Going through a divorce is an emotional time. You’re likely worried about what the future will hold and what the next chapter of your life will look like. Alongside the emotional turmoil of splitting up with your spouse, you also have your assets to think about.
Many divorces are relatively straightforward, but when high-value estates must be divided, it’s yet another source of contention. In this guide, we discuss how the process works and what challenges you should think about.
What classes as high-value assets in a divorce?
Believe it or not, high-value assets are relatively uncommon. Wealthier couples do tend to stick together, with just 9% of annual divorces coming from the top quintile. However, that doesn’t make them immune to divorce.
Strictly speaking, there’s no firm definition of what constitutes high-value assets. Some put the overall figure as high as £5 million in net worth, but usually, you’re looking at assets that span a range of classifications, including:
· Financial wealth
· Property
· Offshore accounts
· Complex income structures
· Business interests
· Private pensions
High-net-worth divorces are inherently complex and may cover multiple jurisdictions and complicated setups, including trusts. Given that, it’s crucial that you have a legal team in place to protect your wealth.
Challenges in high-net-worth divorces
Most divorces involve relatively small amounts of wealth, with 63% of divorcing couples having less than £500,000. It might not sound like it matters, but higher net worths tend to create additional challenges naturally.
The primary problem is accurately valuing diverse assets, which might include family businesses, international real estate, and investment portfolios. Usually, an expert must be brought in to value these assets without destroying income-producing assets.
Other issues family law experts have to contend with include:
· Identifying hidden assets.
· Untangling complex trust structures.
· Dealing with trusts and inherited wealth.
· Managing the tax implications of substantial wealth transfers.
· Handling spousal/child maintenance when one party is already used to an extremely high standard of living.
When it comes to extremely high-profile individuals, privacy and reputation management for both sides also become factors. If there’s any form of public scrutiny, such as if a divorcee is a known figure, confidentiality is a must.
How the courts tackle high-value asset division in a divorce
Courts don’t alter their processes just because there are high-value assets at stake. The principle is the same for determining how to divide assets. The idea of a 50/50 split is a myth. This is usually just the starting point courts will use. Under the Matrimonial Causes Act 1973, the focus is on:
1. Fairness
2. Full financial disclosure
3. Meeting the needs of both parties
Fulfilling these three principles doesn’t always mean a perfect split. Courts will look at the needs of both sides and the standard of living they’ve become accustomed to. They will also look into matrimonial property vs. non-matrimonial property, with the latter including pre-marital wealth and any inherited assets.
Due to how complex financial affairs tend to be amongst high-net-worth couples, it’s not uncommon for courts to use forensic accountants to arrive at proper valuations for all assets.
As with all divorce proceedings, courts prefer to arrive at a financial settlement that properly severs all financial ties. It may include making lump sum payments to transfer capital, spousal maintenance payments, or transferring property titles.
Ultimately, courts will always encourage couples to try to arrive at an amicable settlement themselves, rather than having a judge impose the final order.
The importance of divorce financial settlements when dealing with high-value assets
You want a clean break so that you can move on with the rest of your life. The last thing you want is to reopen those old wounds with a future claim against your assets. That’s why divorce financial settlements are pivotal to finalising your divorce.
Essentially, these are legally binding agreements that outline how you’re dividing your assets and debts. These are then backed up by a Consent Order, which formalises the settlement. Once it’s in place, it’s extremely difficult to make any future claim.
There are only a small number of ways that your ex could make any further claims, and that’s if they can prove you hid assets or obtained the settlement through fraud or coercion. Again, it underscores the importance of engaging with a legal expert to ensure your assets are protected in the years ahead.
What about prenuptial and postnuptial agreements?
Prenuptial and postnuptial agreements sit in an awkward legal grey zone in England. Unlike in other parts of the world, these agreements aren’t automatically legally binding. However, case law shows that courts acknowledge them.
The key to a successful agreement is that it is entered into freely and with a full understanding of the implications. Judges still have the right to overrule them in part or in full if they think it goes against the principle of fairness, but they’re still worth doing with the help of a legal professional to make them as comprehensive as possible.
Working with a solicitor to manage high-value assets when divorcing
Engaging a solicitor isn’t something you’re required to do by law. Many couples do go through their divorces without specialist advice, but when high-value assets are involved, this is a mistake.
The main problem isn’t the legal process itself, but in uncovering hidden wealth, protecting assets, and properly valuing and dividing those assets forming part of the matrimonial pot. Specialist solicitors are experienced in managing the complex financial structures unique to the wealthy, bringing forensic expertise to the table to ensure a fair settlement.
Plus, they will take the steps needed to mitigate the long-term risks to you. It’s their goal not just to give you a favourable outcome but also to reduce the risk of future disputes, which could emerge years down the line.
At VM Family Law, we know how vital preserving your wealth is when you’re dealing with a high-net-worth divorce. Work with our expert divorce solicitors and get tailored advice on how you can protect more of what you’ve earned. To learn more about the nuances of these types of divorces, contact us now.