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02 Oct 2020

Threat of No Deal Brexit is causing divorce settlements to be lowered

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The threat of a No Deal Brexit is now being used to reduce the value of some larger divorce settlements, private client law firm Boodle Hatfield has claimed.

In a recent high net worth divorce hearing, a judge ordered that the value of a jointly owned business should be discounted by 10 percent to allow for the possibility of a No Deal Brexit and the economic downturn caused by Covid, meaning one party may be disadvantaged if the business’ value subsequently rises rather than falls.

Boodle Hatfield warned that more business owners going through a divorce are likely to use the economic disruption of Brexit and Covid to try and justify paying less money for their spouse’s share in their business.

After the outbreak of the coronavirus and with the potential economic threat of no-deal Brexit, some owners are arguing that the value of their businesses have been substantially affected by the lockdown and are further at risk if there is a no-deal Brexit with a view to reducing the size of their divorce settlements. A similar trend was observed after the 2008 financial crisis.

Emily Brand, a partner in Boodle Hatfield’s family practice, said: “We expect more of these No Deal Brexit/Covid arguments to be deployed over the coming months. Given the clear economic uncertainties ahead, it is only reasonable to highlight the obvious risks which will potentially affect a business’ value.”

“A No Deal Brexit could cause business values to drop further, potentially reducing the value of divorce settlements even more.”

Ms Brand added that to avoid one partner being left considerably worse off following a divorce – particularly if a risk-laden assets fails to provide the anticipated returns, both should share in each different asset class so as to diversify their risks.

This article was first published in eprivateclient on 2 October 2020.