Divorce is already a difficult situation with all of the emotional weight as well as if one or more parties is a HNWI. When you introduce children into this, it becomes extremely complex. When there is a disagreement between the two parties, it throws a spanner into both party’s plans. Jennifer Hargreaves, a solicitor at Stowe Family Law, sheds light on this important matter in this analysis for IFA Magazine.
Sophie Turner and Joe Jonas’ divorce dominated the news headlines in the autumn of 2023. For family lawyers, however, their case was all the more noteworthy as it highlighted some specific and complex legal issues, including multi-jurisdictional divorces and child abduction.
In recent weeks, Turner has reportedly filed paperwork requesting divorce proceedings to be ‘reactivated’.
Their ongoing case raises some interesting questions, particularly around divorce timescales and whether there are specific elements that High-Net-Worth individuals need to be wary of if they delay legal processes like a financial settlement.
Divorce Timescales
In England and Wales, there is no set time frame to divorce proceedings, out with the framework set by no-fault divorce. No fault divorce introduced a mandatory 20 week waiting period between the date of divorce application to when the couple can apply for a conditional order (where the court agrees that you can divorce). Often spouses use this time to reflect on their relationship and agree on any practical matters, including the financial settlement. Following this, a further 6 weeks needs to pass before the final order is granted and the divorce is finalised.
However, it is important for divorcing couples to remember that legally ending your marriage does not automatically bring financial obligations to an end. In some cases, claims can be brought many years in the future, so it is paramount for that any outstanding issues are addressed as part of the initial divorce process. A financial consent order made by the court officially brings an end to a couple’s financial commitment to one another, and unless there is ongoing spousal maintenance gives the parties a clean break.
Any delays to the process are not held against you and your divorce application does not ‘expire’.
That said, if more than a year has passed since the conditional order was pronounced, the couple would have to make a formal application to the court explaining the reasons for delay and request permission for the final order to be made.
Why delaying a financial settlement could be risky for HNWs
In saying this, separating couples need to be aware of the importance of a timely division of finances, property, and assets, and ensuring the arrangements are documented in a legally binding financial consent order.
There are some specific areas that separating high-net-worth couples should be aware of when going through a divorce, and where the risks of delaying a financial settlement may be.
Financial Disclosure
When considering a fair and all-encompassing financial settlement, full and frank financial disclosure is required from each party. This information would be exchanged between the separating couple and normally would only include the previous 12 months’ worth of bank statements.
If the couple are no longer living together, it would be hard to spot if one spouse is moving or disposing of assets, especially if they have had most of the control over finances in the relationship.
Delaying a financial settlement is only offering more time and space for the spouse to hide or move assets, which may not then appear on the 12-month archive of documents needed for financial disclosure.
No control over the spouse’s approach, attitude to money and how they manage matrimonial assets
Behaviour and management of matrimonial assets could have an impact on the overall financial settlement. When considering a fair financial settlement, the court would consider the parties’ capital and income resources together with the parties’ needs at the time of dealing with the financial settlement, rather than at the time of separation.
If one spouse is prone to engaging in risk-seeking behaviour, the consequences may impact the assets to be divided. Examples may include partaking in high-risk investments (stocks, shares, crypto), making unusual expensive purchases, engaging in illegal activity, ill-advised business transactions, making quick sales of assets, lavish holidays, failing to pay tax bill, gambling, luxurious weekends away and hotel stays and significant gifts to friends and family.
A change in health, needs or financial position.
The court must take into consideration ‘any physical or mental disability of either of the parties to the marriage’ when making the decision. Therefore, should either party develop a chronic disease, be diagnosed with a disability or terminal illness during separation, but before any financial settlement, this would impact the division of the matrimonial assets.
Another element of consideration is whether there have been changes to one party’s financial situation, for example if income changes or bonuses or commission are earned. As the court considers the income resources available to the parties at the time of the financial settlement, any changes post-separation may impact the settlement.
These resources may also be impacted by new, cohabiting relationships, as the resources of a new partner would be taken into consideration by the court, impacting the overall financial settlement.
Tax implications
The tax impact on separating couples should not be underestimated, as divided and shared assets could be liable to capital gains tax. There are reliefs available to transfers of assets which take place during the same tax year of separation. Therefore, it is critical for individuals, particularly high-net-worths, to seek professional financial advice.
Conclusion
In the case of Sophie Turner and Joe Jonas, it remains to be seen how their finances will be divided. Despite their reported ‘ironclad prenup’, which allows each party to keep all the income from their respective careers, other factors may be taken into consideration, particularly the births of their two daughters.
Although there are no strict time frames in England and Wales for divorce proceedings, it is important that separating couples are aware of the risks of delaying legal processes, specifically the financial settlement.
Clients should always be advised to seek legal guidance, as well as independent financial advice.
Jennifer Hargreaves is a Solicitor at Stowe Family Law.
