Celebrity divorces - dividing riches and royalties - Boodle Hatfield

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20 Nov 2019

Celebrity divorces – dividing riches and royalties

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Singer Adele recently filed for divorce from her husband of three years.

Adele’s divorce will take place in the US but if it had taken place in the UK, her ex-spouse may have argued for a share of up to 50 percent of her wealth, private client law firm Boodle Hatfield has noted.

So just how are the particular assets of actors, writers and musicians, such as royalties income, handled on a divorce? This is income earned during the marriage that may not be received for many years after a divorce and therefore requires careful consideration.

James Ferguson, head of the family team at Boodle Hatfield, has looked into what this might mean for any celebrities looking to divorce.

If royalties make up a large percentage of marital assets celebrities could be forced to sell them

Mr Ferguson explained that if royalties were earned during the relationship or if they have significant value, a judge could order that they should be sold for their cash value and then split between the divorcing couple. However, the market for royalties (although growing) is still not liquid and such intellectual property rights can be very hard to value.

“Another option,” Mr Ferguson said, “if the royalties cannot generate a divisible lump sum, would be to make an award of maintenance for a term. However, having a share in your ex-spouse’s royalties income could feel like being unpleasantly chained to them for years following the divorce. This goes against the trend towards clean break settlements and the severance of one party’s financial dependency on the other.”

The weaker financial partner could argue that they supported their spouse’s successful career despite not contributing financially to the marriage

“The financially weaker spouse does not have to contribute financially to the marriage in order to get a cut of the royalties income in divorce, Mr Ferguson explained. They can show that they contributed to the relationship in other ways which supported their spouse during the years that the royalties were built up.

“For example, spouses could argue that they created a stable home environment, looked after any children or gave up their own career to support their spouse. The fact that the English Court takes these aspects of a marriage into account means that the financially weaker party is likely to receive a larger award than in most other jurisdictions,” Mr Ferguson said.

Unconscious sexism in the Courts can negatively impact husbands of HNW women

Mr Ferguson explained that whilst judges cannot (or, legally, should not) allow gender discrimination to impact the outcome of financial proceedings, practitioners have seen cases where it has been much harder for their male clients to secure regular maintenance payments after a divorce, compared to women. Bias, he said, can inadvertently creep in, to the extent that it can have a material impact on the size of the award made to the male spouse of a female HNW.

The length of marriage may impact the award

Whilst the claim by Adele’s spouse would likely be limited by reason of the short duration of the marriage, a seemingly short marriage may be considered to be longer if there has been a significant period of uninterrupted cohabitation prior to the date of the actual marriage, Mr Ferguson warned.

“Even if the marriage only lasted for one year, if you have been cohabiting for 10 years prior to that, a judge is likely to take that into account when making an award and could rule that the financial assets should be divided equally.”

A prenup will not always protect a celebrity’s royalties

Despite being seen as a way to protect assets in the case of divorce, and whilst royalties can be ring-fenced in a pre-nup, Mr Ferguson warned that celebrities should not assume that what was recorded in the pre-nup will necessarily be upheld by a judge.

“If the outcome of the pre-nup is unfair or unreasonable at the time of the divorce, English judges have the power to deviate from it. This is often the case if the financially weaker party would see their standard of living significantly downgraded as a consequence of the agreement.

“Even if a pre-nup provides for the financially weaker party to receive a substantial amount of money, it may still be capable of being overturned.”

This article first appeared in eprivateclient on 20 November 2019. 

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