Silk specialises in helping clients with multiple property and business interests, so we are often approached by business owners, investors or other high-net-worth individuals.
Typically, the desire is to move forward quickly and efficiently with discretion. As a result I am often asked to facilitate a “clean break” divorce, which might involve making an upfront settlement offer to the business owner’s ex-partner.
My approach to working with any client is to navigate divorce in a way that achieves their favoured outcomes where possible. And of course, I want to help everyone to achieve as simple and straightforward a divorce as they can, if that is what they want.
However, there are a number of challenges that often arise in this situation, which I will explore in this blog. I will also share some guidance on different approaches to achieving desired outcomes, as well as answers to some common questions which arise in these situations.
Challenges which arise when seeking a “clean break” divorce with complex assets:
- Business owners or people who manage multiple interests are usually very skilled at complex problem solving and finding simple solutions. So, a “simple” solution like a clean break divorce settlement without going through the time and expense of a financial disclosure exercise, where they have to provide full details of all of their various interests to the other party, may feel desirable. It may also be achievable, particularly if both parties are amicable about the split and both wish to move on with their lives.
- But things often do not play out as straightforwardly as they at first appear. For instance, once the financially weaker party speaks with their solicitor, things can change. The first challenge in these types of cases is in “reading the room” and predicting the approach that your client’s former partner and their legal representation will take in response to a settlement offer.
- Often, the other party’s advisors are likely to say they want to unravel and understand your client’s full financial position before accepting an offer.
- For example, I am working on a case at the moment which involves both commercial and personal property assets and various business interests – some owned jointly with business partners, some in their own right and some in joint names with the spouse they are divorcing. The other party’s legal team have responded to the settlement offer with a request for more information on the whole gamut of interests before they will even consider the proposed settlement. Ultimately, if my client wishes to achieve a settlement in these circumstances sufficient financial information is going to have to be provided to satisfy the spouse and their legal team that it is a fair one before this can be achieved.
- Also, even if the ex is prepared to agree a settlement “blind” without going through a full financial disclosure exercise, if my client wants a binding agreement (where no further claims can be made) then a Judge in the family court will need to sign off on it – and they will not do so without knowing at least a summary of the financial position!
- While you may know or believe that your situation is straightforward, particularly if your business is active and you are in the middle of buying and selling other businesses or property, your partner may think you are trying to hide something or failing to disclose the true value. Now of course, just because something is complex doesn’t mean it is suspicious. We are used to seeing clients with complex set ups with lots of moving parts, properties being bought and sold, money being reinvested, refinancing taking place etc. But where there is complexity, there can be an assumption that assets are either being hidden or simply not accurately taken into account during the calculations that have led to the settlement offer.
- At this point, we come up against another challenge – how to accurately value assets and interests that have multiple owners or are in a highly fluctuating marketplace.
- Silk Family Law works with an extended team of experts including forensic accountants, business property and land valuers, pensions and investments experts and even cryptocurrency advisory and investigation services. So, no matter how complex the assets, nor where they are held – in the UK, in cyberspace or internationally – we can organise valuations for our clients. But engaging experts in all of these areas and conducting investigations incurs additional costs in the process. So it is always best to prepare as much as possible in advance to minimise both costs and the duration of proceedings.
- Our clients also need to be carefully advised as in order to achieve the longed for “clean break” they (particularly if they are entrepreneurs at heart) might also want to or be willing to take on the more volatile and “risky” assets while their partner keeps the more solid, “copper-bottomed” assets in the settlement. This can be a huge risk, especially if there is no proper valuation exercise undertaken, as if the value of the “risky” asset drops through the floor later, it is not usually possible to unravel the settlement to provide for this.
- Where business or property interests are shared with third parties outside of the marriage, particular care has to be taken that their rights are not interfered with and are taken into account fully. This is to mitigate the risk of any satellite litigation or, potentially, the third party intervening in the divorce itself to protect themselves. Clearly, this can significantly complicate the process of achieving a settlement.
- A successful settlement requires a snapshot in time of the full financial position. Where a client has multiple business and property interests and is regularly buying and selling those interests, achieving an accurate snapshot in time (that everyone is happy with) can become an obstacle. You may never get to a point where everyone is ready to negotiate. That situation clearly has to be managed in the middle of a divorce, which might mean reviewing or changing business or investment plans until the divorce has gone through.
- Considering your business plans in such a way that a you can be ready to take your business forward again afterwards may be part of the process of achieving the best divorce outcome for everyone.
Case study: complex assets in a high net worth divorce
I am working on divorce and financial proceedings with a client at the moment who runs a financial services business alongside having interests in various other retail businesses. He owns a number of commercial properties as well as the family home. He has various business interests with his wife, is branching out into a new business sector with his new partner, and also has some investments held jointly with a third party. He is also considering selling some jointly owned property with his wife to utilise this for the settlement on his divorce.
Here are some of the questions which have arisen from this case:
Should I sell the jointly owned property I have with my wife and give her the funds for a new property?
It is always difficult to answer this kind of question in isolation. To advise a client I would need at least a summary of the overall value of the client’s assets. For instance, he could be providing too much for the new property which could leave both parties “short” to provide for other expenditure, e.g. for school or university fees for the children.
Should I buy property with my new partner before the divorce is complete?
You can if you have assets which you do not share with your wife to fund this. This could cause a blockage to settlement, however, in that you might have tied up assets in such a way that you don’t have enough liquidity to fund the overall divorce settlement, meaning a clean break cannot be achieved. Also, psychologically your wife may be less open to a settlement when she sees you settled with your new partner. In addition, if this in itself limits your own financial needs (because your partner is meeting all or some of them) then this exposes your income to a potentially greater claim by your wife.
If I buy a new property with new partner, is it at risk in the divorce?
Potentially, yes. Until a final settlement is approved by the court, any asset of yours or which you have provided the funds for could be taken into account and ultimately ordered by the court to be sold / transferred.
If you are currently looking into a high net worth divorce and have any concerns related to the topics covered in this blog post, you can contact me in confidence for guidance on your unique situation by emailing email@example.com or calling me on 07712 937747.
Image credits: Sam Pearce Warrilow (header) and Adeolu Eletu on Unsplash