As global mobility reshapes the lives – and balance sheets – of wealthy clients, divorce is no longer a purely domestic affair. In this exclusive article for IFA Magazine, Shivi Rajput, Partner at Stowe Family Law, explores how jurisdictional complexity, cross-border assets and shifting legal frameworks are raising the stakes for financial advisers. And why early, internationally-minded planning is becoming essential to protect client outcomes.
Divorce and separation have far-reaching consequences, practical, legal, financial and of course, personal. For Ultra and High-Net-Worth clients, financial planning can be thrown off course by the impact of divorce, potentially derailing pensions, planned inheritance, business assets and more. For those wealthy clients who are internationally mobile, and this number is ever-increasing with the ease of financial movement across borders, the complications can be more significant.
The impact of globalisation on family law
Family law is inherently domestic in nature. Systems and legal frameworks that govern the principles of divorce and separation, and all the matters intwined within these such as financial negotiations and private children law, are unique to the individual jurisdiction. This can cause obstacles in a world where people and money move more fluidly than ever before. The outcome of a divorce application is nowadays more dependent on where the case is heard, rather than the contents of the case itself.
This has, for HNW clients, often resulted in a ‘jurisdiction race’ to serve a divorce application in the country that will best serve the individual. Parties now have more choice over where their divorce is heard, providing they meet the country’s criteria. The rise in divorce tourism has been notable and family law systems are trying to move with the pace of society. For example, the UAE has in recent years modernised its family law structures to become more accessible and favourable for modern, mobile and wealthy clients.
Nevertheless, for many British nationals abroad and foreign parties, London retains a strong attraction. Family law in England and Wales is also considerably more favourable than other countries as homemakers’ contributions to the household are considered on an equal footing with breadwinners’. The requirement of ‘full and frank’ financial disclosure supports couples where there is a wealth disparity to understand exactly what is contained in the matrimonial pot. We do, however, also have a controlled legal concept of the ‘millionaire’s defence’, which allows exceptionally wealthy individuals to limit financial disclosure in court proceedings by asserting their ability to meet any reasonable financial orders without providing detailed financial information. This can be highly attractive to UHNWs who value privacy.
Where there is starting to be a glitch, however, is the lack of cross-border flexibility in family law, where parties have assets and lives in multiple jurisdictions. It is difficult for the structures to remain quite so rigidly domestic for divorcing couples, especially for the purposes of international financial planning. This has led to a number of family law firms expanding globally or partnering with firms across the world to better serve clients who move between nations.
The impact of globalisation on financial planning
Family law and financial planning go hand-in-hand when it comes to supporting clients with cross border financial disputes upon family breakdown. Divorce and separation can often cause issues for financial planning, changing plans for inheritance, pensions and property. It is common for HNW families to hold assets across a number of different countries, including those where they don’t live or intend to live.
Nuptial agreements, including prenuptial and postnuptial agreements, are hugely popular among the wealthy to ensure protection for individual portfolios, tax efficiency and plans for succession. However, it is important to note that these might not always be immune to borders. An agreement properly drafted and executed in one country may not automatically be upheld in another upon divorce.
This also applies to court orders made as a result of divorce. Most divorces will include some kind of financial arrangement, especially for HNW clients. However, these orders may not be automatically enforceable in another jurisdiction, particularly if assets are held in complex structures.
As such, financial advisers need to:
- Advise clients early
- Work closely with family lawyers
- Keep up to date with changing dynamics in global finances and family structures.
Early, robust advice for clients, ideally ahead of any significant changes such as relocation or expansion of a financial portfolio to another country, and of course, marriage, is vital. This includes being realistic about how enforceable documents like nuptial agreements will be in different jurisdictions in the event of a marital breakdown down the line. In order to provide the most comprehensive advice, therefore, financial advisers should be working in tandem with family lawyers (ideally those with specialist experience in cross-border disputes).
Conclusion
It is more common than ever before for HNW clients to want to build an efficient and effective financial portfolio across multiple countries. This is an opportunity for professionals to work closely with clients throughout their financial journeys. Within this, early advice is absolutely critical, especially when it comes to marriage and potential family breakdown. Divorce and separation are not the most romantic discussions to have, but in the interests of financial planning, understanding multiple jurisdictions and how best to advise clients is essential.
Shivi Rajput is a Partner at Stowe Family Law
