The public’s fascination with the rich and famous can be particularly intense when a marriage breakdown occurs. This is especially the case when there is a large amount of wealth involved. A high net worth divorce can be very contentious and create a number of legal issues. This might please journalists, but for the couple experiencing the divorce, their financial and family issues are suddenly broadcast to the world, becoming memorialized in public record.
Divorces involving large assets can be cause for a lengthy divorce. Determining the value and ownership of all assets entails a great deal of work and can often serve to draw out the divorce proceedings.
The high-profile divorce of billionaire Elon Musk, 45, and actress Talulah Riley, 31, recently dominated front page news. The couple had a rocky on and off again relationship for the past 8 years. Musk kicked off 2015 by filing for divorce on January 1st and reportedly agreed to a settlement in the amount of $16 million, but they reconciled in the following spring and Musk rescinded his application. Riley, however, filed for divorce in March of 2016. The couple had a marriage contract that entitled Riley to a lump sum payment of $16 million in lieu of spousal support.
In the absence of a marriage contract, Canadian courts would divide wealth between spouses under a regime known as “equalization”. Fundamentally, equalization is taking account of each spouse’s net family property (NFP) and dividing the difference so that each is walking away from the marriage on relatively equal footing. NFP is the amount a spouse has when their net worth on the date of marriage is subtracted from their net worth on the date of separation.
Typically, the person with the larger NFP pays the other spouse half of the difference between their values. For example, if Spouse 1 has an NFP of $150,000, and Spouse 2 has an NFP of $100,000, Spouse 1 would have to pay Spouse 2 $25,000. This way, both their NFPs becomes $125,000. Using this model, Riley would have received a much larger payment than the amount agreed to in the marriage contract. Calculating net family property is subject to a variety of exclusions so it can be very difficult to calculate.
Please refer to separation.ca or contact a family lawyer for further information on how to calculate your net family property.