Understanding Your Assets During a Divorce

One of the most common concerns that people have when getting divorced is what happens to any assets they hold whether shared or not. Separation and divorce can be very distressing, particularly when it comes to considering how you should separate your finances. The current law as to what factors are taken into account in determining how assets should be divided is governed by the Matrimonial Causes Act 1973, which is old legislation. The statute sets out the types of orders that can be made and the factors that should be considered when deciding how assets are to be divided.

Understanding both your financial position and your ex-partner’s will provide clarity and help you understand each other’s commitments. If you are transparent with your finances, it can be easier to come to a conclusion which suits both of you.

The below legal information and guidance apply to divorces in England and Wales. Please check with your local authority regarding divorce legislation in Scotland and Northern Ireland.

Contrary to popular belief, there is no formula for working out how assets should be divided in a divorce. The current law in England and Wales is discretionary meaning the court can take both parties needs into account and vary the division of assets based on this. Every case is different. In order to achieve a fair outcome, all factors and circumstances need to be taken into account.

Not always. There are several variables that can affect what a divorce settlement looks like. When dividing the matrimonial assets, the aim is to achieve fairness. Every divorce case is different and, based on what is fair, it may be possible that you or your ex-partner may be entitled to more than the other.

Divorce can be a confusing and upsetting time and the law surrounding it can be difficult to understand as it does not follow a set formula. At Hawkins we can explain the different options available to you and be there to support you as much as you need.

The Court must apply the statutory criteria set out in Section 25 of the Matrimonial Causes Act 1973 in order to arrive at a fair outcome. These are set out below.

– Dependant children
– The financial needs and responsibilities of both parties
– The standard of living before the marriage breakdown
– The age of yourself and your partner
– The duration of the marriage, including any time spent living together before the marriage.
– Any disabilities or health concerns that impact your day-to-day life
– The role each party played in the marriage, such as primary caregiver and breadwinner/ primary wage earner

When applying these criteria, the Court looks at what the needs of the parties are in terms of housing, income, and pension, and also the needs of any dependent children. This means that the split of capital may not be an equal one if the needs of one party are greater than the other, taking into account all the circumstances of your case, or if the Court accepts that certain assets should be treated differently and not automatically split if the needs of the parties are met.

The Matrimonial Causes Act 1973 means that the Court will consider all circumstances in your individual case.

It can be very difficult to stop any assets from being part of the divorce settlement. Depending on both party’s needs, the assets will be considered as fairly as possible and divided in an appropriate way.

You can transfer any assets that you own in your sole name before or during a divorce, but the timing of such transactions will be questioned due to the fact that hiding, selling or transferring these assets could prevent the other party from receiving as much as they would otherwise. This is often referred to as ‘putting assets beyond a person’s reach’ and could be seen as misleading the Court, which in turn could amount to fraud, which is a criminal offence.

To avoid this, you should be open and honest with the other party by providing full financial disclosure. Genuine trusts or transactions are often easy to explain; ones that aren’t so genuine usually have vague or evasive explanations. If it is necessary to transfer assets, legal advice should be sought to understand if your intentions could be mistaken.

Contrary to popular belief, a prenuptial agreement is not a legally binding document. However, if entered into properly, this will be a good indication to the Court as to the intention of how the assets will be divided. This makes the document highly persuasive and should be considered. Read more about prenuptial agreements here.

A matrimonial asset is an asset with any financial value that either you or your spouse (or both of you together) have accrued or obtained during your marriage.

Non-matrimonial assets refer to anything that was accrued or obtained outside of the marriage – e.g.: the period prior to the marriage and/or the time that has passed since separation. Non-matrimonial assets may include gifts or inherited assets. However, it is possible for non-matrimonial assets to be considered and deemed as a matrimonial asset.

For many divorcing couples, arguably the biggest matrimonial asset to think about will be the family home. It is common for many separating couples to have to use the money they will receive from the sale of the house to purchase a new property after the divorce. However, this is not always the case and individual circumstances will be considered before it is decided if the property should be
sold or retained.

If your house is a family home, it may be within the best interests of any dependent children for one party to stay at the family home. However, this will only be an option if your financial needs can be met without the sale of the family home.

It is often hard to financially ensure that both parties can comfortably rehouse, and this is something that you may well need the advice of a solicitor on.

Some options include:

● Put the property on the market for sale. The sale proceeds would then be divided between you both. The split will depend on considerations such as the housing needs of both of you and the extent of the other assets available

● One of you can buy the other’s share and remain living at the property

● The property can be kept in the current ownership, but you both come to an arrangement that results in one party living there for a defined period of time and the other party having a percentage interest in the property to be paid to them at a set later date. This option is most common when there are children involved and can be referred to as a ‘Mesher’ order

● The property’s interests are transferred in the divorce settlement, with the percentage of the proceeds shared accordingly

Mesher order: A mesher order is a term given to an agreement where a specific event triggers the sale of the property, such as the children finishing their education or reaching a certain age, typically 18.

