When getting divorced, it is important to seek legal advice in terms of the financial aspect of the separation at the earliest opportunity. In order to plan for your future, it is important to establish what you will take from the divorce financially. The financial aspect of the divorce is a complicated one, and every case is different so it is important to speak to a specialist solicitor as opposed to trying to work out what you may be entitled to by speaking to friends whose circumstances are completely different, or trying to find the answer online.
Below is an overview of the process and the factors that are taken into consideration by the court, along with some helpful tips.
What are matrimonial assets?
Matrimonial assets, also known as marital assets, are the financial assets, acquired or accrued during the marriage. Matrimonial assets include the following:
- The family home
- Rental properties or holiday homes
- Stocks, shares and policies
What are non-matrimonial assets?
Non-matrimonial assets are financial assets which were acquired before the marriage, or post separation.
Non-Matrimonial assets are not always excluded from divorce settlements, and need to be considered alongside other factors, in particular the parties ability to meet their future housing and income needs. This can be a complex area and seeking legal advice is extremely important.
Are matrimonial assets divided equally?
Not necessarily. This is a common misconception, and one that, in the absence of legal advice, can result in unfair outcomes, and cases where one party is left unable to meet their future housing needs.
When determining how assets should be divided, a number of factors will be considered by the court, including:
- the income, earning capacity, property and other financial resource which each of the parties to the marriage has, or is likely to have in the foreseeable future. This includes 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
- the financial needs, obligations and responsibilities which each of the parties to the marriage has or is likely to have in the foreseeable future
- the standard of living enjoyed by the family before the breakdown of the marriage
- the age of each party to the marriage and the duration of the marriage
- any physical or mental disability of either of the parties to the marriage
- 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
- the conduct of each of the parties, whatever the nature of the conduct and whether it occurred during the marriage or after the separation of the parties or (as the case may be), dissolution or annulment of the marriage, if that conduct is such that it would in the opinion of the court be inequitable to disregard it
- in cases where there are young children, the Court’s first concern will always be the welfare of those young children and how their needs will be met. In reality, the decisive factor in the majority of cases is the reasonable needs of the parties and the children of the family.
What about Debts?
If you and your spouse have accrued any debts, including credit cards, overdrafts, and loans, during the term of your marriage, these will also be considered as part of the divorce settlement. The court will decide which debts are matrimonial and non-matrimonial for example, and whether they should be paid from the sale proceeds of the family home, or by which party.
What happens to the family home?
For most divorcing couples who own one, the family home is usually the most valuable asset. What happens to the family home can be one of the biggest causes of stress and friction as quite often neither party wants to leave, or it isn’t financially possible for either party to remain in it.
There are a number of options available in relation to the family home, which can either be agreed, or imposed by the court:
- Sale: This involves both people moving out and selling the family home. The sale proceeds will be divided by agreement, or order of the court. It isn’t necessarily always an equal division of equity.
- Transfer of equity: One spouse can arrange to buy the other out of the property, thereby making them sole owner. A lump sum would need to be agreed, or determined by the court, which would be paid simultaneously with the transfer taking place.
- Mesher Order: This is an order which involves postponing the sale of the property until a later date, for example: when the youngest child reaches 18, or the spouse living in the property remarries for example
How do you make the settlement legally binding?
In order to ensure that the settlement is legally binding, it should be carefully drafted into a clean break consent order by an experienced solicitor. This ensures that neither party can go back on the agreement, or come back for a “second bite of the cherry” in the future.
The order will need to be approved and sealed by the court.