Divorce battles among the super-rich attract much press coverage, but of course these are also important cases for wealth managers and advisors to understand. This publication interviewed a raft of law firms about latest developments.

After the recent false alarm about a divorce between football/fashion power couple Victoria and David Beckham, the world of wealth management has been asking questions about the complexities involved in a divorce between ultra-high net worth individuals, especially when the couple in question have separately-owned businesses. London is dubbed "divorce capital of the world" as the starting point for the division of assets is 50/50 regardless of who earns the largest amount.

Planning for divorces for UHNW people also takes time, and some advisors think plans should be made before they get married through pre-nuptial agreements because of the wealth involved. According to the Daily Telegraph, one of the highest divorce settlements was between media mogul Rupert Murdoch and Anna Murdoch in 1999, which was around a reported $1.7 billion. 

As such great sums are at stake in a divorce between top earners, this publication spoke to several UK law firms about the complexities of wealth division, asset splitting, and pre-nuptial complications in settlement cases in the UK.

Theo Hoppen, senior solicitor at Stowe Family Law
“London is often regarded as the 'divorce capital of the world' for the extremely wealthy. Particularly popular with the financially weaker spouse, in English law both partners are often entitled to share the capital that is built up in a marriage equally. In the case of a high-net-worth divorce, the starting point of an equal share still applies. The complexity of these cases comes from the valuation and splitting of significant financial resources. Valuable assets can include property, investments, businesses, pensions which are often tied up in complex corporate and legal structures. Not to mention, children, custody and maintenance.
 
In recent years several high-net-worth divorce cases have ended up in the Supreme Court as assets have been hidden in the settlement. Assets and funds can be hidden in various ways, offshore banking facilities being particularly popular among high-net-worth divorcees.  Accepting what is said about asset verification can be a big mistake. In high-net-worth cases, if it is believed assets are being hidden, it is especially important to appointment a forensic accountancy team before any settlement is made.
 
The process for a high-net-worth divorce is the same with mediation and negotiation options available. Despite the headline-making high profile cases, most people want to keep their divorce out of court and the public domain unless they really have to – or they want their day in court. Splitting finances and assets within any marriage can be a very difficult time. For those going through a high-net-worth divorce, the layers of complexity magnify this difficult situation.”

Anita Shepherd, senior associate at Shoosmiths
“With many people marrying later in life or for the second or third time, there are likely to be more financial issues to consider before entering into a marriage. It therefore makes sense to discuss these openly and draw up a pre-nuptial agreement on the financial arrangements in the event of a divorce. To ensure the process is carried out as smoothly and fairly as possible, a collaborative and conciliatory approach is best. All parties should sit around the table to work through potential scenarios and come to an agreement on how assets would be divided should a separation occur. Circumstances can change and it is important to build in a review period every few years to ensure that life changes such as children or health issues are accounted for.”

Harriet Errington, senior associate in the family team at Boodle Hatfield
“Inevitably, 'celebrity' divorces attract a barrage of media attention. While such clients usually have support from their PR/reputation management advisors, if a divorce is mismanaged it can be nigh impossible to keep the more intimate details of a marriage private as they can potentially become public record in court hearings, hurting the brand equity of the parties involved. If the grounds for the divorce are not challenged in the courts it can remain private, avoiding open court and the potential damage to any brand equity. However, the divorce system in England and Wales usually requires some allocation of fault so this can be hard to achieve. The party filing for divorce must provide reasons for the breakdown of the marriage and these can range from such innocuous flaws as snoring to the potentially more distressing allegation of adultery. This system can often turn previously civil spouses into adversaries, lessening the likelihood of a harmonious settlement. 

If the basis for divorce is contested, this can lead to a hearing in open court and the public airing of dirty laundry. It is advisable to remind a client that the cited cause for divorce has no effect on the financial settlement. This can be particularly important if one spouse is more well-known than the other and would, subsequently, suffer disproportionately from negative media coverage. Indeed, diverging levels of fame provide a power dynamic that is more often than not in favour of the lesser known spouse. It is not uncommon to utilise concerns about privacy to achieve a more favourable settlement. The spouse with more to lose may then be forced to decide whether being more generous than absolutely necessary is a price worth paying for privacy. 

Brand equity is often a major element in the financial settlement and spouses, for their own sake, should not look to damage their former spouse's brand as this could have a detrimental effect on his or her earning capacity. There are many ways of achieving a 'quiet' divorce. One is the increasingly common pre-nuptial agreement which pre-defines the allocation of assets following a divorce and will also cover issues of confidentiality and the resolution of any remaining disputes privately, for example through arbitration. Other alternatives to court exist such as privately paid hearings and mediation. However, the most common route to privacy undoubtedly remains a swift deal by private negotiation.

