Divorce as a financial reset

In cases where parties’ wealth is substantial, business structures are complex and assets are spread over several jurisdictions, there may be a shared desire to divorce quietly, whilst seeking a fair and workable financial settlement.

In Scotland, financial provision on divorce is governed by the Family Law (Scotland) Act 1985. Whilst the legislation provides structure and some element of predictability, financial provision cases are fact specific and require careful strategic planning to ensure fair outcomes.

When approached thoughtfully, divorce can operate as a financial reset, a point at which the parties’ finances are reassessed to support them as they move forward separately.

Date of separation

In Scotland, the date of separation is a factual issue with potentially significant financial consequences. Assets (and any liabilities) held in the parties’ sole names are valued as at the date of separation (the “relevant date”). Whilst spouses may remain married despite a lengthy period of unhappiness, a court would tend to look at a wide range of factors in considering the point at which the parties had actually ceased to live together as spouses. Evidence from third parties can be important in establishing when separation in fact occurred.

Assets can fluctuate in value, and therefore even a small variation in market conditions can make a big difference to the overall matrimonial “pot”. Where the date of separation is disputed, early advice is essential, as an incorrect or poorly evidenced position may carry serious financial consequences.

Valuation, settlement and practical implementation

Whilst valuations underpin any claim for financial provision on divorce, it is often necessary to look beyond the headline figures. Consideration may be given to a non exhaustive list of “special circumstances”. Parties may also be able to argue that they have sustained an economic disadvantage, or that their spouse has sustained an economic advantage, during the marriage.

Care is also required where non‑matrimonial wealth has been converted into matrimonial property; for example, through changes in business structures or the acquisition of new assets funded by pre‑marital wealth. In such cases, the valuation of the asset as a whole may require careful scrutiny.

Equally important, is how any settlement will operate in practice. Agreements that appear fair on paper may prove unworkable in practice if, for example, parties remain jointly tied to family businesses or heritable property. Tax exposure, timing and control of assets are critical considerations in this context.

Cash-flow, liquidity and expert input

To ascertain what settlement should look like in these cases, the instruction of experts may be necessary. Forensic accountants, independent financial advisors, actuaries, surveyors, employment experts and other professionals are sometimes required to provide input. Their involvement can be invaluable.

Business interests, corporate structures and tax planning

Where business interests form part of the matrimonial property to be assessed upon separation, divorce may prompt a reassessment of corporate structures. Settlements therefore need to account for the commercial realities of the parties’ business interests and the fact that, they may continue to be going concerns post-divorce.

Reviewing estate and succession planning

Separation and divorce may warrant a wider review of the individual’s own estate planning. Wills, trusts and insurance policies should be revisited to ensure they accurately reflect the individual’s post-divorce intentions.

In high net worth and ultra-high net worth cases, divorce is not just about separation, physically and financially: it is a transition that reshapes an individual’s priorities and financial position. With careful planning, divorce can act as a financial reset, providing a springboard to the next stage of a person’s journey.