What does the law state with regards to financial distribution?
The law governing financial remedy applications can be found within the Matrimonial Causes Act 1973. This legislation simply provides the court with powers to make certain orders such as sale of property, payments of lump sums by one spouse to the other, periodical payments (monthly maintenance), pension share orders etc. However, the legalisation does not set out precisely what the division will be and only states that the court must:
have regard to all the circumstances of the case, first consideration being given to the welfare while a minor of any child of the family who has not attained the age of eighteen and in particular should have regard to the factors below (known as the S25 factors).
(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 which, by reason of the dissolution or annulment of the marriage, that party will lose the chance of acquiring.
Has anything changed in recent years?
Case law (law that has been established by following decisions made by judges in earlier cases) has developed to give more colour on this and to reflect an evolving society and current thinking about marriage being a true partnership. The basic rule to take away is that assets and income should be redistributed fairly between both parties.
Are all of your assets divided equally in divorce?
There is a presumption that ALL assets built up during the marriage (no matter by whom and in whose name they are held), known as ‘matrimonial assets’ should be split equally unless there is very good reason otherwise.
This presumption of equality is a presumption only and there will be plenty of cases where an equal split of assets will not be fair, for example if an equal split does not meet a party’s basic needs. Needs are therefore a very important factor that the court will consider and, in some cases, will be overriding.
This presumption of an equal split does not apply to other assets that have been accrued before the marriage or post separation or that have come from outside the marriage, such as from an inheritance (known as ‘non-matrimonial assets’). However, the court will take into account all assets of whatever nature when considering the overall balance of fairness. The provenance of assets after a long marriage will become less relevant. Further if ‘non-matrimonial assets’ have become mingled with matrimonial assets this can muddy the water and cause such mingled assets to be treated as ‘matrimonial assets’.
What about more complex assets?
Unusual asset structures, trusts and company assets can add a particular complexity. Certain assets can be hard to value and an expert will need to be involved.
The above deals with division of the capital. Division of pensions is usually dealt with by a pension sharing order (but there are alternative ways to balance out pensions). Again, there is a presumption of an equal split and there is less inclination by the court, especially in a longer marriage, to give credit to any party for building up pension value pre-marriage if to do so would leave the other with insufficient provision in retirement. The ages of the parties are particularly relevant when it comes to pension division as the older the party the less opportunity to build up provision for the future. Pensions are a complicated area and if they are of a higher value and if they contain final salary (defined benefit) scheme the input of a pension expert is usually required to give a fair value and assess the split necessary to give equality of income on retirement.
Is future income included in maintenance decisions?
When it comes to any payments of maintenance, it is not the law that future income should be shared. The higher earner would be liable to pay support to their former spouse if the former spouse has a need and the amount assessed as payable would be driven by the other party’s needs. There is an expectation that the party receiving maintenance should exploit their earning capacity. Further, the court has a duty to consider the duration of the maintenance obligation for such term as allows the receiving party to adjust without undue hardship to independence.
Maintenance for children is a separate category of claim and can only be determined by the court in certain limited cases although if the parties agree the amount, the court can make an order for child support. If agreement cannot be reached the majority of cases will fall to have child support assessed by the Child Maintenance Service which is a government agency (formerly known as the Child Support Agency).
What are the next steps?
Judges have a wide discretion on matters and as with all humans, will view things differently. So, it is very hard to predict accurately what the outcome will be if the decision is left to a judge. As lawyers we can usually predict the outcome within a certain range, but that range can be quite wide.
It must be emphasised that litigation is expensive and risky, so it is always sensible to try and find a compromise. Most people do in fact reach agreement with legal assistance and/ or with the help of a Mediator and without going to court. Even if they start court proceedings only a small percentage get to a final hearing where a judge imposes a decision.
If you need any help navigating your way around financial claims within divorce then we have a large department with caring, supportive and experienced solicitors who can assist. Just call or email us.
