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Home Lifestyle DIY Divorce

DIY Divorce

by uma

 By Joanna Newton, Partner, Stowe Family Law

Last year saw a number of High-Net-Worth divorces with some very high-profile cases. The international nature of many HNW families can make divorce proceedings more complex than for less wealthy couples. 

Svetlana Nicolaisen and Bjorn Nicolaisen’s divorce was a complicated matter. In filing for the divorce against her husband, who founds and owns a large Norwegian cleaning produce company, Svetlana claimed that she had been habitually resident in London for the 12 months prior to her claim. This meant that she believed she was legally entitled to pursue the divorce under English law. 

However, difficulties arose when the family court decided that Svetlana had not moved from Vienna to London in any meaningful sense, owing to her being the primary carer of her and Bjorn’s son, who remained in Vienna. 

Nicolaisen v Nicolaisen is just one of many high profile divorce cases the UK – and international – family courts witnessed throughout 2022. 

Julia and James Goddard-Watts returned to court last year as Julia tried to overturn the settlement with her ex-husband, the Screwfix founder. The original settlement, Mrs Goddard-Watts has said, left Mr Goddard-Watts with 90% of the couple’s wealth. The Court of Appeal are assessing the case after a ruling at the High Court in January 2023 that Mrs Goddard-Watts should receive an addition £1.1million, taking her share to £7.4m whilst Mr Goddard-Watts walks away with £75m.

Over the past few years, divorce rates have soared and recent statistics highlight that divorce applications in the UK have reached a ten-year high, rising by 11% to 119,709 in 2022. This is the most divorce applications since 2012, and followed a very quiet year for divorces in 2021, where they sat at the lowest point for 20 years. 

High-Net Worth divorces are taking on considerable prominence as the UK sees a huge increase in divorce rates. 

Family lawyers are attributing this to the economic crisis, but also to the implementation of no-fault divorce. 6th April 2023 marks one year since no-fault was introduced into law, removing the need to apportion blame in divorce proceedings. 

Many couples put off their divorce until no-fault divorce came into force last year, with more than three-quarters (78%) of couples acknowledging they were putting off divorce until the change in law, according to Stowe Family Law’s survey of 2000 people in 2022.  

In the month that followed, divorce applications skyrocketed. 33,566 applications were submitted between April and June 2022, primarily under the new no-fault guidelines or made by sole applicants. This was 22% higher than the same period the previous year.

However, as the year progressed, although divorce enquiries continued to reach record levels, there was a notable increase in what are colloquially known as ‘DIY Divorces’ and ‘kitchen table settlements’. 

These alternative routes to divorce have increased in popularity since the implementation of no-fault divorce as couples try to navigate the proceedings themselves – without seeking legal or financial advice. The context in which divorce happens has changed dramatically over the past year and as a result couples are turning to new methods to make their breakup official.   

Stowe Family Law’s survey into no-fault divorce revealed that 70% of couples who are looking to start divorce proceedings would consider a DIY divorce and receive no legal or financial advice.

For high-net-worth couples, however, attempting to negotiate the divorce without professional advice could pose a significant risk. Eliminating legal and financial advice from proceedings could mean that money and assets are not properly apportioned or considered.

For wealthier couples, this could be problematic, with one spouse taking far more than the other. One element that is often forgotten in the stress of divorce is the division of pensions. Whilst immediate assets, like houses, boats, artwork or jewellery might seem far more pressing, a pension must be properly considered and appropriate advice should be sought. 

Pensions are often far more valuable than they appear to be on paper, with long-term benefits, potential financial uplifts or bonuses providing additional money. 

Not seeking professional advice in this area could lead to ill-informed decisions, particularly in the stress of divorce proceedings. A DIY divorce may seem a swifter, cheaper option, but the reality is more complicated. For high-net-worth couples, the risk is all the more substantial.

Starting divorce proceedings as a wealthier couple can be a minefield of complications. As mentioned, it is common for high-net-worth couples to be resident in several countries, or certainly own property or businesses across countries or continents. This can make the legal processes problematic as the jurisdiction under which the divorce can happen needs to be decided. 

As seen with Nicolaisen v Nicolaisen, this can be quite a contentious issue and will need a court to decide.

Not only this, but division of assets between ex-spouses can pose obstacles. 

If money is tied up in a shared business, like, for example Bill and Melinda Gates, valuations must be obtained and also the potential tax consequences of any settlement need to be considered carefully. Obtaining this advice can often take some time and can be very expensive and it may be that on party is not as involved in the business and this can add another layer of complexity and/or stress. 

 Companies themselves can be very difficult to value.  If a company was started by a couple during their marriage, the parties may simply get a current valuation of the company at the time they divorce and use this as the figure for division.  

Things become more complicated if the company pre-dates the marriage or there has been a change in the company post-separation. The parties can try to get a retrospective valuation of the company to show what its value was as at the point of marriage, and a further current valuation. This way the parties can evaluate what the growth value is over the marriage. This marital growth value may then be shared by the parties. Further issues can arise if the value of a company at the time of divorce is likely to increase significantly in the short term, for example due to a potential IPO or if there is a sale on the horizon. 

What happens to a company on divorce is even more complicated if the company assets are spread around the world, and/or held in complex off shore structures. Issues with different laws and the power of the English courts abroad are also thrown into the mix.

The scope and intricacies of high-net-worth divorces mean that the DIY route is, for the most part, inappropriate. The role of large assets, finances, companies and pensions is something that should not be taken lightly. 

Caution should be taken for any couple wishing to start divorce proceedings and considering taking this route. However, for high-net-worth couples, seeking professional financial and legal advice is essential in ensuring a proper and satisfactory conclusion to the split.