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  1. Wealth
October 10, 2012

On Which Side of the Pond Should You Seek Your Divorce?

By Spear's

I Wanna Break Up in the City that Never Sleeps Which side of the Atlantic you divorce on can make a big difference. Our legal team give an opinion

I Wanna Break Up in the City that Never Sleeps
Which side of the Atlantic you divorce on can make a big difference. Our legal team give an opinion
and transient nature of high-net-worth families and corporate executives has created a tremendous growth in the number of multi-jurisdictional issues that arise on death and divorce. London and New York often provide dual home bases to such individuals and families. It is no wonder that lawyers in London and New York have experienced a dramatic rise in the number of clients seeking advice regarding which countries’ laws apply to them with respect to taxes, death and divorce.
Differences in the laws of these and other jurisdictions, combined with the enormous wealth creation of the past several decades, present the potential for substantially different outcomes for individuals and their estates depending on where such issues are determined.

The courts of London and New York share reputations as being receptive to large divorce claims. These reputations are certainly well earned. London is now described as the ‘Divorce Capital of the World’, given a trend of very large awards made to spouses in recent years.

The law of England and Wales provides that all assets owned by either party from whatever source (as well as various trust interests) are to be considered and subject to division. In doing so, English courts have an extremely broad discretion to determine what is a ‘fair’ outcome in each case.

New York courts follow a different approach, identifying property of the parties as being either ‘marital property’ (which generally includes assets earned during marriage) or ‘separate property.’ New York courts will ‘equitably distribute’ the ‘marital property,’ but not the ‘separate property’ (which generally includes pre-marital assets and inherited assets). Always innovative, however, New York courts have expanded the traditional notion of ‘marital property’ to include (and have placed very significant values on) various ‘intangible assets’ such as educational degrees and professional licences, as well as business ‘enterprise value’, and certain types of appreciation on ‘separate property’.

These and other differences in the laws between the two jurisdictions can, despite identical fact patterns, create enormous disparities in outcomes based upon the particular facts presented.

Our respective firms have seen an increasing number of cases in which several different jurisdictions each present a compelling basis to serve as a proper forum. Where individuals are subject to various different jurisdictions, counsel should be asked to explain the potential outcomes of each jurisdiction — including seeking advice from local counsel in each potential jurisdiction. Such in-depth analysis should be performed at the onset of a representation, as unforeseen circumstances may arise which require you to act decisively and swiftly. Where one spouse is considering these issues, the other is just as likely to be doing so as well. Be aware of tactical advantages that others may be looking to secure.

In many jurisdictions, a pre-nuptial agreement or post-nuptial agreement may allow an individual to address much of the uncertainty as to the outcome of divorce, as well as the location and the law which will apply. New York has long recognised and upheld pre-nuptial and post-nuptial agreements entered into between its residents as binding contracts, subject to various substantive requirements and strict formalities as to execution. Indeed, with respect to both the breadth of issues that may be addressed and the enforceability of a properly executed agreement, New York is considered an extremely ‘pre-nuptial-friendly’ jurisdiction.

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FOR MANY YEARS, pre-nuptial agreements in England were regarded as not being worth the paper they were written on. However, Radmacher v Granatino witnessed a substantial shift in favour of upholding of pre-nuptial agreements.

In contrast to New York, these agreements are not considered contractually binding, and the English courts retain discretion in determining what is ‘fair’.

Plenty of complications can arise: individuals who have a presence in various different jurisdictions and are considering a pre-nuptial or post-nuptial agreement should disclose these contacts to their lawyer, and have their lawyers consult with counsel in such jurisdictions.

The enforcement of pre-nuptial agreements in countries or states other than where executed can add another layer of complexity.

To avoid these pitfalls and complexities of competing jurisdictions, be aware of the jurisdictions to which you and your estate are subject, discuss them in detail with your lawyer, and if possible enter into a pre-nuptial or post-nuptial agreement that provides the fullest protection available in all such jurisdictions.
Suzanne Kingston and Michael Gouriet, are partners of
Withers LLP, London
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