How Finances Are Divided In A Divorce

In fact, most couples can work out a fair financial settlement without going to Court. Working with a divorce Solicitor who is a member of Resolution increases the chances of a non-confrontational agreement being achieved as they are focused on helping clients resolve disputes constructively.

Your family lawyer will help you divide your finances and assets by referring to the guidelines set out in section 25 of the Matrimonial Causes Act 1973. And if you cannot reach a financial settlement with the help of negotiation and/or mediation, you can be confident that the Court will also carefully consider the section 25 principles when making a Financial Order.

Before outlining the principles, it is important to point out that both parties have a legal obligation to make a full and frank disclosure regarding their financial position. If you believe your spouse is hiding assets, your divorce lawyer can work with a forensic accountant to pierce corporate veils and look into any off-shore trusts. A Freezing Order can also be sought from the Court to prevent the suspected spouse from disposing of the assets in order to avoid including them in the financial settlement.

The principles of the Matrimonial Causes Act 1973, section 25 are as follows:

The financial resources of the parties

The court will have regard to the "income, earning capacity, property and other financial resources that each party to the marriage has or is likely to have in the foreseeable future.”

Not only will each spouses’ current earnings be considered but also their earning capacity, i.e what they could earn if they exploited all reasonable opportunities.

The needs, obligations, and responsibilities of the parties

The term ‘need’ is subjective and depends a lot on the standard of living enjoyed during the marriage. For high-net-worth couples, ‘need’ will be generously interpreted. Obligations to third parties, such as children from a former marriage or business partners will also be considered.

The standard of living enjoyed during the marriage

This will play a large role in high-net-worth divorce. When a couple separate, both will likely see a drop in living standards. The Court will want to avoid any unfair situations, such as one party suffering a large drop in their standard of living whilst the other spouse quickly regains their pre-divorce lifestyle.

The age of the parties and the length of the marriage

How old the parties to the marriage are at the time of divorce matters greatly when it comes to the financial settlement.

For example, a wife in her 60s who has worked in low-paid, part-time positions whilst bringing up children has different financial needs from a childfree 25-year-old who has their whole working life ahead of them.

The division of pensions can also become a significant source of tension for middle-aged divorcing couples.

The longer the length of the marriage, the more intertwined finances are likely to have become, which may lead to a more equal division of assets. However, each principle will be separately considered, so a two-year marriage where one party has enormous earning potential and young children are involved may result in a financial settlement well removed from an equal division.

The contributions of the parties

The Courts have made explicitly clear in case law that financial and non-financial contributions should be treated equally. What this means in practice is although the starting point for dividing property and assets is a 50/50 split, the Court can and does move away from this, for example by awarding spousal maintenance.

Conduct

The conduct of the parties will only be given weight in the most extreme circumstances. For example, in the case of

 H v H (Financial Relief: Attempted Murder as Conduct) [2005] EWHC 2911 (Fam)

the husband was awarded a smaller proportion of the matrimonial assets after he attempted to murder his wife. Failure to disclose assets or lying to the Court about the true state of their financial affairs has also resulted in one or both parties’ conduct being considered; however, adultery and unreasonable behaviour is normally ignored by the Court when working out a financial settlement.

In summary

Although working out a fair financial settlement in a divorce can cause disputes, especially in cases involving high-net-worth individuals, most couples manage to reach an agreement outside of Court. Instructing an experienced family law Solicitor who is a member of Resolution will ensure your best interests are protected and disagreements are resolved in a harmonious, respectful way.

For a free consultation regarding financial remedy proceedings and arrangements, please call us on 0208 300 6666.