Navigating Divorce For High Net Worth Individuals

John Paulson made his fortune in property speculation in the run-up to the 2008 financial crash while married. It is widely thought that the Paulsons’ divorce may be the most expensive in history, even potentially eclipsing that of Bill and Melinda Gates, and like the Gateses, there is no pre-nuptial agreement in place. In this article, we will look at why nuptial agreements are essential for high net worth couples, why full and frank disclosure of financial assets is a must following divorce, and what can be done if one party hides assets during divorce proceedings.

A pre-nuptial agreement is now essential for high net worth couples

Prenups and postnups have gained in popularity in recent years, but when Bill Gates and John Paulson got married, their use was not particularly widespread. As the names suggest, prenups are legal agreements between two people who are about to get married or enter into a civil partnership agreeing who will own certain assets in the event of divorce, whereas postnups are entered into after the marriage or civil partnership. 

Some high net worth individuals may be reluctant to enter into a pre or postnup in the knowledge that the agreement is not legally binding in England and Wales. While this is true, they do make it easier to divide assets and avoid conflict after divorce or dissolution, and hence the courts will take their contents seriously. 

Nuptial agreements set out both how matrimonial and non-matrimonial assets should be dealt with. In the case of John and Jenny Paulson, whose wealth was amassed while married, the non-matrimonial assets will likely be of less significance, but for others who have amassed large asset values or received large inheritances and gifts prior to marriage or civil partnership, such an agreement can ensure these are protected.

The main aims of a nuptial agreement are to:

• Clarify that the financially weaker party will be secure in the event of divorce
• Provide certainty regarding how assets will be handled in the event of divorce (including assets in other jurisdictions)
• Provide protection of pre-marital assets from a potential claim
• Reduce the potential for costly and drawn-out financial proceedings following divorce or dissolution

For a nuptial agreement to be valid, it must be:

• Valid and formed correctly – i.e. a valid contract which is executed as a deed
• Timed correctly – it must not be made in the 28 days immediately before the wedding or civil partnership ceremony
• Based on full disclosure – as explained below, both parties must provide each other with the information needed to enter into a nuptial agreement.
• Based on sound legal advice - both parties must have received legal advice before entering into the nuptial agreement

The importance of full and frank disclosure in high net worth divorce or dissolution

As we wrote in a recent blog involving the high-net-worth divorce case of Tatiana Akhmedova (W) from Russian Billionaire Farkhad (H) Akhmedov, the High Court take a dim view of any deliberate attempt to conceal wealth when disclosing assets. W was originally awarded £453 million in 2016 after the divorce, but H subsequently went to great lengths to conceal his assets from his ex-wife with the help of his son. The High Court sided with W in this case, making it clear that they are not afraid to enforce an order in favour of the less financially well-off party to a divorce. 

In any divorce, regardless of the worth of the parties involved, if a financial agreement cannot be reached amicably, then the court can make this decision on their behalf by issuing a financial order.  In accordance with Section 25 of the Matrimonial Causes Act 1973, the first step in this is to complete Form E, which requires both parties to list all of their financial interests and assets. This must be a ‘full and frank’ disclosure. 

Where a party is suspected of being dishonest in this process, a lawyer can instruct a forensic accountant to uncover the true extent of any assets held and the attempts made to conceal them. This can then be used by the courts to enforce an existing order or create a new financial order, and very often, this is weighed against the party concealing the assets. In addition, any assets which are believed to be at risk of being disposed of can be legally frozen, preventing such actions from being taken.

Final words

If you are about to enter into divorce proceedings or in the midst of coming to a financial agreement with your ex-partner, it is essential to have expert legal representation to protect your interests and those of your children. This is especially important if you and your partner have a high-net-worth to ensure that a fair and amicable financial agreement is reached which meets the needs of all concerned.

For a free consultation regarding high net worth divorce proceedings, please call us on 0208 300 6666.