The rules regarding how the division of property is dealt on separation and divorce are the same for everyone, irrespective of the wealth of the parties involved. However, there are some legal issues which can more commonly affect our high net worth clients.
Crypto assets or cryptocurrency are digital representations of value, the ownership of which is cryptographically proven using a computer code. Cryptocurrency is the term used for all forms of electronic currency, including Bitcoin. It is thought that there are approximately 22,932 different cryptocurrencies as at March 2023.
They are treated in the same way as any other assets on relationship breakdown, meaning that they require to be valued as at the date of separation. However, for a few reasons, valuation can be tricky. Cryptocurrency units each have a value attributable to them but that value can fluctuate significantly over short periods of time. Further, the technology which underpins cryptocurrency makes full transparency difficult to establish, especially when the investor has not disclosed to their spouse that they have invested in cryptocurrency or which cryptocurrency they have invested in.
Capital gains tax
An important update is that from 6th April 2023, separating spouses and separating civil partners will be given up to three tax years (after the tax year during which they stop living together) in which to make a 'no gain, no loss' disposal for CGT purposes (although this time period would end earlier if the court pronounces the final order).
What this means, in reality, is that a spouse can transfer a house to their other spouse, post-separation, without incurring CGT. This will particularly benefit those parties involved in more complex and costly proceedings or negotiations, as it means that more time can be spent on considering the available options without worrying too much about the CGT implications.
Many high net worth clients have assets, including properties, overseas. Those assets, irrespective of their location, are matrimonial property if acquired during the period of marriage and before the date of separation unless they were acquired by way of third party gift or inheritance . The holding of funds in foreign bank accounts and pension investments overseas is also commonly encountered.
The primary considerations are the length of time it takes to obtain accurate information from overseas and then how to draft agreements or seek orders to best ensure their recognition and enforceability.
Private school fees
As an expensive financial commitment, payment of private school fees post-separation can sometimes be a source of anxiety and confusion. It is best to try and agree as to how they are to be paid through negotiation but if that is not possible the legislation (Family Law (Scotland) Act 1985) specifically grants power to the court to make an order for aliment in respect of "educational expenses".
Protection of assets and what we can do
Everybody, irrespective as to their level of wealth, can take steps in advance of a separation, to protect their assets by way of a cohabitation agreement, prenuptial agreement or postnuptial agreement. Such agreements essentially act as insurance policies, protecting an individual's assets from being subject to a future claim in the event of a relationship breakdown. The level of complexity of the document drafted and signed by both parties will depend upon the nature and extent of their assets.
The lawyers in our family law team are experienced in assisting high net worth clients through their separation and in the drafting of agreements to protect their assets.
Partners Shaun George, Lisa Girdwood and Sarah Lilley are listed in the Spear's Family Law Index 2023, which lists the best family lawyers for high-net worth individuals (HNW) in the UK.