How working with a financial expert could help your high net worth clients navigate divorce

Find out how a financial expert can help your high net worth clients navigate divorce and effectively manage the division of their extensive and complex assets

When Bill and Melinda Gates finalised their divorce in 2021, it went down in history as one of the most expensive settlements on record.

According to figures published by CNN (2 August 2021), Bill was worth an estimated $152 billion at the time. So, while exact figures have not been publicised, Melinda could potentially have walked away with $76 billion following their divorce.

High net worth (HNW) couples are likely to feel huge pressure on their shoulders when getting divorced. Not only are the stakes extremely high but also, the divorce process is typically much more complicated when dealing with extensive and complex assets.

While your divorcing clients’ bank balances may not rival the Gates’, it’s crucial that HNW individuals seek financial advice to protect their long-term financial security.

Read on to learn how I can help your HNW clients navigate the divorce process and ensure that all bases are covered, so they can continue to enjoy the lifestyle they’re accustomed to.

Reviewing and accurately valuing complex assets

Obtaining a clear picture of the assets your clients share with their ex-spouses or civil partners, and accurately assessing their value, is an essential first step towards achieving a fair financial settlement.

Your HNW clients may have complex assets to divide, such as:

• Global investments of significant value
• Assets held in trust for tax efficiency or inheritance purposes
• Highly valuable pension pots (more on this later)
• Entire businesses or shares in businesses
• Properties located outside the UK.

Unfortunately, valuing assets such as businesses and private company shares is usually not straightforward and may require expert input.

What’s more, there’s always the possibility of an ex-spouse or civil partner fraudulently “concealing assets”, such as company assets, to prevent your client from receiving their fair share.

I can help your HNW clients by engaging relevant experts to thoroughly assess and value all assets including properties, businesses, pensions, personal belongings, and any other shared assets.

Gaining clarity on the value of assets accumulated during the marriage could reduce uncertainty and help your client achieve a settlement they feel happy with.

Equitably dividing substantial pension pots

Any pension assets accumulated during a marriage or civil partnership are generally considered marital property. So, your divorcing clients need to consider how to divide these as part of their financial settlement – but sadly, most divorcing couples ignore pensions altogether.

Pension sharing may be especially important for HNW individuals who are likely to have accumulated substantial wealth within their pension pots.

There are three main pension sharing options in the UK:

• Earmarking
• Pension Sharing Order (PSO)
• Offsetting.

Each route offers unique benefits and limitations – unfortunately, there is no one-size-fits-all approach.

Indeed, when high-value pensions are at stake, even small differences in how pensions are divided during divorce could have significant implications for your clients’ long-term financial outlook.

As a divorce expert with a partner company in regulated financial planning, I can use cashflow modelling to project future income and financial needs. I can also refer your clients to an appropriate expert who can provide a Pension Sharing Report. This document will clearly explain their options and help them understand the value of any entitlements.

Together, these insights could help your clients make an informed decision about how to divide their pension assets in a way that serves both parties’ best interests.

Ensuring that assets are transferred tax-efficiently

For your HNW clients, dividing assets during their divorce could have significant tax implications.

For example, your clients may be liable for Capital Gains Tax (CGT) on assets they dispose of, or they could incur Stamp Duty Land Tax (SDLT) when transferring property to their ex-spouse or civil partner. In addition, assets held in trust may be subject to different tax regulations and require further expert guidance.

It’s also worth considering the Inheritance Tax (IHT) implications of divorce (more on this later).

A financial expert can help your HNW clients understand and plan for such liabilities by making the most of tax allowances and exemptions available to them. This could allow them to preserve as much of their wealth as possible for their life after divorce, and to pass on to future generations.

Preserving family wealth for dependants

Preserving wealth for dependants may be a key concern for your divorcing HNW clients. Especially if they joined the marriage or civil partnership with substantial independent wealth, or if they have children from a previous relationship.

As a divorce specialist, I can work with you and your clients to preserve their wealth for the future benefit of any intended beneficiaries.

This might include placing assets in trust to ensure that your clients’ wealth can be passed down to their children or grandchildren tax-efficiently and according to their wishes. Or, using offshore trusts and IHT planning to maintain their wealth as tax-efficiently as possible.

However your HNW clients choose to structure their settlement, working with a financial expert throughout the divorce process could help them protect their wealth and meet both their immediate and long-term financial needs.

Get in touch

If your HNW clients could benefit from working with a qualified divorce expert, they can find me at lottie@truefinancialdesign.co.uk or call 07824 554288.

I am also happy to discuss cases with solicitors first, before you refer your clients to me, or you can contact me by email and CC your client accordingly. I am happy to accommodate whatever mode of communication works best for you and your clients.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority does not regulate Inheritance Tax Planning, estate planning, cashflow planning, tax planning, or trusts.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance. 

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.  

Workplace pensions are regulated by The Pension Regulator.