Recent news of celebrity engagements – including that of Taylor Swift’s engagement to Travis Kelce – shines a spotlight on the intertwining of finances and assets when a couple gets married.
A billionaire, Taylor Swift is one of the wealthiest people in the world but what do advisers need to consider when UHNW clients are tying the knot? When royalties, business ventures, multiple estates, trusts etc. are involved, how are these affected when getting married and what measures can be put in place to protect them?
In this exclusive analysis for IFA Magazine, Zanariah Webster, Senior Associate at Stowe Family Law, explains why prenups are becoming increasingly popular, especially amongst HNWs, despite not being legally binding. But to what extent do they hold up in court in the event of divorce, especially if one party has the financial means and incentive to contest it?
Celebrity engagements are always a cause for excitement, but speculation and scrutiny can quickly become the central message. Cristiano Ronaldo’s engagement to long-term girlfriend Georgina Rodriguez hit the headlines mainly due to the size of her ring, reported to have a value of up to $5m. Taylor Swift’s engagement to her American footballer boyfriend Travis Kelce followed soon after.
Whilst both events have caused a stir, family law professionals and financial advisers should be prepared for Ultra and High-Net-Worth (UHNW, HNW) clients’ questions about what happens to luxury goods in the event of a breakup and divorce.
What happens to luxury goods on divorce?
Celebrity and HNW marriages include significant portfolios, usually from both parties’ pre-existing asset bases. In the event of a divorce, these assets can be the battleground for disputes.
Engagement rings
Much of the focus around the recent celebrity engagements has been the expense of the rings received by each woman. Should a couple separate before the wedding has taken place, the question of what happens to the ring is often raised. Under UK law, an engagement ring is an ‘absolute gift’. The intention of the giver is that the recipient would keep it. In the event of a separation, the ring is the property of the recipient unless the giver expressed or implied that in a breakup, it should be returned.
In cases where the couple has married, and later divorces, the ring’s value is considered as part of the matrimonial finances and potentially available for division. If a couple have alternative intentions, for example that in the event of a divorce the ring should be sold and its value returned to the benefactor, this should be documented.
Business assets
Businesses can be a contentious issue in divorce. They can easily become complex, especially if both parties have an interest, for example they set up the business together or own shares. Generally, a market value of the business is carried out “between a willing buyer and a willing seller.” The valuation depends on factors such as the business, structure, employment (e.g. if a spouse is employed by the company), business assets and a trading pattern. In some cases, there is scope to argue for a portion of future earnings, however, this is very much dependent on the business structure and value of the business. An independent expert will need to be jointly instructed, and the parties’ financial circumstances would need to be explored further to ascertain the fairness and practicality of seeking a share of the business’s future income.
In most cases, the outcome is usually a transfer of shares from one party to the other. It is rare, although not impossible, for a court to order that the business be sold, although couples can choose to do this to create a clean break.
Property
Taylor Swift reportedly owns eight properties across four states in the US. Her fiancé Kelce has a portfolio of three of his own. If the couple divorces, these properties will need to be considered in the financial negotiations.
Under UK law, property division in divorce depends on whether it is matrimonial or non-matrimonial. If the couple has used the property as a family home, it is likely that it will be considered matrimonial, regardless of whether it is held in sole or joint names. Where property has remained a sole asset, it may not be included, particularly in a HNW divorce where the individual needs (e.g. reasonable outgoings, post-divorce housing etc) of each party can easily be met by the contents of the matrimonial pot.
Matrimonial vs non matrimonial assets in Standish v Standish
How an asset has entered the marriage, and been treated during its length, is central to whether it is subject to division. If the parties worked together and treated an asset as shared, even if it is in one party’s sole name, there may well be an argument to suggest it should be considered joint. Joint matrimonial assets will be considered for potential division.
In the recent judgment of Standish v Standish, the Court of Appeal set out 5 core principles in claims involving non-matrimonial assets, reaffirming that:
- matrimonial assets are the result of joint efforts during a marriage
- Non-matrimonial property cannot be shared
- Equal sharing applies to matrimonial property as a starting point
- There must be a clear “matrimonialisation” of assets
- Transferring assets to a spouse’s sole name to minimise tax does not demonstrate an intention to share the matrimonial property.
Advising HNW Clients ahead of marriage
The best way to ensure protection for pre-existing asset portfolios is a nuptial agreement.
HNW clients should be advised that in England and Wales, nuptial agreements are not currently legally binding. However, if each party receives expert financial and legal advice and the document is drafted by a lawyer, they will likely be upheld by a court.
Wealth management professionals may well see an uptick in nuptial agreement appointments, influenced by recent celebrity engagements.
Zanariah Webster is a Senior Associate at Stowe Family Law
