Honest answers - financial settlements for separating and divorcing couples

No matter what anyone tells you, there is never one ‘single truth that works for everyone’ when it comes to relationship breakdown and divorce.

When a couple divorces there is a difference between matrimonial assets (those acquired during the marriage) and non-matrimonial assets (eg acquired before the marriage, or by gift, or inheritance).

The starting point for the division of matrimonial assets is that they are shared equally. However, the courts can decide that even non-matrimonial assets are shared between the couple. Below we discuss some of the common assumptions, assertions and questions on the division of assets in a divorce.

Is there a standard calculation to work out a fair split of our assets?

The answer to this question is a resounding “no”! No two family situations are exactly the same, so every financial settlement on a divorce is dependent on its own facts and on relevant considerations that are taken into account.

Most people recognise there is a difference between a short, childless marriage and one where the parties have been together for many years, raising a family and building up assets such as significant equity in a home and a healthy pension fund.

Looking closer, there may be less common circumstances such as a company owned and run by one party to the marriage, or a child with special needs whose care means that one of the parties is unable to go out to work.

Every different set of facts needs to be carefully considered by the parties and their solicitors, taking into account the applicable law and previously decided cases.

Are most financial settlements a 50/50 split?

A 50/50 split can be the starting point for discussions about how to divide financial assets including property, savings and pensions, however, there are lots of factors that are then taken into consideration that will change this ratio.

Dependent children and each party’s financial need will impact things considerably. For example, one party may have very low income and may not be able to get a mortgage - this will affect how any equity in a house is split between parties and the lower earning party could retain the entire property or the majority of proceeds from any sale either permanently or until the children are grown up.

For example, if there is a mortgage free house worth £1.5 million it may be considered reasonable that each party has £750,000 to enable them to re-house. However, if both need £950,000 to purchase a property and one person is on a low income, then it may be that person receives the full £950,000 and the other receives less as they have a much higher salary and mortgage capacity. If there is only £300,000 of equity from the sale of the house, then an equal division of £150,000 will probably not enable a weaker financial party to rehouse at all and so a different solution would be sought.

I will get more because I worked and paid for everything during the marriage

The Family Court is concerned with fairness and presumes that working and non-working spouses contribute equally to the marriage.

The court makes its decision based on case-specific facts, which include the length of the marriage, whether there are any children, income/earning capacity, the health of the parties and level of wealth. No matter whether you are the “working” or “non-working” spouse, do not make any assumptions about how your financial assets will be split.

My wife is going to get everything

Many husbands feel like this, but it is certainly not the case. It may be that the wife remains in the house in order to provide a home for the children, but this could be a ‘short term’ use, and the husband could receive his fair share in the future.

It can be particularly hard if a couple is splitting up if, say, they are older, and the husband may already be drawing a pension. He may have thought that, in their retirement, they would have the benefit of their jointly owned mortgage free home and retirement income and such savings as they have. In sharing it upon divorce he will, understandably, feel that he will be much worse off than the retirement he envisaged.

I am automatically entitled to spousal maintenance

Spousal maintenance is a sum of money that is paid from one spouse to the other either annually or monthly. A financial settlement needs to be fair for both parties so whether and how much spousal maintenance is paid depends on the circumstances of the couple. Income, earning potential and outgoings are taken into account, but there is no set calculation for how much will be paid

Spousal maintenance may be paid on an interim basis until a financial agreement has been reached, in the short or medium term, for example, whilst children are young or finish education, or it may be payable for life. Maintenance provisions cease at the point of re-marriage or death and potentially, could end if the receiver cohabits.

Be aware that the amount of spousal maintenance can be varied either up or down as a result of a significant change in circumstances of either party.

I don’t have to disclose my finances or my earnings to get a legal agreement

When spouses separate and contemplate divorce, some common questions arise. What do I have to disclose to my former spouse in terms of my assets, debts and income? What does my former spouse have to disclose to me? Can we reach agreement without my former spouse knowing about my financial affairs?

Both spouses must disclose their financial position to each other before a fair settlement can be reached.

Whilst this may seem very clear, in practice the process of financial disclosure is much more nuanced. There are several levels and methods of financial disclosure and separating spouses should take legal advice as to the most appropriate level and method in their specific circumstances.

My ex can easily hide their assets

It is not easy to hide assets in family law proceedings. Detailed financial disclosure can be obtained including bank statements for all accounts.

As part of financial disclosure credit card statements also have to be produced. Any withdrawals or transfers within all these accounts will be identified. Business assets can be valued with an independently instructed forensic accountant. There are also legal steps that can be taken at an early stage to protect assets.

In some cases one spouse may transfer assets to a friend, or family member, feeling confident their ‘story’ will be supported by the friend. However, when the person receiving the money realises they must go to court to give evidence, they are rarely willing to commit perjury.

Read our longer article 'I can transfer money to a trusted friend and it cannot be counted as a marital asset'  for more information.

