This news service talks to Northern Trust about the kind of complexities arising when business owners and their spouses break up, and the sort of structures and methods that can be used to make the process less painful and disruptive than it needs to be.
The COVID-19 pandemic has wrought many changes and one has been a sharp rise in divorce legal proceedings once courts cases resumed in the summer. And for high net worth and ultra-HNW couples with business interests, the stresses of lockdowns and economic disruption add to the challenges.
It may take time for full data to emerge about how the virus has put relationships under pressure – maybe proving the “final straw” for people already in difficulty. But what is clear is that handling complex cases is going to be a particularly busy area of work for private client lawyers.
Where business owners and their spouses are concerned, a number of tools and structures exist to dampen down some of the sharpest arguments about money and offer a way to resolve certain disputes, Steph Wagner, director of Northern Trust Wealth Management’s women and wealth advisory practice, told this publication.
In many relationships there will be a “financial spouse and a non-financial spouse”, she said. “Often that is where they will need a bit of an advocate and advice to level the playing field a little.”
With law courts closed and cases delayed, or handled via video, etc, it means that valuation disputes - accentuated by COVID-19 - become more of an issue, Wagner said. “It is taking a lot longer for courts involved in an asset issue and parties are having to work more together.”
COVID-19 has certainly pushed divorce filings higher. The number of people looking for divorces was 34 per cent higher from March through June compared with 2019, figures from Legal Templates, a company that provides legal documents, has found.
While it is not a palatable subject, divorce cases among HNW and UHNW individuals are a major wealth management concern. After all, there’s little point laboring to build wealth only to see it dissipate because of poor planning. Or worse, to damage the interests of third parties. For that reason, ways of resolving issues in break-ups are important private client tools.
Untangling the business and non-business assets of divorcing couples is complex, not least because if a business gets broken up, not only does it affect the couple but employees, suppliers and other interested parties are involved.
Although it may seem a dry way of putting it, Wagner said that divorce is essentially a business transaction (buyout) and when an illiquid asset (namely, the business interest) is part of the marital estate there can be varying opinions on what the value of that asset is.