Dividing matrimonial finances during a separation can be a source of conflict. There may be disagreement over how much each party should receive, especially when there are also assets to split.
However, agreeing on a fair assets split in divorce proceedings is crucial to allow you to reach an amicable financial settlement, and to ensure that both parties can make a clean break from one another.
In this guide, we’ll answer the question of how are assets split in divorce, looking at the legal framework that surround this issue and the ways in which the divorce courts decide what is considered a ‘fair’ award for each partner.
We will also look at some of the ways in which you can protect the value of matrimonial and non-matrimonial assets, so that you and your spouse can retain as much of that value as possible following your separation.
For more guidance on any of the issues raised in this article, contact our financial mediators at Marcia Mediation, and we will be happy to help you decide how to split your assets fairly during your divorce.
It’s important to know the difference between matrimonial and non-matrimonial assets. In general during a divorce, you only need to consider how to divide matrimonial assets.
The key difference between the two is:
Some common examples of non-matrimonial assets include gifts and inheritances that have never been used for the benefit of your spouse.
In some cases, assets can become ‘matrimonial’ when they previously were not. For example, if you inherit a property and put it into joint names, or use matrimonial finance to pay off the mortgage, then your spouse is likely to have a claim to a share when you separate.
There are also instances where non-matrimonial assets may be taken into account by a divorce court. This includes when your ex-partner would otherwise face severe financial difficulties, and especially when the welfare of children might be affected.
The strictly legal answer to the question of how are assets split in divorce is set out in a piece of legislation called the Matrimonial Causes Act 1973, which dates from May 23rd 1973 but has been updated many times in the years since.
Under this legislation, the courts are given the power to make financial orders that determine how assets are split between both parties, which should take certain criteria into account.
Some of the factors that can determine the court-ordered financial settlement include:
These criteria are listed in Section 25 of the Matrimonial Causes Act 1973 and the court must take them into consideration, putting the welfare of minors above all else.
There is no fixed formula for the courts to apply that determines how are assets split in divorce. Although the criteria listed above are mandatory considerations, they do not dictate the final financial award.
As such, the decision of what’s fair in a divorce settlement is at the discretion of the court. The order made will often be a balancing act between objective criteria like matrimonial vs non-matrimonial assets and finances, set against subjective considerations like how much each party ‘needs’ to maintain their quality of life.
If you have children under the age of 18, their needs will be prioritised. This means, for example, that a court is unlikely to order your children to leave the family home without alternative accommodation of an equivalent standard.
The division of assets in divorce can be complicated. It’s not always apparent exactly how much an asset is worth, and theoretical valuations don’t always match the real-world market value if you try to sell the asset.
Because of this, the courts will aim to make a fair valuation of the real-terms value of any marital assets, similar to valuing the total estate of a deceased individual. This total value of the finances and assets from the marriage is then divided according to what the court feels is fair to each partner.
The list below gives some typical examples of matrimonial assets. In general, a marital asset is anything that has a non-cash value, which is jointly owned or used for the joint benefit of both spouses in a marriage.
Another way to think about this is whether you can divide the item immediately between you (e.g. a cash savings account) or whether you need to sell it and split the cash (e.g. property or stocks and shares). If you need to sell it to be able to split its value, it is likely to be regarded as an asset.
Some of the most common assets in divorce include:
Jointly owned businesses can be a point of contention, and you should decide whether you can continue to work together amicably after divorce, or whether you want to transfer the business into one party’s name following your separation.
This is an issue our family business mediators at Marcia Mediation encounter on a regular basis, and we can help you to decide the best way to proceed.
It’s also important to include the value of private pension savings when calculating who gets what in divorce – this is often missed, which can have an adverse effect on the quality of life of one party when they reach retirement age.
A prenuptial agreement is not strictly binding on the divorce courts in England and Wales. However, it will generally be taken into account and honoured if there are no specific reasons against doing so (e.g. the welfare of minors).
Protecting assets using a prenuptial agreement is seen as an honest and open way to ringfence certain assets by mutual arrangement with your spouse. It’s also an opportunity to give a fair valuation to pre-existing assets, so they don’t become contentious later.
In comparison, transferring assets into your sole name can be perceived as ‘putting assets beyond a person’s reach’, which the courts could consider misleading (and may potentially consider to be a form of fraud, a criminal offence).
We offer prenup mediation at Marcia Mediation as part of our financial mediation service, so that we can help you to make sure that your intentions are clear when transferring assets or placing them into sole ownership.
In general, using divorce solicitors to negotiate financial settlements – or relying on the court to do so – can be a lengthy and costly process, with less chance of both parties receiving a satisfactory settlement.
Reaching agreement outside court is often preferable. It allows you to negotiate more flexibly, taking into account sentimental value as well as purely financial value.
For example, you might decide that a family business passed down through the generations should stay with the party who inherited it, even if it is deemed to be a matrimonial asset. Or a painting by a favourite artist might be worth much more to one spouse than its saleable market value.
Marcia Mediation’s financial mediators can help you to make these decisions during the stressful process of divorce, with a view to making things easier on all involved.
Ultimately, we want you to be able to divorce with dignity, while holding on to the full value of your marital assets – allowing both parties (and any dependants) to proceed with a clean break and the best possible quality of life.
If you have any questions, call us on 0330 236 7450 or fill out this form
