences between countries. Full disclosure and full consideration of the trust’s role in the marital estate is key to obtaining a proportionate outcome to future negotiations.
Pensions
Pensions are often one of the most valuable marital assets and must not be overlooked in reaching a fair settlement. There are various ways to consider a pension:
- Pension sharing – moving a portion from one person’s pension pot to the others
- Offsetting – keeping a pension intact by giving a larger share of other marital assets
- Attachment orders – redirecting the benefits of a pension when payments are made to the holder of the pension
Tax Implications
Dividing substantial assets may result in significant tax liabilities, such as Capital Gains Tax and Inheritance Tax. Early tax planning is essential to ensure financial stability post-divorce. Your solicitor may refer you to a tax professional to help provide the appropriate advice to navigate this often complex area and help facilitate the division of assets. Due to their complexity, it is essential that you contact an experienced high-net-worth divorce solicitor to help to achieve the right outcome for you and your family and to ensure that the correct processes are adhered to, for example to achieve a proportionate outcome it is vital that all assets are identified through the disclosure process and valued accurately.
Hidden assets
In high-net-worth divorce, ensuring full financial transparency is crucial. Occasionally spouses may attempt to conceal wealth through hidden investments, offshore accounts or undervalued assets, but asset concealment is unlawful and courts take a very firm stance against it.
With expert legal help (and sometimes the help of a forensic accountant), undisclosed wealth can be identified and properly accounted for in the proceedings.
If, during the divorce process, you believe your ex-partner has been hiding either money or assets and not disclosing them, you can make an application to the court for a freezing order or an order which requires the other party to disclose the financial information required. A freezing order will prevent your ex-partner from being able to move or dispose of any assets.
There are a number of consequences which the court can impose, should they find you or your ex-partner concealing assets during the divorce process. These may include:
- Contempt of court. This can lead to fines or even imprisonment.
- Financial penalties. The person who hid the assets may have to pay the legal costs for their ex-partner.
- A reduction in the financial settlement.
- Delays to the divorce process.
Matrimonial vs non-matrimonial assets
Not all assets are automatically subject to division in divorce.
Usually courts distinguish between:
- matrimonial assets (acquired during the marriage and typically shared)
- non-matrimonial assets owned before marriage or inherited wealth (typically excluded from the settlement)
This area of the law is evolving quickly with the recent Supreme Court case Standish v Standish clarifying how non-matrimonial assets are treated in high net worth divorces, particularly regarding the “sharing principle.”
At AFG Law, we have several skilled divorce solicitors who are experienced in handling and supporting individuals through high-net-worth divorces. To speak to an expert on this area, call 01204 377600.
Pre-Nuptial and Post-Nuptials
These agreements are entered into with the goal of providing clarity and protection on a range of assets in the circumstances where a couple separates. They are there to mitigate the costs of a divorce by abating the risk of needing to go through court following a relationship breakdown.
Pre-Nuptial and Post-Nuptial agreements tend to cover how assets such as inherited assets, non-matrimonial assets and gifts received by one party during the course of the marriage will be dealt with in the case of divorce. They usually protect the party in the relationship who had previously acquired wealth or was to inherit wealth so that they retain this in future. Whilst the court will ultimately have the discretion to override the agreement during financial proceedings, it will usually uphold it if it is a fair agreement.
To determine this, the court will look at elements such as:
- The agreement being freely entered into by both parties with the understanding of the consequences of the agreement.
- The fairness of the agreement being upheld to both parties. If there has been a vast change in the circumstances of the couple since the agreement was signed, such as children now being involved in the divorce, this will be factored in.
How AFG Law can help
If you are in the process of getting a high-net-worth divorce and want expert help and guidance, you can reach out to the experienced high-net-worth divorce solicitors at AFG.
If you have any questions regarding divorce or if you require legal advice on any of the information contained within this blog, please call 01204 377600 to speak with AFG Law’s expert family team who can support you in all aspects of family law. Alternatively, you can email one of the team members at familysolicitor@afglaw.co.uk.
AFG Law have multiple offices with family solicitors in Manchester, including Stockport, Bolton and Bury. We can also assist clients remotely.