The court can also make a ‘Martin’ order – this entitles one party to occupy the property for life or until they remarry. ‘Martin’ orders are common where there are no children involved and one party doesn’t immediately need the money from the property to meet their own needs.

The short answer is no. An equal share is always the initial consideration, but there are many factors that can influence this and cause a departure from equality – even only a small one – such as earning capacity, mortgage capacity, and the extent of other assets available.

The family home
If you purchased a property prior to the marriage and it is then used as the family home, it is likely that it will be considered a matrimonial asset, although this doesn’t mean that any sale proceeds would automatically be divided equally.

Independently owned property
If you purchased property prior to the marriage, then this may be considered a non-matrimonial asset and may not be part of the divorce settlement, dependant on the extent of the other assets. However, if the property was rented out and the income from such property was used for the family during the marriage, then it may be considered a matrimonial asset as the use of the income may be seen to have merged the asset within the marriage.

It should be noted that if the matrimonial assets are insufficient to meet both parties’ basic needs, then the court will look at the non-matrimonial assets that are available in order to make up the shortfall.

If you own a farm and/or private land
Farming divorces are complex situations and therefore each one is unique. It is not unusual for a farm to have been in one party’s family for many generations – and that party wants to keep it that way. In addition, the majority of wealth may be tied up in machinery and livestock, for example, and other family members may work on the farm. Because of this, there are many factors that the Court will consider before coming to a conclusion.

Similarly, working out what should happen to any land that you own is also complex – for example, it can depend on whether the land has planning permission or is rented out to a third party. Advice from a solicitor will usually be needed.

Properties abroad
These can be treated the same way as any additional property in the UK – if the property was purchased during the marriage, for example, as a holiday home, then it may be a matrimonial asset. This would mean it can either be sold or one party can retain it by buying the other out.

If the property was purchased before the marriage, it will depend on its usage – whether it was rented out or used as a holiday home as to whether it is classed as a matrimonial or non-matrimonial asset.

High-value assets can be complex and result in a more challenging divorce settlement. It is important that both parties are open, honest and transparent. Some people may attempt to hide their assets in the hope of keeping them excluded from the divorce settlement. This is known as ‘concealing assets’ and could be deemed as fraud. If this is suspected, then a forensic accountant can sometimes be employed to assist. It is important that when going through a divorce, you are fully aware of each asset that needs to be taken into consideration as well as those that can be excluded.

Examples of high-value assets

● Fine art
● Classic cars
● Antiques
● Businesses or business shares
● Share-based incentive schemes
● Property investments – e.g., rental properties, land, holiday homes etc

Hawkins Family Law says: “The most common way of deciding the value of matrimonial assets is to instruct an expert to carry out a valuation. The expert instructed will often be instructed on a joint basis so that the valuation can be relied upon by both parties.”

A specialist accountant will carry out a detailed assessment of the business to ascertain if there is any value in it or if it is typically just an income generator.

Both parties must agree to an expert being instructed as well as who that expert will be. Both parties must also agree on the value of an asset for negotiations to be effective. If the parties can’t agree, then an application can be made for the court to decide.

If you have complex or high-value assets during your divorce, it’s important that you have the right legal advice and representation for you. By using a specialist divorce lawyer you can trust that the support and guidance you receive will get you the best possible result in your divorce settlement.

Hawkins Family Law is a family law specialist, which means we have years of experience in divorce and divorce settlements, including those that involve high-value assets and high-net-worth individuals. If you are looking for reliable and accredited legal advice regarding your divorce or getting a divorce, speak to one of our team today.

Hawkins Family Law has been recognised as a Top-Tier Firm in The Legal 500 2023 edition. For 33 years, The Legal 500 has been analysing the capabilities of law firms across the world, with a comprehensive research programme revised and updated every year to bring the most up-to-date vision of the global legal market.

Managing Partner Jo Hawkins is listed in the elite “Leading Lawyers” group and Partners Loraine Davenport and Annabel Hayward are listed as key lawyers.

Jo Hawkins and Loraine Davenport are also both recognised as Top Recommended in the Spear’s Family Law Index for the best family lawyers for high-net-worth clients.

There is a wide variety of options when it comes to negotiating a divorce settlement. Out-of-court solutions, referred to as Alternative Dispute Resolution (ADR) solutions, include mediation and arbitration. You can read more about them here.

The court has the authority to make the following types of orders:

● Payment of a capital lump sum from one party to the other
● Orders in relation to how pensions should be shared and managed
● Sale or transfer of a property (either owned jointly or by one of the parties)
● Spousal maintenance (also known as periodical payments)

The length of a marriage is an important consideration for the Court. However, the Court must consider all the circumstances in a case, including long relationships that move into a short marriage before separation in a comparable way if it is fair to do so.

It is highly recommended to seek legal advice on a potential agreement to ensure it is fair and that it is likely the Court would approve it.

Here we answer some of the most frequently asked questions about dividing assets in a divorce. If you are unsure about how to divide your assets in a divorce financial settlement or are concerned about how your money will be split, contact our specialist divorce lawyers who will be able to help you.

