Dividing the assets - A costly business?

Thursday 11th March 2021

Divorce law is intricate and complex, largely owing to the many historical updates that have been made to the law and the wide remit the Court has when deciding who gets what.

The divorce process varies depending on how well the two parties are able to cooperate when splitting assets and reaching amicable mutual agreements.

Solicitors will be able to assist you in mediation and arbitration, holding round table meetings to try and reach divorce settlements out of court. This is nearly always preferable and encouraged by the Court.

If an agreement is made, a Consent Order can be provided to the Court who will make the agreement legally binding. An alternative is a clean-break order, suitable for shorter marriages with fewer intertwined assets.

The service of a professional solicitor experienced in family and divorce law is imperative when dividing divorce assets.

What matrimonial assets are included in a divorce?

In simple terms, matrimonial assets are financial assets that you and your spouse have acquired during the course of your marriage.

This includes the family home, savings, investments and pensions.

It does not matter if some of these matrimonial assets are acquired in your own name, they can still be considered matrimonial assets in the case of divorce. For example, if you are paying into your own pension during your marriage, or inherit some money, your spouse will still be entitled to some.

That does not mean the split will be 50/50, this is why there is so much discretion available to the court. All assets have a different character, and many have variable contributions, especially in the case of shorter marriages.

Matrimonial assets may also include assets purchased out of matrimony, e.g. the family home if they were intended for use within matrimony.

If matrimonial assets are not significant enough for a fair split, then the court does have the power to consider non-matrimonial assets too. This is one of the many scenarios that leads some couples to seek a prenuptial arrangement.

How are assets divided in a divorce?

Section 25 of the Matrimonial Causes Act 1973 sets out the bulk of the guidelines Courts must apply in England and Wales. The Court will also be able to refer to previous cases in the case of complex divisions.

Children under 18 will have a huge influence on how the Court exercises guidelines.

The main guidelines are as follows:

● The aim is to fit the assets fairly, but fairly does not necessarily mean 50/50. Parties must be ideally left in equal standing. There can be discrimination based on family roles, e.g. the traditional breadwinner and homemaker roles are considered equal for the purposes of the divorce settlement.

● Dependent children’s needs are a maximum priority. The child must be accommodated by the eventual custodial parent, even if this is the matrimonial home.

● Section 25 factors will be considered in the context of the case. The starting point is an equal division of assets. The Court will then modify the division of assets depending on the unique factors in play. The aim is to divide assets equally unless there is a significant reason not to, or to maintain the fair standing of each party without discrimination.

● The Court will always attempt to meet the needs of each party. If these needs are met, the Court has additional discretion in dividing ‘surplus’ assets. Non-matrimonial assets will not be divided between the parties unless this is required to meet their needs. In short, assets, both matrimonial and non-matrimonial, can be divided equally until the needs of both parties are met. After then, they can be divided in accordance to contribution and origin.

The Court will seek a clean break, meaning there are no financial links between the parties after the divorce. The Court can order spousal maintenance to achieve a clean break. The only exceptions to this are when dependent children are also involved.

What orders can the court make?

In divorce as well as dissolution of civil partnerships or judicial separation, the Court can make several orders.

1) Lump Sum Payments

The Court may order one party to pay the other a lump sum. This might be a single payment or a series of payments. Lump sums may be ordered instead of paying spousal maintenance.

Lump sums can equalise assets, e.g. when one party keeps the matrimonial home, the other may have to pay a lump sum to balance this out.

2) Sale or transfer of property

The Court can order parties to sell and transfer property. Typically, this will be the matrimonial home. The sale of the home will be usually equally divided unless there is an unequal contribution. Property can also be transferred between parties.

Dependent children will be accommodated in the matrimonial home if there are no other avenues for accommodation.

3) Pensions

Pensions can be divided or earmarked for dividing later. Some or all of a pension fund can be transferred into a new pension to divide the pension between parties. Known as a pension sharing order.

4) Spousal Maintenance Orders

The Court can order either party to pay maintenance to the other. These are usually paid for life, or until one party remarries. They can also be paid over fixed periods. This is often avoided by a ‘clean break’ where neither party is maintained by the other.

5) Child Maintenance

Child maintenance figures are agreed upon outside of court and can be implemented via the Child Maintenance Service.

The Court can stamp or ratify these agreements. These types of agreements are enforceable by the Court. Mediation is always the first port of call for agreeing on child maintenance.

What does the court consider when dividing matrimonial assets?

1) Child Welfare

The welfare of dependent children is the first priority. The home will be prioritised for the children and assets will be weighted towards the child’s carer. The needs of the other parent will not be totally overlooked in favour of the carer, however. The division of assets will be allocated in accordance to needs, the needs of the carer will be greater, thus they will be granted more assets.

2) Capital & Assets

Parties will often have to declare the full extent of their assets. Financial Statements and disclosures will make the courts aware of what the parents have, including any pre-matrimonial assets. All assets will have to be valued and the Court will look at the current income of parties and their expected earnings trajectory. The income and assets of any new partners may also be taken into account.

3) Needs of the parties

It is always in the Court’s best interest to accommodate both parents equally in regards to basic needs, such as housing. Both parties will be expected to break down their needs and cost them appropriately to assist the Court in splitting assets fairly.

4) Age of parties & length of the marriage

Longer marriages are more likely to be split closer to 50/50. The assets of shorter marriages are much more likely to be divided more proportionally in line with individual contributions. Younger people also have longer to reestablish themselves in work and finance, which makes a ‘clean break’ easier to achieve.

Younger people may also share fewer assets by default and may choose to remain more financially independent, the motive of which can be taken into account by the Court.

5) Pre-marriage breakdown standard of living

The Court will try and maintain the standard of living experienced by both parties whilst they were married. This might affect the division of assets where the traditional homemaker is entitled to the same standard of living as they experienced prior to the marriage breakdown.

6) Mental or Physical Incapacity

In the event that one or both parties are mentally or physically incapacitated, GPs will often be asked for an expert opinion about how assets can be split fairly in the circumstances.

7) Individual contributions to the marriage

The insignificance of varying family rules has been long established. That means that where one party has contributed more to joint finances whilst the other has looked after the home and any children, these roles are economically equal at the point of divorce. However, these arguments fare weakly in shorter marriages.

Many assets that parties may consider strictly ‘personal’ such as inheritance can still be considered matrimonially relevant where they have been used to contribute to joint assets, e.g. paying off a mortgage.

8) Loss of Benefits

The Court can also account for the loss of any benefits related to the divorce

9) Bad behaviour & conduct

Bad behaviour can rarely be taken into account by the court when dividing assets

Divorce Court Hearings

Appearing at court is unlikely, usually, the Court will deal with the process via paper only and no one will have to physically appear in court.

In the event of court, the parties will be entitled to a Private Hearing, involving just themselves, their solicitors and the Judge. They do not have to see each other at all if this is preferable or necessary.

There are 3 main hearings;

● The First Appointment Hearing – A case management hearing that tries to resolve issues without pressing on with the case. Sets out the timetable for the case.

Financial Dispute Resolution Hearing – A hearing that provides a Judge-assisted opportunity to reach a final settlement. Both sides will present their recommendations, demands and evidence.

Final Hearing – If the case is not settled before this point, both parties will provide their final arguments with evidence. The Judge will deliver a judgement on the settlement.

If you have any further questions then please do not hesitate but to contact Waldrons Solicitors.

Our family and divorce lawyers will be in contact as soon as we can.