Courts will consider the pre-divorce standard of living when dividing assets, especially in high-net-worth cases where children are involved.
Divorce is often a life-changing event, as individuals - who once shared earnings, assets, and even children - navigate new lives independent of one another. In this respect, one may wonder whether it is indeed possible to maintain the same lifestyle after divorce, especially in high-net-worth cases, where the parties may have enjoyed a very high standard of living throughout the marriage and that will require significant assets to sustain.
Following a divorce, it is understandable that an individual will want to continue with a similar lifestyle, as before. This is important not only for material reasons, but for theirs - and, where such is the case, their child(ren)’s - wellbeing and stability.
In order to preserve as much stability as possible, the law previously stipulated that the court should strive to leave the parties “in the financial position in which they would have been if the marriage had not broken down”.
Though this explicit requirement was removed in 1984, the courts nonetheless have a broad discretion in making financial remedies orders upon divorce and, in exercising that discretion, the courts must consider a number of factors, including the:
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While, as above, the parties’ standard of living is a factor to be considered by the courts, it is otherwise important to stress that this does not mean that the same standard of living is guaranteed. For example, in cases where the assets are not sufficient to meet the parties’ needs going forward, it will be impossible to replicate the same standard of living on divorce.
However, where the parties’ needs are easily met by the assets available, the courts are generally guided by the principle of the ‘yardstick of equality’. This means that the court will share the resources between the parties, with the starting point of a 50/50 split, which can be adapted to ensure a fair outcome to both parties in consideration of the factors listed above, and irrespective of the roles they took within the marriage. In such cases, it is clear that the previous lifestyle of the parties forms an important consideration, with the court able to ensure that the status quo is preserved without prejudicing the needs of the parties or disregarding any of the other factors they ought to consider.
Where there are substantial financial resources, the concept of ‘needs’ can also entail a consideration of the previous standard of living. This may especially be the case if any children of the marriage have become accustomed to a certain lifestyle. For example, in a case such as this, it can be highly persuasive to argue that it is disproportionate and disruptive to expect a spouse looking after the children to relocate, possibly requiring the children to move schools.
Because of this, it is important for high net worth and ultra-high net worth individuals to have the best legal team to ensure that, where possible, they can maintain a standard of living closest to that which they enjoyed throughout the marriage. From producing accurate valuations of assets to countering excessive proposed needs and entitlements, Vardags can provide the valuable support and expertise which will ensure you get the financial settlement, and future, you deserve.
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