Guide To Splitting Assets In a Divorce
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Besides the legal process of obtaining a divorce, and all aspects involving children, there are also many important financial elements that require consideration.
This guide to splitting assets in a divorce considers the financial aspect of divorce in the UK and specifically which personal assets are included in the matrimonial pot when dividing assets in a divorce.
The general principle and therefore the starting point is that the matrimonial pot should be divided equally upon divorce.
But in practice, the process is often not that simple and many cases involving splitting assets after a divorce end up as a divorce 70 30 asset split.
How to divide assets in a divorce?
The general principle is that the matrimonial pot should be divided equally in a divorce and there is an assumption of a 50:50 split as the starting point.
But there is an overriding principle of ‘fairness’ which may well trump a simple division of assets.
That’s because each individual divorce settlement will have its own specific set of circumstances and the court may decide that one spouse is entitled to a larger division of assets.
So depending on each party’s need, a divorce 70/30 asset split or other such ratio splits may be more appropriate.
It’s important to understand that fair doesn’t necessarily mean 50/50 when it comes to agreeing to a divorce financial settlement.
When researching the division of assets in divorce the common split examples in the UK are a divorce 70/30 asset split, a 60/40 asset split, or a 50/50 asset split. Less common is an 80/20 asset split divorce.
In the UK at least, receiving an asset split of over 60/40 is very rare.
You may have heard stories about a spouse receiving a 70/30 asset split and therefore assume that this is common, however, it’s highly likely that this was a myth.
When the Court is deciding if your agreement is fair and whether the deviation away from a 50/50 split (for example, a 70/30 split) is reasonable and necessary, they will consider a number of factors set out in Section 25 of the Matrimonial Causes Act 1973, such as:
- The welfare of any children under the age of 18 is the primary consideration.
- 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.
- Financial needs, obligations, and responsibilities that each of the parties to the marriage has or is likely to have in the foreseeable future.
- Standard of living enjoyed by the family before the breakdown of the marriage.
- Age of each party in the marriage and the duration of the marriage.
Which assets are typically included in a divorce?
Most assets and finances that have been acquired or built up during the course of the marriage will be added to the so-called ‘matrimonial pot’ upon divorce. These include:
- Matrimonial home – the house where husband and wife lived (irrespective of whose name is on the deed).
- Personal savings – whether these are in individual or joint accounts, any monetary assets are generally added to the pot.
- Pensions – these are considered to be a matrimonial asset, and their value will be taken into account when coming to a financial settlement.
- Business assets – even non-family businesses set up and managed by one spouse are considered to belong to both husband and wife in terms of their value. But rather than selling the business and splitting proceeds, often the division of assets will be realised via ongoing maintenance payments and/or a lump sum.
- Personal belongings – Things such as furniture, electrical goods, art, jewellery, and even family pets are often included in financial agreements.
Any non-matrimonial property including an inheritance or assets which were acquired before the marriage, and kept separately from joint finances, are often treated differently in the context of divorce.
If money is inherited by either spouse during the marriage, the question of whether it will be added to the matrimonial pot will depend upon several factors.
The rationale behind this was set out in the case of White v. White, in which the court acknowledged the view, widely but not universally held, that ‘property owned before the marriage by one spouse and inherited property whenever acquired stand on a different footing from what may be loosely called matrimonial property’.
In addition, parents will occasionally provide gifts or loans to their married sons or daughters, so are gifts to one spouse considered marital property in UK divorce settlements?
Gifts from parents or others to an individual spouse will likely become matrimonial property in England or Wales when dividing assets in divorce settlements.
However, the situation is different in Scotland, where gifts from third parties will not usually be considered matrimonial property.
What happens if we cannot agree on how to divide our assets?
It’s always best to come to a fair agreement between yourselves however, sometimes this just isn’t possible.
The courts can then help decide how your assets should be split but this does come at a cost. You will need to apply to the court, which comes with a fee attached.
Mediation may work and help keep the costs down but it’s always best to seek legal advice, especially if you believe you are not getting a fair settlement.
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