The division of assets in cases of significant financial resources and wealth
During divorce proceedings, one might expect conflicts related to the division of assets (commonly referred to as financial remedy orders). These types of conflicts tend to arise where the parties have significant financial resources, be that through their high earning capacity or through valuable assets. What are the initial considerations in such matters?
Who are high net worth individuals?
HNWI tend to be people whose assets exceed their financial needs. This can often include people who have achieved an annual income of £100,000 or more or possess net assets of £250,000 (for at least a year). In such cases, people often sign an agreement(s) (i.e. prenuptial agreement) which detail the division of assets should the parties divorce. However, if you have not signed such agreements, you do not have to worry. We can provide you a tailored service with an experienced team in place to fight for the best possible settlement.
What should be taken into account during such a division?
The first consideration for the court will be the welfare of any children of the family, under 18 years old. The Court will then consider what is commonly referred to as the s.25 factors.
The capital and income resources available (those currently existing or reasonably foreseeable in the future)
- Details of the financial needs, including:
- the standard of living enjoyed;
- the ages and the length of the marriage; and
- any disabilities.
- The court also considers the following additional factors:
- the contributions of each party;
- the conduct of each party is considered only exceptionally, and any benefit that may be lost (i.e. spouse’s pension).
The court will determine the financial needs and standard of living enjoyed by the parties. If a family’s standard of living is high, their financial needs will tend to be greater. Therefore, a court may then decide that one of the parties needs a larger settlement, taking into account his or her standard of living. This type of settlement can account for expenses such as entertainment, travel, cosmetic treatment, clothing, etc. However, the balance can go both ways and there may be the possibility of having to lower your current standard of living after a divorce.
How are assets divided in case of a divorce?
The initial stage of disclosure is very important in such cases. The proceedings will require the parties to provide full and frank details of their finances, resources, and needs.
We have named just a few below:
- Details of all properties owned;
- Bank/Building Society details (with at least 12 months statements);
- Details of investments (i.e. shares, artwork, classic cars, etc);
- Details of insurance policies;
- Details of pension valuation(s);
- Details of debts.
This is to prevent any of the parties hiding assets and to ensure all the information is available to provide a fair split. Once disclosure has taken place, we will be able to raise any concerns on the disclosure provided by raising questions. This will assist in narrowing down assets.
If you have any concerns about hidden assets, we can assure you that we investigate the same, using various methods. We will be able to ensure that full disclosure has been provided and in using our team of experts we can verify the appropriate valuations of all personal and business assets.
It is entirely possible for different judges to come to differing conclusions regarding cases of identical facts. This is judicial discretion. However, if you have an experienced legal team, they will be able to use relevant case law and present your case in the best possible manner.
The starting point is for the assets to be divided 50%-50%. However, remember, this is just the starting point and it is for the parties to argue why the court should stray from an equal distribution. In considering this, the court will take into account the principles of equal sharing, needs, and compensation.
If the parties’ financial resources exceed their needs, the sharing principle would lead to an equal distribution of matrimonial assets (accrued during the marriage). However, where assets have been created by your special contribution, we could argue that there should not be an equal distribution. The sharing principle would not normally apply where you have introduced the property or inherited it unless, such assets have been integrated to form part of the matrimonial assets (i.e., if you sold such property and purchased another jointly).
What about the division of businesses?
Businesses do form part of the assets to be shared on divorce. It is common for parties to have disputes over limited companies (public and private), sole traders and partnerships. It is possible for the court to consider the business as a marital asset regardless of whether it is owned by one or both parties. If the business is owned by several individuals, then the value of the interest is limited to the shareholding relevant to the parties. It is common for such businesses to be valued when considering disclosure. If the business merely provides an income stream and does not have any capital value, then a valuation may not be necessary. Dependant on the circumstances, it is possible for the court to leave one party as being the owner of the property and compensate the other party with a larger share of other assets/maintenance.
Maintenance – how is it determined?
This varies depending on the circumstances of the case. This is why we would recommend specialist legal advice regarding this matter. A person with a high income may be obliged to pay maintenance to a spouse, especially if there are children or if the second party has a lower income and will not be able to earn his or her own living (for example, due to illness). Defining the amount of maintenance, a court will take into account many factors, such as the length of the marriage, spouses' health, and their income. This amount is determined separately for each case.
How to secure your own property against a division?
Start with gathering documents which you could present in a court and relevant to arguing your case. Gather information on the following subjects: income, savings, loans, real estate, and other assets. Pay particular attention to whether resources from a joint bank account have not been transferred to any other account or withdrawn.
If you notice that your spouse tries to hide any possessions, do not try to enforce the law on your own. In such a case, you may apply for an injunction to freeze a spouse's assets. This will help fight against the other party possibly hiding or transferring any assets during court proceedings.
If assets are not disclosed they cannot be considered for settlement. It is very important for all assets to be disclosed. If a party fails to disclose, there can be serious consequences as the parties would normally sign a statement of truth with the possible consequence of criminal proceedings for contempt of court. There is also the possibility that the court could award costs against the party that has failed to disclose, provide a greater share to the ‘honest’ party or if the other party has already transferred a property the court has the power to transfer this back.
It is very important that you contact us so we can provide you specific advice tailored to your circumstances.
The most common mistakes
The basic mistake made by many people is to intensively focus on determining which party is responsible for the breakdown of the marriage. A court does not take into account any marital betrayal or other mistakes of the other party during a division of property. The conduct arguments are rare and normally only in serious circumstances.
Instead, you should concentrate on the quickest and most effective resolution that will be beneficial for you. Where possible, a final hearing should be avoided in order to save substantial costs. The first thing you should do is to retain professional legal support – lawyers who have experience in divorces of HNWI. We are experienced in providing an excellent service with support from experts who can assist you to present your case in the strongest terms.
This is simply an introduction to the basic information you need when planning a division of assets. If you have substantial income and assets, and you are planning to divorce, we can help you avoid mistakes and possible financial losses. We will fight to protect your property, aiming at the best possible solution. HNWI divorces demand a particular approach. If you need the professional support of lawyers and you do not want to worry about your assets, contact us, on 0161 250 7771 or write to us on email@example.com.