The popular maxim that London constitutes the “divorce capital” of the world is no over-exaggeration. From divorce through to corporate transactions, the English system has always attracted litigators for its straightforward, clear, and intellectually applied rules and principles.
When it comes to divorce, this translates as a fair and non-prejudicial ‘sharing’ regime, whereby the courts take the view that assets built up during the marriage are divided equally, irrespective of the contributor of those assets.
For the financially weaker party, this system can be incredibly beneficial, enabling future financial security as well as effectively providing compensation for sacrificing a career or the ability to earn a higher income to look after the house and/or children.
However, for the financially stronger party, this may raise concerns. Even where assets have been built or acquired prior to the marriage, they are not necessarily precluded from falling into the “marital pot” to be shared out.
The courts in England and Wales will consider the needs of each spouse, which is determined by various lifestyle factors. Depending on the lifestyle that a person has enjoyed previously in their relationship, this can even include items such as travel via private jet and domestic staff.
Therefore, even in relatively short marriages where there has not been sufficient time to accumulate marital wealth, a financially weaker party could expect to come out with enormous sums.
Protecting your assets
While no one marries in anticipation of divorce, it is a fact of life that one in every three or four marriages now ends in divorce. Although an unpleasant thought, it is necessary for couples to consider what would happen if the marriage were to breakdown. This is especially the case when there could be millions or even billions of assets on the line. Ensuring that your assets are correctly protected is possible so long as you follow the correct approach.
What you should be doing
Get a pre- or post-nuptial agreement
Any form of nuptial agreement may be regarded as completely unromantic (and for couples in the honeymoon period of their relationship feel completely unnecessary). Pre-nuptial agreements are legally recognised contracts, entered into by both parties prior to the marriage, with the purpose of outlining what will happen should the couple divorce. This will include how assets will be divided following separation and which will be included as part of the marital wealth. As of 2010, these contracts now carry significant weight in determining how the couple’s finances will be divided so long as the court is satisfied that they are fair and were entered into freely by both parties having taken independent legal advice.
Pre- and post-nuptial agreements are an effective method of protecting business(es) and family inheritance, without which, the decision on what happens to these assets falls into the hands of the courts. There is no distinct formula for discerning how a judge will decide the division of a couple’s finances, and so without a contract in place, you cannot be certain about the outcome of your financial settlement. With uncertainty, comes a lack of protection.
If you are already married without a pre-nuptial agreement in place, the alternative is a post-nuptial agreement, which follow similar rules and offer the same protection for your assets as one done before the onset of marriage.
These agreements do not need to be seen in a negative way. Mutually deciding, from the outset, the outcome of your divorce means that you are telling your spouse that you value your relationship enough that you want to prevent animosity even if the worst should happen.
Where there is not a valid nuptial agreement in place, it is still possible with expert legal advice to protect your assets. Obtaining high quality specialist advice in relation to all aspects of your divorce including the division of assets and the possible options available to you, can be make the difference of thousands, or even millions, of pounds.
Where the situation is acrimonious it is best to leave the discussions and negotiations to your lawyer who can argue on your behalf without causing further damage to the situation.
What you must avoid
Hiding your assets
When things do get ugly – and sometimes they do – about it can be tempting to protect your assets by hiding them from your spouse. However, it cannot be stressed strongly enough that hiding assets, for example in complex structures, and choosing not to disclose them will have very serious repercussions. The consequences this carries can be severe and result in a worse situation than you would have been had you exercised complete transparency. This includes having your settlement set aside or ‘adverse inferences’ being made about the true value of your assets (where valued higher, the other party could end up entitled to more). You can even end up with a criminal sanction.
Using any children as a bargaining tool
The care and upbringing of any children is something that also needs to be determined during divorce proceedings. However, it is ill-advised to use the children as any sort of weapon or tool. There will be some overlap since the courts will consider what the children (and the parent that is the main caregiver) will need financially. But avoid doing anything that could be seen as using the children to create an unfair advantage.
Your next steps
Marriage can be an extremely complicated contractual relationship, that obviously has lifelong ramifications. One can be forgiven, though, for not mulling over its financial implications when sending out wedding invites or booking a honeymoon. However, with careful planning and the right legal advice, it is possible to ensure the best outcome in your particular circumstances.
Vardags has built an enviable reputation as the home of life-changing, law-making divorce and family litigation for high net worth and ultra-high net worth clients. For a free consultation to qualifying individuals please go to vardags.com or call our confidential enquiry line on 020 7458 4345. Lines are staffed 24 hours.