In this increasingly globalised world it is not uncommon for wealthy and well-known persons to have ties, such as property, in multiple jurisdictions. This can lead to 'forum shopping'. For financially weaker spouses, London is often the preferred option due to its perceived generosity to wives, hence granting London the title of 'divorce capital of the world'. Remember within the European Union it is he/she who files for divorce first who determines where and under which legal system a divorce will take place (although it remains to be seen whether things may change following Brexit).”

Katie McCann, partner and family law expert at Irwin Mitchell Private Wealth
“The business of protecting wealth in a marriage has become increasingly more important as we see divorces with settlements involving truly staggering numbers as well as the more traditional view of the nuclear family giving way to increasingly modern values such as cohabitation, second and third marriages, and surrogacy among others. These days, where there is wealth to protect there is usually some sort of nuptial agreement in place. Pre-nups are self-explanatory, but we have certainly seen the rise of the post-nup, especially where there is family money by way of a legacy business or family trust arrangements and gifts are to be made for tax and estate planning purposes. If there was a pre- or post-nup, sometimes in high-net-worth divorces one party will want to try and wriggle away from it, resulting in contested proceedings.
 
Where there is significant wealth to go around and take care of everyone’s ‘needs’, arguments start to creep in about what was ‘matrimonial’ and hence in the pot and up for grabs, as well as what can be classed as ‘non matrimonial’ and potentially ring-fenced. This tends to cover things like family money that has been in one side’s family for years in the form of trust structures or business assets built up before or after the marriage for example.
 
Sometimes the argument of ‘special contribution’ can crop up. For instance, one party could argue that the wealth of the parties has been built up by just one person’s hard work.  Recent case law suggests that this is the preserve of the ultra-wealthy and is a very difficult argument to run. Indeed, wives for example are also arguing that having this concept in the law seeks to denigrate their contribution to the marriage as mother and home-maker. Sometimes there can be extreme issues of non-disclosure where one party, usually the financially stronger party, decides that they want to try and hide assets from the court. This can cause massive amounts of litigation, although the courts are getting much tougher on this presently by adopting stiffer forms of enforcement. Take for example the high-profile case of Akhmedov v Akhmedov case, where Mr Akhmedov had hidden his super-yacht in a corporate entity.

Solicitors have to grapple with many technical issues in cases where there is significant wealth. There are generally trust issues as well as tax and corporate advice needed for the business dealings. Also, there are usually international issues of property and grappling with international laws involved as assets are often overseas. We sometimes have to deal with international issues relating to the children; for example, someone who does business in Dubai may want to relocate there with the children, but one party wants to stay in the UK. Because of these many issues that straddle different disciplines we have to ensure that we build a significant team of advisors around the client such as tax lawyers, corporate advisors, wealth managers, and that advice is provided at the earliest onset to ensure as smooth a process as possible during what is an emotionally devastating time for some.”

Amrit Johal, consultant solicitor, specialises in sports and entertainment
"Concerning HNWI divorces, the starting point as like all divorces, is that the court seeks to provide "yardstick of equality" and that the parties should be entitled to 50:50 split of their assets. This arose as a leading divorce case known as White and White (2001). The court tried to prevent discrimination between bread winner and home maker. On division of assets, various factors are to be considered by the court, namely the (i) standard of the living of the parties before the breakdown, (ii) the age of the parties, (iii) and a very important factor being the welfare of any children who are minors to the marriage. Assets prior to marriage or inherited are generally not considered in the marriage pot.

Pre-nups are now enforceable in law, following a famous decision in Radmacher in 2010. A pre-nup, being essentially a formal written agreement between two partners prior to their marriage about assets (and distribution of), in event of a breakdown of marriage. It must be said however, that whilst pre-nups are now enforceable, the court still has the absolute discretion to waive any pre-nup if upon enforcement, the terms of any pre-nup would be unfair. In today’s society, a pre-nup would provide an emotive topic for couples however as like most contentious matters, the law and emotion are kept distinctly separate in a court of law. Legal certainty as the split of assets would be advantageous for couples before embarking upon any marriage and would spare huge legal fees. Couples who do not have a pre-nup would naturally not have the benefit of any pre-determined certainty and the court would consider the factors as listed above.

[With] Mutual business owners who decide to divorce, it is usually a starting point that the businesses or shares in a company be valued. Where practicality does allow, the business owners can continue to work with each other, however as often is the case, this does not prove practical. If one party wishes to exit the business, such an individual could seek maintenance going forwards upon leaving the business. On most occasions, there is a dispute between the valuation of businesses or shares, which often requires a forensic accountant to value such assets. This can become a very protracted dispute between the parties."