For many wealthy separating couples in Canada, it takes a small army of professionals to disentangle their financial affairs
The news of Bill and Melinda Gates' recent separation after 27 years of marriage has caused a media frenzy and a mix of awe and envy in family law circles, where jokes about the size of the retainer involved have been circulating rapidly by text and email.
Much to the chagrin of court-watchers and the curious, however, only a few details on the divorce have trickled out so far. News outlets have reported that court documents filed in Washington state indicate that Bill and Melinda have already worked out the terms of their separation agreement, avoiding public mud-slinging and a showdown over property and support claims. It appears the couple only requires the court to grant their divorce — which will likely be ordered on consent — while the financial details of their arrangement will remain private.
This has not stopped the public from speculating. Apparently, the divorce documents confirm that Melinda does not require support, likely meaning the property settlement was large enough to make continuing payments unnecessary.
It is also unclear whether the couple had a pre-nuptial agreement. It would not be unusual for someone as wealthy as Bill Gates, previously thought to be the fourth-richest man in the world, with an estimated worth of US$130 billion, to have one. But whether a 27-year-old agreement would still be considered binding may have been a live issue.
While the Gates' net worth has made their divorce newsworthy, the way in which they are dealing with their financial issues is similar to the process followed by many high-net-worth couples in Canada.
Property, child support and spousal support in Canada can be settled by agreement. Most couples with means avail themselves with an array of professionals to assist with the financial issues arising from their separation, leaving only the divorce order to be dealt with by the court.
In addition to accessing therapists for the spouses and children, it is common for high-net-worth couples to use the services of family lawyers together with the services of chartered business valuators, tax accountants and real estate, tax and corporate lawyers.
Sometimes the family lawyers reach an agreement in principle, and then hand the implementation of the agreement over to the tax accountants and corporate lawyers.
In other circumstances, the two parties reaches an agreement between themselves, with the family lawyers later advising about whether the arrangement needs tweaking to meet legal standards. At that point, tax accountants and tax and corporate lawyers implement the arrangement in the most tax-effective way possible.
And in still other situations, there may be disputes about the value of certain assets or the validity of a cohabitation agreement or marriage contract.
A sensible separating couple will agree to resolve those disputes privately. They are often resolved with the assistance of a mediator with expertise in valuation issues or with an arbitrator — a "private judge" — who conducts a hearing with expert witnesses and decides the issues in dispute.
The amendments made recently to Canada's Divorce Act require a separating couple to try to resolve matters through an out-of-court family dispute resolution process, and also require the lawyers to encourage their clients to resolve matters through the use of such services.
High-net-worth couples have been ahead of the curve in that regard and, for at least the last decade in some parts of Canada, have gravitated toward out-of-court resolutions for a number of reasons.
First, an out-of-court process is confidential and private.
If a matter is resolved in mediation, the arrangement is usually reflected in a separation agreement, the contents of which are not public. The only aspect of a separation agreement that will be public is the aspect involving child support: when a court grants a divorce, it is obliged to review the child support agreement to ensure that reasonable arrangements were made for the children's support. The rest of the agreement need not form part of any publicly available court file.
If a matter is decided by an arbitrator, the arbitrator's reasons for making the decision and the decision itself are private unless one of the parties seeks a review by the court or appeals the decision. While the arbitration award may be incorporated into a court order for enforcement purposes, the details of such are usually sparse, keeping the publicly available information about a couple's finances to a minimum.
High-net-worth couples also often choose a private family dispute resolution process because of the expertise of the mediator or arbitrator. A separating couple cannot choose their judge, and in most jurisdictions in Canada, judges are generalists, who are expected to be able to resolve disputes in every area of law. By contrast, most family mediators and arbitrators are lawyers who have practiced family law for more than 20 years, giving them the necessary depth of expertise to resolve complex financial issues within the family law context.
Finally, a family arbitrator is generally more available than a court, especially given the effect of the pandemic, which has significantly affected the availability of timely resolutions in the courts in many parts of the country.
By contrast, arbitrators are usually prepared to hear urgent matters before or after court hours or on weekends, if the need arises, and are usually able to create more streamlined decision-making processes than the courts.
For many separating high-net-worth couples in Canada, it takes a small army of professionals to disentangle their financial affairs. But like Bill and Melinda Gates, they most often opt for a private dispute resolution process and stay out of the public eye.
This article originally appeared in the Financial Post.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.