Division of Assets
Division of Assets
Divorce: factors which govern the resolution of financial matters
The circumstances of each divorce are different and there are no strict rules relating to the resolution of financial matters. The law in this area is flexible. It is not always the case that the assets will be divided equally between the two of you.
When attempting to reach an agreement as to the appropriate financial settlement, there are a series of factors which must be taken into account. These are as follows:
Child support and welfare
Available income, capital and other resources
Financial needs
Ages and length of the marriage
Standard of living enjoyed before the marriage breakdown
Physical or mental incapacity
Contributions
Bad behaviour or conduct
Where there are children involved, their welfare and future financial support is always the first consideration. In practice, this usually involves ensuring that your children's housing and day-to-day needs are met. Where there are limited assets available, it is common that whichever of you is the main carer will receive most or all of the liquid assets of the marriage, in order to enable your children to be rehoused.
Available income, capital and other resources
Before any family solicitor can properly advise upon the realistic division of assets on divorce, the full extent of those assets needs to be identified. Therefore, the home, business and other assets need to be valued and, in the case of pensions, up to date valuations must be obtained. Financial support from third parties, most commonly parents, may also be a relevant consideration, whether that support has already been provided, or is likely in the foreseeable future. The family court will not only look at the income of each of you, but also your earning capacities. For example, if you are not working, there may be an issue regarding how much you could potentially earn if you were to return to work. Where either of you is in a new relationship and cohabiting, your new partner's financial affairs may also be taken into account.
It is necessary to work out not only the finances required for your children to be re-housed, but also the re-housing needs of both of you. Future income needs must also be calculated. It is usually necessary for each of you to complete a schedule of outgoings, estimating how much you need to meet all of your outgoings on a monthly basis, both now and in the future (for example if you are currently in rented accommodation, but anticipate buying another property after the divorce).
Ages and length of the marriage
Generally speaking, the longer the marriage, the larger the claims arising upon divorce. When looking at the length of the marriage it is usual to start from the date on which any pre-marriage cohabitation started, up to the point when you separated. Age is usually a consideration when looking at earning capacity and pension needs on retirement.
Standard of living enjoyed before the marriage breakdown
This is usually taken into account in the context of balancing the overall available assets and resources against the needs of each of you.
Although not relevant in most divorces, this can have a significant impact where it is relevant.
The role of a wife as homemaker and mother is seen as an equal contribution to that of the husband as the main earner. Contribution arguments can be relevant in situations where either of you possessed significant assets prior to the marriage, or where significant assets have built up during the period of separation. For example, the introduction of inherited assets to the marriage can be viewed as a relevant contribution.
This is rarely taken into account in a divorce. To be considered by the court, the behaviour must be extreme.
Recent changes in divorce law
These factors have been in existence since the early 1970s. Divorce law experts now apply them to cases in a very different manner to the way in which they were interpreted and used in the 1970s. The approach is largely influenced by reported high-profile divorce cases which indicate how we should interpret the law, leading to significant changes in divorce law.
In recent years, the most important and influential divorce cases are have been White v White in 2000, and Miller v Miller and McFarlane v McFarlane in 2006. Since White v White in 2000, the courts have to consider the 'yardstick of equality'. The term, coined by the House of Lords, refers to the fact that, whilst there should be no presumption in law that a 50/50 split of assets is necessary, the court must check against the 'yardstick of equality' when assessing whether a fair result has been achieved, whilst at the same time ensuring it is not acting in a discriminatory manner. This principle evolved in Miller v Miller and McFarlane v McFarlane, when the House of Lords confirmed that when making a financial award, the three principles which should guide the court (and therefore family lawyers when advising their clients) are needs, compensation and sharing. There are no hard and fast rules as to how these principles are applied.
The assets of the marriage are not divided equally in every divorce, but where certain factors apply there is a strong argument for an equal division. An equal split of assets will usually take place in the following circumstances:
- where the assets of the marriage are large and are therefore sufficient to meet the housing needs of both the husband and the wife
- the assets were built up during the course of a marriage.
Issues also arise relating to what constitutes 'matrimonial assets' and what should be subject to the sharing principle. This is currently an uncertain area. Arguments often arise over whether assets owned before the marriage should be viewed as non-matrimonial and therefore treated differently. Often the same issues arise over inherited assets or assets built up during the period of separation.
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