It is no secret that divorce is one of the top five most stressful events a person can experience in their lifetime. Apart from the emotional turmoil involved, dividing up assets that have been acquired during a marriage can turn even the most amicable separations into an all-out war. You may find yourself fighting tooth and nail to secure material assets you never dreamed would be important to you, and wondering how you and your ex-spouse went from being happily married, to resembling the characters played by Michael Douglas and Kathleen Turner in “The War of the Roses”.
Throughout England and Wales last year 42% of marriages ended in divorce. And if a couple cannot agree between themselves how to divide up marital assets, then they can apply to the Court for a decision on how the property will be split.
The law surrounding the division of matrimonial property and assets is lengthy and complicated. This blog is designed to provide you with a brief overview of the main law surrounding the division of property upon dissolution of marriage. If you are in the midst of a divorce, it is always advisable to seek independent legal advice to ensure your personal interests, and the interests of any dependent children, are protected.
Matrimonial and Non-matrimonial Property
If you have decided to end your marriage, one of the first things you need to do in regard to dividing up marital property and assets is establish exactly what is and what is not matrimonial property.
Unfortunately, the law is far from clear on what constitutes matrimonial property. If the marriage has lasted for many years it is likely that any property acquired prior to the marriage will be considered part of the ‘matrimonial pot’. However, if the marriage was one of short duration, ie fewer than five years, then it is less likely that one party to the marriage can make a claim on the extra-marital property of the other party. In the case of Miller v MacFarlane (2006), Lord Nicholls stated,
“In the case of a short marriage, fairness may well require that the claimant should not be entitled to a share of the other’s non-matrimonial property. The source of the asset may be a good reason for departure from equality. This reflects the instinctive feeling that the parties will generally have less call upon each other on the breakdown of a short marriage”.
The Basic Premise For Division of Marital Property and Assets
In most situations, separating couples manage to agree between themselves how to divide the proceeds of matrimonial property and assets. The Court approval of the agreement is then obtained as a ‘consent order’ to make the agreement legally binding. However, if there is a dispute, legal advice needs to be sought. Going to court is a last resort and couples are always encouraged to resolve their dispute by alternatives such as mediation.
As a broad starting point, the courts will look at splitting all property and assets equally between the divorcing couple. This is known as the ‘yardstick of equality’ and the principle should only be departed from if, when considering the couples individual circumstances, if the court finds good reason for doing so.
When considering a departure from the ‘yardstick of equality’ the courts are guided by the Matrimonial Causes Act 1973, in particular, section 25 (2) (which is worth listing in full). It states that the court should have regard to the following matters when deciding how to divide marital property and assets:
(a) the income, earning capacity, property and other financial resources which each of the parties to the marriage has or is likely to have in the foreseeable future, including in the case of earning capacity any increase in that capacity which it would in the opinion of the court be reasonable to expect a party to the marriage to take steps to acquire;
(b )the financial needs, obligations and responsibilities which each of the parties to the marriage has or is likely to have in the foreseeable future;
(c) the standard of living enjoyed by the family before the breakdown of the marriage;
(d )the age of each party to the marriage and the duration of the marriage;
(e) any physical or mental disability of either of the parties to the marriage;
(f) the contributions which each of the parties has made or is likely in the foreseeable future to make to the welfare of the family, including any contribution by looking after the home or caring for the family;
(g) the conduct of each of the parties, if that conduct is such that it would in the opinion of the court be inequitable to disregard it;
(h) in the case of proceedings for divorce or nullity of marriage, the value to each of the parties to the marriage of any benefit F4. . . which, by reason of the dissolution or annulment of the marriage, that party will lose the chance of acquiring.
Dividing Property and Assets If Children Are Involved
When Kate* and her husband split up she was worried how she and her ex-husband would manage the issue of the family home. “My main concern was to ensure that the children did not experience any more upheaval than was necessary. They were happy in their school so moving was out of the question”. During mediation, Kate and her ex-husband agreed that Kate would remain in the family home with the couple’s children, and the sale of the home would be delayed under a Mesher Order. A Mesher Order allows for the sale of a family home to be postponed and both parties to maintain some equity in the property until a trigger event occurs, such as the youngest child reaching the age of 18 years, or finishing full-time education. Once the trigger event occurs, the property can be sold and the proceeds of the sale can be divided according to an agreement made at the time of the dissolution of the marriage.
High Net Worth Couples and the Division of Marital Property and Assets
Prior to 2000, the courts typically decided in the case of the spouse who was financially vulnerable, (for example, a woman who had left her career in order to stay at home with the couple’s children) that the weaker party would have their basic financial needs and reasonable requirements taken care of, but nothing more.
Then came the decision of White v White (2000).
This case, decided in the House of Lords, turned matrimonial property division in the case of wealthy individuals on its head. Lord Nicholls stated that, when ruling on the division of property and assets in the case where one party to the marriage had stayed at home to care for the children while the other party worked, "as a general guide, equality should be departed from only if, and to the extent that, there is good reason for doing so. The need to consider and articulate reasons for departing from equality would help the parties and the court to focus on the need to ensure the absence of discrimination”.
This case gave recognition to the fact that a spouse who stays at home and supports their partner by taking care of the home and children, provides an equally valid contribution to the acquisition of property and assets as the person who is bringing in the money.
The process of dividing marital property and assets during a divorce can be fraught with high emotions and stress. Solid and pragmatic legal advice can help keep issues in perspective, and bring about an agreement in the most amicable way possible.
* Names have been changed.
To find out more click here or contact Donald Freeman for more information . You can also phone us on (01444) 235 232 and we would be happy to answer any questions you may have.
29th September 2014
This blog is intended for the use of clients and other interested parties. The information contained in it is believed to be correct at the date of publication but it should not be relied upon as a substitute for obtaining specific professional advice.