Protecting Your Wealth: How can high net worth individuals safeguard assets during a divorce?

On divorce, couples have financial claims against one another for property, lump sums, maintenance, and pensions. The greater the wealth, the larger those potential claims will be.

There are several ways to potentially safeguard assets in a high net worth divorce, but it is important to bear in mind that the court has broad discretion. It is generally for the party who is seeking to exclude their wealth from division to convince the court that it is fair and appropriate in all of the circumstances of the case to do so.

Arguments you may be able to raise before the court to safeguard your assets include:

1. That the wealth is not matrimonial in nature. This may be because the wealth predated the marriage, arose after your separation, or came from a source external to the marriage, such as an inheritance. The strength in such arguments rests heavily on the length of the marriage, whether that non-matrimonial wealth has been “intermingled” with family money, and also the ability to meet needs without sharing that non-matrimonial wealth.

2. That you made an “exceptional” or “stellar” contribution to the marriage, which would be unfair or inequitable for the court to ignore, it is rare for arguments of this nature to succeed.

3. That the conduct of your partner is such that it would be inequitable of the court to disregard it, conduct is extremely difficult to argue successfully. Conduct which has been upheld in the past has included one party stabbing or shooting the other, excessive gambling, and placing assets beyond the reach of the court.

4. That the marriage is so short that it would be unfair to share the matrimonial acquest     (namely the wealth generated during the marriage) equally. It is far harder to convince the court that assets generated during the marriage should not be shared equally than it is to argue 1. above successfully.

Because of the wide discretion of the divorce court, the outcome of litigation of this nature is uncertain, not to mention costly, stressful, and fraught with delay. Much better ways to safeguard assets on divorce are listed in order of preference/resilience below. As can be seen, time is of the essence. The earlier an agreement can be reached as to how wealth will be safeguarded, the better the prospects are of successfully protecting that wealth. -

1. Don’t get married. Whilst this is depressing advice to give, it is the only guaranteed way of avoiding the pitfalls of divorce. Instead, you could cohabit and enter into a cohabitation agreement and, if appropriate, declarations of trust in relation to any properties you may own, or

2. Enter into a pre-nuptial agreement not less than 28 days before your wedding, which protects your non-matrimonial wealth and clearly sets out what will happen to the wealth generated during and after the marriage. You will need to discuss the terms of that agreement many months before the date for the wedding and, ideally, before or around the time of the proposal so that it is an open topic of conversation right from the very beginning, or

3. If you don’t have long before the wedding, or if you are already married, enter into a post-nuptial agreement (and possibly also a pre-nuptial agreement at short notice), the terms of which can be agreed whilst you and your partner are on good terms and are in agreement as to what should happen if you separate, or

4. If your marriage has already faltered, try to remain on good terms and explore reaching an agreement amicably and without court involvement. There are many options, including direct discussion with your partner, mediation, a collaborative divorce, negotiation between solicitors or various ADR (alternative dispute resolution) such as a private FDR (financial dispute resolution).

In summary, if you are a high net worth individual and you already have or anticipate amassing wealth, it is critical to consider and seek to agree at the earliest possible stage on how to protect that wealth should your relationship break down in the future.  Consulting a specialist family solicitor at an early stage will help you to ensure that you take the right steps at the right times.

For more information about how we can help, our family solicitors all offer a free initial 15 minute telephone appointment to discuss your needs. I can be contacted on 01206 217384 or via email at [email protected]