Complex assets and financial settlements in a French divorce

The difficult divorces are rarely the ones with the most money. They are the ones where the money is hard to see. A company that one spouse built and still runs. Stock options that have been granted but not yet exercised. A 401(k) in New York and a pension in Paris. A family trust set up by a parent in Connecticut. An apartment in the 7th arrondissement bought with funds that came from three different places. In these cases the legal questions are ordinary. What is unusual is the work needed before anyone can answer them.

Olivia Uzan represents spouses on both sides of these settlements, in Paris and in cases that run between France and the United States. Recent matters have involved compensation claims in the six and seven figures, both in securing substantial awards for the spouse entitled to one and in reducing significantly the amounts claimed against the higher earner.

Begin with the inventory, not the negotiation

Every financial settlement in France rests on the same foundation: which assets are shared, which belong to one spouse alone, and what each of them is worth. Under the default French regime, what was earned or acquired during the marriage is shared and what was owned before, or received by gift or inheritance, is not. Under separation of property, each spouse keeps what is in their name. Couples who married abroad, or who moved countries after the wedding, may be under a regime they have never heard of. That question comes first, and it is covered on the page on prenuptial agreements and matrimonial regimes.

Once the regime is known, the inventory follows. This is slower than clients expect and it is where the outcome is often decided. A spouse who arrives with a complete and documented picture of the family’s assets negotiates from a different position than one who is still trying to find out what exists.

Businesses and professional interests

A company founded during the marriage, under the community regime, is generally a shared asset even if only one spouse holds the shares and runs the business. The other spouse is not entitled to half the company, but to half its value. That leaves two problems. The first is valuation, which for a private company means an expert, a method, and usually a disagreement about both. The second is liquidity: the spouse who keeps the business has to pay for the other’s share, and the settlement has to be structured so that the payment does not sink the company that is supposed to fund it.

Where the business predates the marriage, or was inherited, the analysis shifts to what the company earned during the marriage, what was reinvested rather than paid out, and whether the shared estate is owed something for the work one spouse put in. Professional practices, partnerships and shares in a family holding raise the same questions with their own particularities.

Stock options, restricted stock and deferred compensation

Executive pay is where French rules and American pay structures fit together least well. Options granted to a spouse during the marriage are treated as belonging to that spouse personally, but the shares obtained by exercising them while the marriage lasts fall into the shared estate. Options still unexercised when the community is dissolved are a different matter, and so is compensation that was earned during the marriage but paid after it. Restricted stock units, carried interest, bonuses paid with a delay, each has to be placed on the right side of the line, and the date on which the shared estate closes, which in a French divorce can be moved back by the judge, changes what falls on which side.

US retirement accounts

American retirement savings are a frequent source of misunderstanding. In France, the pension rights each spouse builds up during the marriage remain their own and are not divided, though the disparity they create is taken into account elsewhere. A 401(k) or an IRA is not a pension in that sense. It is an account with a balance, and under the community regime the part of that balance built up during the marriage is generally a shared asset like any other savings.

Recognising that in Paris is one thing. Dividing it is another. An American plan administrator will not act on a French judgment. The division has to be implemented through an order in the United States that meets the requirements of the plan and of federal law, and the French settlement has to be written so that such an order can be obtained without reopening the case. Tax and penalty consequences on early withdrawal, and the different tax treatment of traditional and Roth accounts, belong in the calculation from the start.

Trusts

French law has no trust of its own, and French courts have learnt to look through them. A trust set up by a spouse’s parents, of which the spouse is a beneficiary, is not a shared asset, but the distributions the spouse receives, and the resources the trust represents, will be examined when the court assesses the disparity between the spouses. A trust into which a spouse has placed assets during the marriage raises harder questions about what was contributed and whether the other spouse’s rights were affected. Trusts with a French connection also carry reporting obligations in France, and a trust that has never been declared is a weakness in the file of the spouse who relies on it.

Property in two countries

A Paris apartment and a house in Los Angeles are not divided by the same rules. Real estate is generally governed by the law of the country where it sits, and a French court will decide the fate of the French property with far more confidence than that of the American one. A settlement that allocates the Paris apartment to one spouse and the California house to the other has to work under both systems, and has to anticipate the tax on each side: the French duty on the division of shared assets, capital gains tax on a later sale, and the exposure of a spouse who has changed tax residence in the meantime.

Finding what has not been shown

There is no American-style discovery in a French divorce. Each spouse signs a sworn statement of their assets and income, and the judge can order documents to be produced, but the burden of finding what is missing falls largely on the other side. This is where experience matters: tax returns read against bank statements, company accounts read against what the spouse says the company earns, a lifestyle read against declared income. A spouse who conceals a shared asset and is found out can lose their entire share of it, which changes the conversation once it is put on the table.

The compensation payment in high-value cases

The prestation compensatoire, the lump sum meant to correct the gap in living standards that the divorce opens between the spouses, is assessed on the whole picture: what each spouse will own after the division, what each earns and can expect to earn, and the choices made during the marriage. In a case with substantial assets the two questions cannot be separated. A division that favours one spouse reduces the disparity and therefore the compensation; a compensation claim built on an incomplete inventory is easy to attack. The page on the prestation compensatoire explains how the amount is decided and how a claim is defended.

How the work is done

Olivia Uzan handles these files personally, with the valuation experts, notaires and American counsel the case requires, and drafts every settlement so that it can be enforced on both sides of the Atlantic. Being admitted in Paris and in California means that a California marital settlement agreement, a plan administrator’s requirements and a French liquidation are read by the same person, which removes a great deal of friction and a certain amount of risk.

The first consultation is used to establish the regime, map the assets, identify where the difficulties will lie and set out a strategy, whether the aim is to negotiate, to file or to defend. Clients leave knowing what has to be done first and what it is likely to cost.