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Insights // 14 May 2021

Does Significant Wealth make Divorce Settlements Easier?

Partner Claire Dyer, in our leading Family Law team asks whether significant wealth makes divorce settlements easier, as Bill and Melinda Gates announce their plans to divorce. 

The announcement that Bill and Melinda Gates are to divorce has reignited media interest in ‘big money’ divorce cases and whether having lots of money makes a settlement easier. Of course the Gates’s are US residents so their divorce will not be governed by English law. In the case of English divorces, the answer to this questions is, as is so often the case, ‘it depends’.

In theory, having lots of money ought to make a settlement easier. A divorce settlement can be tricky where there are not really enough assets and income to meet the parties’ needs and you are trying to ‘get a quart out of a pint pot’. Where there is more than enough to go round, both parties’ housing and income needs can be generously provided for, with plenty of surplus for frivolities or philanthropy, or both!

In 2000, the highest English court made it clear that after a long marriage during which the parties have been a partnership, albeit possibly having different roles – one earning and one looking after the children – the assets should generally be shared equally where there is enough to meet needs. In theory, therefore, it should be relatively simple to calculate the assets and divide by two, with both having more than enough.

In practice, however, those who have plenty of money are the ones who can afford to pay for their lawyers to come up with clever arguments about why the assets should not be divided equally. Lots of the cases which get reported are where the assets are £10 million+ and one of the parties thinks nothing of spending £250,000 or more on legal fees trying to get a greater than 50% share. Arguments which can be run are:

  • Where one party had significant assets at the start of the marriage which provided a springboard for what there is now, they might argue that this contribution should justify a departure from equality. This is particularly common if the assets are in the form of, or derived from, a company which one person started before the marriage.
  • Where a significant proportion of the assets was inherited by one of the parties, he or she might argue that this should be reflected in the division. This is more likely to succeed if the inherited assets have remained separate and distinct.
  • Where one party had the genius idea which lies behind the success of a business, they might argue that they should have more. This was successfully argued by Mr Cowan in 2001, when the court recognised his ‘stellar’ contribution (or creative genius) through his invention (the black bin bag) and Mrs Cowan was awarded less than 50% of the assets (taking into account other factors as well). Although this argument has become harder to run, it has not been extinguished.

Ultimately the court has to arrive at an outcome which is fair, not one which is necessarily equal. Where the assets are extensive, even a modest departure from equality might be significant.

One way to try and avoid arguments on divorce is to have a pre-marital contract which sets out what should happen to the assets in the event of a divorce. Although not binding, the courts will generally follow the terms of such a contract unless it leaves someone in financial difficulties. A pre-marital contract is not uncommon where one or both has considerable wealth at the time of the marriage. However, as is the case with the Gates’s, where the assets have been accumulated during the marriage, such a contract might not have been considered necessary or appropriate at the outset.

The conclusion is that having money does not necessarily mean that you will avoid an argument. Much depends on the parties’ view of what is fair compared to what the courts would consider is fair and whether the difference is worth arguing about.

For further information or legal advice, please contact law@blandy.co.uk or call 0118 951 6800.

This article is intended for the use of clients and other interested parties. The information contained in it is believed to be correct at the date of publication, but it is necessarily of a brief and general nature and should not be relied upon as a substitute for specific professional advice.

Claire Dyer

Claire Dyer

Partner, Family Law

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