Businesses, pensions and trusts on divorce

We offer practical, expert advice on how to handle complicated financial issues

We specialise in divorces involving complicated financial issues, including businesses and pensions.

Business interests

You or your spouse may be involved in a trading firm, partnership or company. We can advise on how the business should be dealt with as part of your divorce, including how and whether the business should be valued. If necessary we can work with accountants or business advisers.

We can also help protect businesses at the start of a relationship, typically with the use of a pre or post nuptial agreement.

In some cases the business was established long before the marriage began, and the value of the business may be of little importance. In other cases (if the business is the main asset or was created during the relationship or you were both involved) the value is more likely to be shared.

Valuing businesses is complicated. Valuations are typicvally based on earnings or the asset value of the business. We know the questions to ask to identify the right way to handle your divorce.

We can also advise on issues of liquidity – how can money be extracted to help fund a divorce settlement? What will the tax consequences be? If necessary, we can work with accountants and tax advisers.

Some couples continue to work together even after a divorce. This is unusual but we do not rule anything out. The options we offer including mediation and collaborative law can be particularly effective where it is important to preserve the continued success of a family business.

The questions we will typically help you deal with are:-

(a) Do we need to value the business?

(b) Does it matter who owns the business or whose name it is in?

(c) How involved were each of you in the business?

(d) We need to keep the business running to provide income. How can we share the value without ruining the business?

(e) What are the options for extracting money from the business?

Trusts

We also deal with divorces where trusts are involved. You or your spouse may be the beneficiary of a family trust. Trusts are generally intended to help pass assets from one generation to another.

There are different types of trusts. Most commonly we see discretionary trusts. The court tends to look at the reality of how the trust has behaved in the past – if one of you has received funds from the trust in the past, the court may assume this will continue.

Depending on the type of trust the divorce court may have power to vary the terms of the trust. It can make orders which bind the trustees. More commonly, the court may make orders on the basis of assumptions of how the trust will behave in the future.

Pensions

Pensions are likely to be one of the most valuable assets in a divorce. It is important they are taken into account properly. For more information, see our pension page here.

When divorcing you need to consider what type of funds are available, the rules in terms of how and when capital and income can be taken from the pension, and the options open to the courts. The most common approaches are offsetting (which means one person keeps their pension and the other person receives other assets such as money from the house), or a pension sharing order (which means the pension fund is physically split and a portion of the pension fund is transferred into a pension in the other person’s name).

We commonly deal with public service pensions, private pensions/money purchase pensions, final salary/defined benefit schemes and SSAS’s and SIPP’s, as well as state pensions (and SERPS/Additional State Pension) and AVCs.

All of these issues can be overlooked on divorce. It is important to take expert advice to ensure you do not undersell yourself. We can also work with other experts (such as pension actuaries and financial advisers) to help come up with the best possible outcomes.

The questions we can answer are:-

1. How do we value the pension? Is the standard approach fair – this all depends on the particular type of pension scheme.

2. What will it cost to deal with pensions? Can the costs be reduced?

3. How can we compare different types of schemes such as an Army pension to a private pension? What are the differences and how do we address these?

4. How much will you be left with on retirement? What about the impact of pension flexibility and the new rules allowing early draw-downs?