How to negotiate a high net worth divorce
Divorces involving high-value assets often come with a unique set of challenges that require specialist treatment to negotiate the complexities of the divorce process.
However amicable your separation may be, high net worth divorces are often complicated, technical and emotionally taxing.
Your starting point should be to find a legal firm and solicitor with the right knowledge and experience to guide you. Having confidence in your lawyer and building a strong working relationship is essential.
In our article we have tried to set out what you might expect from the process and what to look for when seeking legal advice.
If you have any questions, please contact our experienced family team for a no-obligation discussion and we will explain how we can help you through the process.
Key factors in a high net worth divorce
When considering a divorce, the finances and division of assets are likely to be your immediate concern.
As a starting point, the courts will seek to divide assets evenly between a couple. However, the division of assets is much more complicated in a high value divorce. Consideration will need to be given to where the assets came from, whether they were brought to the marriage by either party or whether they were generated during the marriage.
How is the historic value of business interests calculated? And what about investments that have grown during the marriage? Getting the right advice is critical.
There will also be tax implications. Decisions that are made now are likely to impact on tax that has to be paid in the future.
Getting the right tax advice will be another key part of the process. At Wolferstans, we always recommend that we work closely with your accountant or put you in touch with an expert who can assist with this element of your divorce.
The ability to find money or assets is crucial to a successful outcome in a high net worth divorce. It is not unusual for one party to try to hide assets from their spouse.
It is also common for one party not to have detailed knowledge of the true financial circumstances of their spouse.
Parties may transfer funds to non-disclosed bank accounts or even transfer assets to offshore accounts. The sheer number of assets might make this difficult to spot but being able to track these funds – potentially using court action – can be crucial.
Identifying matrimonial assets
One of the most common issues that needs to be considered in a high net worth divorce is which of the assets are matrimonial and which might successfully be excluded from the settlement as non-matrimonial property.
The starting point for the family court is that marital acquest should be shared equally and then this is cross-checked with needs and fairness.
Valuing business assets
Perhaps the most high-profile divorce case of recent times involved Amazon founder Jeff Bezos and his former wife MacKenzie, who separated after 25 years of marriage.
The settlement involved Jeff handing 4% of Amazon to MacKenzie – an estimated value of a remarkable £29bn.
Yet had the couple been based in the UK, the approach to the settlement is likely to have been radically different.
In our courts, the starting point for divorce is a 50/50 split of matrimonial assets and the business would likely have been treated as a matrimonial asset, so Jeff would have likely been handing over a lot more than 4% of its value.
When Nick Robertson, the founder of fashion website ASOS, divorced his former wife in 2016, the Judge considered what the business was worth when the parties began cohabiting compared to the value when they divorced.
Mr Robertson had started the company prior to the marriage and argued that it should be treated as a non-matrimonial asset and therefore shouldn’t be shared with his wife.
Unsurprisingly, the Judge didn’t agree with this suggestion but did agree to look at the increase in the value of the business during the relationship and only treat that element as matrimonial acquest. It resulted in the wife being entitled to 31% of the value of the business.
Businesses can be the most complex but important element of a high net worth divorce. Calculating the value of a person’s shares and interest in a business requires significant expertise. This is commonly dealt with by instructing a joint expert to value the business.
Once the value of the business is identified, we then need to look at liquidity (i.e. how can the money be raised to buy one person out). We will also want to achieve this in the most tax efficient way for both parties. You may need to raise funds to buy out your spouse’s share, but the last resort is almost always to dissolve the business and distributing assets – this is rarely in the interests of either party. The Court will be reluctant to kill the goose that lays the golden egg. However, it may be necessary to carry out business restructuring to achieve liquidity. Advice from the accountant will be essential.
Do you have multiple properties or properties abroad? A second home in Spain, a bolthole in Cornwall or an apartment in London? A key difference between a ‘normal’ divorce and a high net worth divorce is often property ownership.
The starting point is agreeing an up-to-date valuation for each property and also considering any tax implications of transferring ownership or selling properties.
Pensions and investments
Couples with wealth are likely to have money in investments and pensions, and pensions can be particularly underappreciated in divorce proceedings. Often, they are home to significant wealth which will be accessed later in life. Sharing pensions in a divorce is common. This can also have tax benefits to one party if their pension assets exceed the lifetime allowance.
Similarly, money held in trusts can often appear hidden but often a request can be made to the trustees for full disclosure. It can be more difficult where trusts are based overseas, and holding assets in offshore trusts to protect wealth can be common.
In some cases, one party may argue that they have made a ‘special contribution’ to the marriage and as such, deserves more than their spouse in the division of assets.
This is often used in cases involving entrepreneurs who have built businesses from the ground up and was also argued by the footballer Ryan Giggs in his separation from Stacey Cooke.
This strategy should be considered but will only apply in the most exceptional of cases. The Courts didn’t agree that Mr ASOS had made a special contribution to their matrimonial wealth.
Finding the best advice
This overview gives you a flavour of the expertise required to guide you through the divorce process to an amicable conclusion. It should also give you an idea of the sort of experience and knowledge to expect from your divorce solicitor.
If you have questions about how to proceed or would like to find out more about the service we provide, please do get in touch with our experts by calling 01752 663295.