The pension I accrued before my marriage is not taken into account if we split up

Whilst this statement can hold true, it is most definitely not always the case particularly after a marriage of any significant length.

There are very specific rules on how pensions can be valued and compared and how such sharing is implemented by the pension providers, and these are very frequently misunderstood.

It’s really important to get it right when it comes to dividing the pensions upon a divorce; getting it wrong can easily mean a very different lifestyle in retirement to that which an individual may have worked and planned for during their working life.

Pensions often make up a large part of a separating couple’s assets and are hugely important in terms of the fairness of a financial settlement, particularly so if one party considers they may have an argument for excluding the element of the pension they accrued before they got married.

Pensions can only be shared in the event of relationship breakdown where there is a divorce (or the dissolution of a civil partnership) and a final financial remedy order in place.

Offsetting, where one party to the marriage receives other assets, such as cash or equity in a property, instead of taking a share of the other’s pension is also possible. It is really important that the needs and aims of the party are carefully considered and the implications of giving up an entitlement to a share of a spouse’s pension fully understood.

Are prenups and post-nups legally binding?

Prenups and post-nups can be legally binding, but in England and Wales they are not automatically binding.

A prenup (entered into before marriage or civil partnership) and a post-nup (entered into after the marriage or civil partnership) are agreements about how property and finances will be dealt with if the relationship breaks down.

A pre-nup should be completed at least one month before the wedding. If, at the time of the relationship breakdown, the agreement does not meet a party’s or any children’s needs (as ultimately decided by the court) it will not be binding. It is down to the courts to make the final decision.

I owned the house before I met you, so you won’t get a half share

The family home is considered to be a matrimonial asset, even if one party bought it before the marriage. Unless the marriage is only a year or two long, it would be very unusual for it not to be split between the couple, taking into account any dependent children and the financial need of each party.

If I leave the marital home, I lose my rights to it

If you move out of the marital home you retain a financial interest in it, so can seek its sale or transfer to you, but you lose the right to occupy it. However, if you move out there are many variables to be decided, such as who pays the mortgage and bills, where will you live and who pays for that cost? There is no easy or “right” answer about whether and when you move out so take legal advice to assess what is right for you.

My ex cannot make a claim against assets I bought before the marriage

Assets are considered in two ways. Matrimonial assets are those that have been acquired during the marriage from income, savings, or an increase in property values. There are other assets which are “non-matrimonial”.

They could be non-matrimonial because they were owned before the marriage, or they have come from an inheritance during the marriage. It may be possible to exclude these from the financial settlement. However, one of the big questions is how have these assets have been treated during the marriage? If they were used as – or used to purchase – a matrimonial asset, it is unlikely that it will be possible to exclude it from the settlement agreement. They will also not be excluded if financial needs require them to be part of the settlement. 

Can I keep all the money that I inherited from my father?

Any inheritance spent on purchasing a matrimonial asset becomes a shared asset. If the money is not spent, it can still be considered a matrimonial asset if court declares it is needed to support the financial needs of the lower earning party.

I can keep the wedding gifts that came from my family

Wedding gifts are given to the couple and are a matrimonial asset.

However, it is important to seek legal advice to check whether there is any documentation which could affect this, particularly if it was a large financial gift such as a mortgage-free home.

You cannot have any of the savings as I want to put these in a fund for the children

Savings are matrimonial assets and cannot be ring fenced ‘for the children’ unless the couple agree together to create a fund.

Are lottery winnings or other windfalls an asset of the marriage?

A lottery win and other windfalls if received by one party during a marriage will be an asset of the marriage which claims will certainly be asserted against. When a marriage has seen windfall or unmatched contributions, consideration will have to be given to overall needs and arguments in respect of mingling and ringfencing assets.

Being divorced means you have no more financial claims on each other

When commencing divorce proceedings parties can chose to resolve financial claims. Even when a divorce is concluded this does not mean that financial claims come to an end.

To resolve financial claims, a specific application for financial remedies must be made. A financial remedy application can be resolved by consent once parties have reached an agreement or imposed by the court at the end of the application process.

Even when matters are agreed or a final order is made, financial claims will only ever end upon the court ordering a “clean break”. In certain circumstances there will be cases where a “clean break is not possible” immediately.

If financial claims are not resolved by the time that Decree Absolute is granted to finalise a divorce, subject to a party not re-marrying, there is no time bar on a party preventing them from bringing a financial claim. Because financial claims can remain open post-divorce, it is better to resolve financial claims alongside the divorce rather than delay.

Whilst a financial remedy application will address financial claims between spouses, it is important to note that a spouse will still have financial obligations for children of the marriage. 

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© SA LAW 2021

Every care is taken in the preparation of our articles. However, no responsibility can be accepted to any person who acts on the basis of information contained in them alone. You are recommended to obtain specific advice in respect of individual cases.

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