High–net–worth and ultra-high-net-worth divorce concerns the division of large amounts of marital wealth that exceeds the reasonable financial needs of each party. High net worth divorce differs from normal divorce because it often involves complex international legal, commercial and financial arrangements (e.g. onshore and offshore trusts). In many cases of high-net-worth divorce, this complexity can make it extremely difficult for both parties to fully understand the scale of the financial wealth and assets owned. High-net-worth couples may also have prenuptial and postnuptial arrangements in place. This is why robust legal representation in high-net-worth and ultra-high-net-worth divorces requires an understanding of forensic accounting, family, divorce, property and commercial law.
What assets are involved in a high net-worth divorce?
High-net-worth divorces commonly involve the division of a large number of asset types, including:
- Financial wealth – cash, savings, ISAs and cryptocurrency
- Physical wealth – cars, art, and jewellery
- Business assets – UK and overseas corporate structures
- Investments – shares, bonds, mutual funds and collectables
- Properties – UK and overseas properties
- Pensions
- Trusts – onshore and offshore trusts
Due to the international arrangement of assets in a high-net-worth divorce, it is important to understand the impact of the law in different legal jurisdictions. This is essential in ensuring the full disclosure of all international financial assets in high-net-worth divorces.
How is your wealth divided in a high net-worth divorce?
When it comes to dividing the financial assets in a high-net-worth divorce, the courts will always start with the following guiding principles:
- Equality – the courts will strive for equality when dividing marital assets in high-net-worth divorce.
- Full and frank financial disclosure – is essential in ensuring that the courts can make a fair and balanced decision on the division of assets (see the section below, ‘Disclosure of assets in a high net worth divorce’).
- The needs of both parties – will be higher than for non-high-net-worth divorces.
- Special contributions – may lead to an unequal division of assets.
- Non-matrimonial assets – will not be included unless the matrimonial assets are insufficient to meet the financial needs of the parties.
The needs of both parties
The courts generally strive for a fair outcome whereby both parties can ultimately become financially independent as much as possible. The courts also fully understand that the financial needs of both parties in high-net-worth divorces are much higher than for normal divorces. This is because high-net-worth couples tend to enjoy a high standard of living. As such, the courts will work out the division of financial assets in a way that is more generous than normal divorce settlements.
Special contributions
As mentioned above, the courts will strive for equality when dividing marital assets in high-net-worth divorces. One exception is where it can be argued that one party made a substantial ‘special contribution’ that may cause the courts to depart from the general principle of equality. This does not mean where one party has been the ‘wealth generator’, they will automatically be considered to have made a special contribution, even if they have made millions of pounds. For this reason, it can be very difficult to argue that an unequal division of assets should be made on the basis of a special contribution.
Non-matrimonial assets
Another consideration is marital vs non-marital assets. Marital assets are those acquired while married or in a civil partnership. Non-marital assets are those acquired before the marriage or civil partnership and inheritances received while married.
High-net-worth divorces often involve disputes regarding what should and should not be considered a matrimonial asset and, therefore, included in the calculation for the division of assets.
In general, the courts will not include non-matrimonial assets in a high-net-worth divorce settlement unless the matrimonial assets are insufficient to meet the financial needs of the parties.
Disclosure of assets in a high-net-worth divorce
In financial remedy proceedings following divorce, both parties have a legal duty to provide full, frank and clear disclosure of their financial assets. The aim of providing full disclosure is to remove any uncertainty and enable a complete assessment of the value of their assets, income and earning capacity. This includes disclosing all financial assets no matter where they are held (i.e. offshore assets) and in which form.
Anyone who does not fully disclose all of their assets or attempts to hide their assets to gain an unfair advantage over the other party may be in contempt of court. This can result in a large fine or even imprisonment. The courts can also issue an order to uncover the extent of assets held, including emergency search orders and freezing injunctions (to stop assets being disposed of). Crucially, a judge may decide to make a larger financial award to the other party.
Children in a high net worth divorce
There are two main types of child maintenance awards:
- Household Expenditure Child Support Award (HECSA) – where there is no spousal maintenance. This covers the reasonable costs of the parent who the child lives with in their role of carer if they cannot meet these themselves.
- Child Support Maintenance (CSM) – a contribution to the children’s direct and indirect costs
In normal divorces, the government’s Child Maintenance Service will work out how much should be paid in child maintenance. The problem is that the highest income that can be taken into account when making this calculation is £3,000 per week or £156,000 per annum. Many high-net-worth individuals earn much more than this, so an application must be made to the court for extra child maintenance. This may include financial provision for additional costs such as private school fees.