6. Assets and divorce
Understanding How Courts Divide Assets in a Divorce
Dividing assets during a divorce is one of the most challenging and emotional parts of the process. Many assume that assets will be divided equally, with each spouse receiving 50% of the matrimonial pot. However, this is not a strict rule. While it may serve as a starting point, the courts often deviate from a 50:50 split based on the circumstances of each case.
Factors Courts Consider in Asset Division
The court’s primary objective is fairness, but “fair” does not always mean equal. A 50:50 division may be appropriate in many cases, but in others, an unequal split could be necessary. Courts rely on Section 25 of the Matrimonial Causes Act 1973, which outlines the key considerations, including:
Income and future earning potential of both parties
Financial needs and obligations, both present and future
The standard of living enjoyed by the couple during the marriage
The age of both parties and the duration of the marriage
Contributions to the marriage, both financial and non-financial (e.g., childcare)
Physical or mental disabilities of either spouse
The conduct of either party where relevant
However, the court's primary concern is always the welfare of any children under 18, which can lead to variations in asset distribution to ensure their well-being is maintained.
Dealing with the Family Home in a Divorce
For most couples, the marital home is the largest asset to consider in a divorce settlement. Several options exist for handling the house, depending on the couple's financial situation and the desire for a clean break:
Selling the home and splitting the proceeds: This provides immediate access to funds, allowing both parties to move on. However, market conditions and the costs of selling can complicate this option.
One spouse buys out the other's share: If one spouse wishes to remain in the home and has the financial means, they can buy the other's equity share. This typically requires refinancing the mortgage.
Co-ownership: In some cases, the couple may continue to co-own the house, either temporarily or long-term. This might be practical when neither can afford to buy out the other or sell at a loss.
What Happens to the House When Children Are Involved?
When children are involved, the court prioritizes their need for stability. In many cases, the parent who serves as the primary caregiver may be awarded the family home, allowing the children to remain in familiar surroundings. Even if one spouse moves out, financial arrangements regarding the home, such as a Mesher Order (which allows one spouse to live in the house until a certain time), can be made to protect both parties’ interests.
Are Businesses Protected in Divorce?
Business interests, including limited companies, are not automatically protected from division in a divorce. Like other assets, business ownership must be disclosed and valued as part of the marital pot. Courts aim to minimize disruption to the business, but one spouse may need to offset the value of the business with other assets or a financial settlement to ensure fairness.
Non-Matrimonial Assets and Their Role
Not all assets are subject to division in a divorce. Non-matrimonial assets, such as property or investments owned before the marriage or acquired through inheritance, may not be included in the marital pot. However, if these assets were used during the marriage or are necessary to meet the needs of one spouse, they may be considered in the settlement.
Key Considerations for a Fair Financial Settlement
Reaching a fair financial settlement requires transparency and careful consideration of both parties' needs. Factors influencing asset division include:
Capital and income resources available to each spouse
Each spouse's needs, considering their age, standard of living, and any disabilities
Contributions made during the marriage, including non-financial contributions such as childcare
Loss of benefits such as pensions due to the divorce
Ending Financial Ties Post-Divorce
A common misconception is that divorce automatically severs all financial ties between spouses. To ensure financial independence, it’s essential to formalize any agreement through a Court Order or Consent Order. Without this, both parties could still make financial claims against each other in the future, even after the divorce is finalized.
Steps to Take When Dividing Assets
Gather financial information: Full disclosure from both parties is necessary. This includes bank statements, property valuations, pension details, and any other relevant documents.
Determine your needs: Understand your housing and financial needs post-divorce. Calculate the cost of living, outgoings, and any future income requirements.
Clarify property ownership: Check the type of ownership of the family home. If necessary, register a Matrimonial Homes Right to protect your right to remain in the home.
Update your will: Ensure your will reflects your current wishes, especially regarding the division of your estate after divorce.
Court Involvement in Financial Disputes
If couples cannot reach an agreement, they may need to apply for Financial Remedy Proceedings. These typically involve three court hearings:
First Appointment: A directions hearing to set the process in motion.
Financial Dispute Resolution (FDR): A judge will actively participate in trying to reach a settlement.
Final Hearing: If no settlement is reached, the case proceeds to a final hearing where the court will make a binding decision.
Conclusion
Dividing assets in a divorce is a complex and emotionally charged process. While fairness is the guiding principle, the outcome varies from case to case, depending on individual circumstances. The court's primary concern is ensuring that both parties’ needs, especially those of any children, are met while balancing fairness in asset division.