● How are business assets divided in a divorce?

A business valuation will provide an accurate picture of the value of the business. This is typically undertaken by both parties instructing a single impartial accounting expert. Consideration needs to be given to issues such as:

– Liquidity of business capital – can capital be paid out to the other party and what would be the tax implications of that

– To what extent the business is an income producing asset and how division of the business may affect its ability to produce income

– The structure of the business and how shares / ownership is held

– The extent to which each party has been involved in the business

● Can you protect your assets in a divorce?

If you enter into a pre or postnuptial agreement this can clearly set out how assets will be divided on any possible future divorce. Find out more information on prenuptial agreements here.

Try to keep assets that may be classed as non-matrimonial assets in your sole name and endeavour not to mingle them with matrimonial assets in a marriage (eg: a portfolio received through inheritance kept in your sole name).

● Can you hide assets before a divorce?

Any attempt made to deliberately hide assets in a divorce, transfer assets, or dispose of non-matrimonial assets will be penalised by the Court.

● Are inherited assets protected in a divorce?

If there is more than enough capital to meet the needs of both parties without taking the inheritance into account then the party with the inheritance will have a greater chance of success at arguing that the inheritance should be ringfenced, especially if it has been kept in the party’s sole name and not mingled with matrimonial assets and has been received during the latter stages of the marriage.

● Does a trust protect assets from a divorce?

Contrary to popular belief, a trust does not automatically stop the contents of it falling into the ‘matrimonial pot’. The court will consider whether the trust was used appropriately for tax purposes or whether is purely a vehicle to stop the spouse benefitting from certain assets. If it is a genuine trust, the assets it contains may well be protected if there is no opportunity to distribute them for the benefit of the parties. However, the court will look carefully at the terms of any trust, who the trustees are and what money has been paid out of the trust historically, for what reasons and to whom. The court have power to set aside transactions undertaken to put assets purposefully beyond the reach of the other party. Additionally, if the court feel that the trust would make distributions to the beneficiary then it could make favourable adjustments in other assets to the other party.

● Is my partner entitled to half my savings?

The starting position is yes – savings are an asset to take into account. As to the percentage split, this will depend on other factors as set out in section 25 MCA 1973 and the difference in the financial position of both parties and the needs of all concerned. It may be possible to look at when and how they were accumulated – through work / bonus and so typically part of the pot for division – or from an external source such as an inheritance in which case if there is more than enough capital to meet the needs of the parties then there may be an argument to ringfence all or part.

● Who decides how assets are divided in a divorce?

It is possible for couples to reach an agreement between themselves – this should then be incorporated into a consent order for approval by the court to make it legally binding. If an agreement cannot be reached, alternative dispute resolution options can be entered into such as mediation and/or arbitration. Another option is for an application to be made to court to help guide them to a fair and reasonable solution. In some situations, the court itself will decide what the settlement should be.

● Does it matter who accumulated the wealth throughout a marriage?

Not necessarily. It is common for one party to have worked whilst the other party stayed at home to look after any children or the family in general. Being a homemaker is just as much of a valid contribution to the marriage as going out to work is. Therefore, it is important that the court considers all the circumstances.

● Why is your spouse entitled to financial assets that they have not contributed to?

There is often a large discrepancy between the value of assets that one party
brought into the marriage versus the other. Not so long ago there was a time where the law favoured the husband (or breadwinner). However, that time has now passed, and a marriage is viewed as a joint venture or a partnership of equals. The role of homemaker is equal to the role of breadwinner.

Although one party may not have contributed financially to joint assets, it is probable that they have contributed in other ways that allowed those assets to be accrued. This results in them being entitled to a share.

● Are you required to provide for your spouse financially after a divorce?

Spousal maintenance is not uncommon, especially where one party may not have worked for a long period of time or is on a significantly lower income. However, this will usually not be granted for life. The courts are now adopting an approach that encourages the recipient of spousal maintenance to re-join the workplace to become financially independent from the ex-spouse.

The court views divorce settlements as being key to providing both parties with an “equal start on the road to independent living” and they will consider each case as to whether it Is suitable for a clean financial break with no ongoing spousal maintenance. If there is a financial disparity between the parties then the court can consider unequal capital shares which may compensate sufficiently for lack of spousal maintenance.

● Is it possible to exclude non-matrimonial assets from a divorce settlement?

An asset obtained outside the marriage is not necessarily exempt from being included in the overall settlement. All the assets need to be looked at as a whole to determine what is fair and reasonable whilst also meeting the needs of the parties and any children.

That is not to say that non-matrimonial assets can’t be ring-fenced (i.e. excluded from any discussions), but this will be considered in the circumstances of the case.

Within the context of an agreement, it can be agreed that one party will keep most of the matrimonial assets so, the other party can keep any non-matrimonial assets that they have in their name.

Hawkins Family Law are family law specialists, which means we have years of experience in divorce and divorce settlements, including those that involve high-value assets and high net worth individuals. If you are looking for reliable and accredited legal advice regarding your divorce or getting a divorce, speak to one of our team today.