Sebastian Gladwish
The former Hollywood super couple, Brad Pitt and Angelina Jolie, filed for divorce back in 2016. Citing “irreconcilable differences”, the couple – often dubbed “Brangelina” – were estimated to have a combined net worth of around $400 million.
In December 2024, some 16 years after the divorce was originally filed, a settlement was reached.
Navigating a divorce is never easy but doing so as a high net worth individual (HNWI) is even harder, with higher stakes, more complex assets, and increasingly complicated processes to work through.
Expert financial advice, though, can help to ensure that splits are fair, tax-efficient, and result in decisions aligned to your long-term goals.
Keep reading to find out how we can help you.
1. Advice can help to ensure that assets are correctly identified and valued
While few people know the details of the settlement reached by Brad and Angelina, their wealth was likely split unevenly between complex investments, elaborate trusts, and savings held across global accounts.
Following the threads to unpick these financial knots won’t have been easy – remember, the process took 16 years. However, identifying and accurately valuing all relevant assets is vital.
As was likely the case with Brangelina, you and your ex-partner will hold high-value savings and investments, such as final salary pensions, as well as assets in trust.
If you or your partner own a business or property portfolio, this will also need to be factored in.
Few of these calculations are straightforward – valuing a business isn’t easy – which is why seeking out our team of experienced professionals could prove so important.
2. Pensions are often forgotten but are vital for securing your chosen lifestyle in retirement
For many UK couples, combined pension values amount to the largest asset outside the family home. As a HNWI, limits on pension contributions mean that this may or not be the case for you, but your retirement pot is still likely to be sizeable.
Splitting these assets equitably isn’t easy, but, as mentioned above, it begins with accurate valuations. Assessing the value of a defined contribution pension is straightforward, but the process for defined benefit (or final salary) pensions can be slightly more complex.
Worryingly, pensions are often left out of divorce discussions entirely. This can be particularly detrimental to the spouse who may have given up work to care for children, which is often the female partner,, with a knock-on for their career and individual pension savings.
There are three main ways to split a pension on divorce:
- Pension sharing allows one partner to receive “pension credit” from their ex-partner, which can be claimed immediately, allowing them to set up their own pension and allowing for a clean break. This tends to be the most common way for pensions to be split on divorce.
- Pension earmarking works similarly to pension sharing, except that the earmarked element only becomes available once the policyholder begins to draw from their pension. This has the effect of tying both party’s retirements together.
- Pension offsetting can be particularly difficult to calculate as it requires one party to forego their pension entitlement, in favour of another asset – or portion of another asset – of the same value.
It’s important to understand not only the value of a pension now, but also its potential future value, and how it might fit alongside your non-pension income in retirement.
As we have seen, the pension to be shared could represent a significant asset, so the timing of when it is, and can be accessed, is critical. You currently can’t withdraw pension funds until the minimum retirement age of 55 (rising to 57 in 2028). If you opt for an earmarking order, though, this could be even later as you’re effectively in the hands of your former partner.
Considerable planning might be needed in the shorter term to avoid hardship and to manage your lifestyle expectations. We can help here.
We have cashflow planning tools that visually explain the implications of different options. This means that seeking advice during the negotiation phase could be instrumental in reaching a fair settlement, and one that works for you.
3. Calculating the tax implications of an asset split could help avoid an unexpected bill and ensure your loved ones are provided for
As with many areas of financial planning, higher values mean higher stakes and increased tax implications.
Transferring assets, even as part of a divorce, could leave both parties subject to unexpected Capital Gains Tax or Stamp Duty Land Tax bills, and there will likely be Inheritance Tax (IHT) considerations too.
While the details of Brad and Angelina’s divorce settlement have not been made public, the couple’s children (alongside their Château Miraval vineyard) were reported to be at the heart of the settlement. You’ll want to ensure that your children continue to be looked after too.
We recently wrote about how to manage complex life insurance and estate planning as a HNWI, which included a look at the important role of life insurance.
Estate planning is a key part of your overall financial plan and you’ll have a definite idea of how you want your assets to be divided when you die. An asset split on divorce can complicate this process, especially in a blended family.
Financial experts will always look at your circumstances now and predict how changes could affect your position in the future. We can bring these calculations to IHT mitigation and ensure that your wealth is preserved for those who are due to inherit, minimising the tax bill you leave behind.
Get in touch
To find out how we can help you navigate a divorce while remaining on track to achieve your long-term financial goals, please get in touch.
Contact us online or call 020 7400 4700.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
