Introduction
The separation of mutual assets.
Unwinding a marriage is like unwinding an identity. Even though the marriage might have been unhappy, losing identity as a married person can be traumatic and uncertain.
This blog aims to help clarify how to ‘unwind’ or separate mutual assets and give you some tools to simplify the process. At Robertsons Family Law, we can help with the foresight and understanding needed to conceptualise the process so that you can move on to the next phase in your life.
There are no hard and fast rules.
Every divorce is different.
When we advise clients about dividing assets, we will take account of ‘Section 25 factors’ which comes from Section 25 Matrimonial Causes Act of 1973.
First, the Court will always consider the welfare of the family’s children.
After that, the Court will look at factors such as the income capacity of the parties, property owned, and other financial resources. They will ask what the financial needs, obligations, and responsibilities are of each of the parties and what contribution each of the spouses has made or is likely to make to the family’s welfare.
There are more factors – but it is sufficient to say that the Court will look at the totality of all marital assets and act accordingly. In the end, marriage was a partnership, and the fruits of the association must be divided fairly and equally. The Court might decide that one party is entitled to a larger share depending on need, but a 50/50 split is the starting point for most divorces.
A landmark court case: White vs White
Pamela and Martin White were married in 1961 and soon after bought Blagroves farm, where they formed a dairy farming enterprise. Pamela subsequently raised three children and carried out tasks that contributed to the operation’s success.
The couple’s marriage broke down in 1994, and in 1996 both parties brought applications for financial remedy proceedings before the Court. Just the principal marital assets at the time were worth £3.5 million. The parties both wanted a clean break at settlement.
Before White vs White, the weaker spouse in a marriage would typically be awarded a settlement based on ‘reasonable needs and requirements.’ Justice Holman, in this case, determined that Pamela reasonably was entitled to £980,000, which was about a fifth of the total marital pot.
Pamela was unhappy, as she wanted to buy herself a new farm. However, the judge ruled that it was not a reasonable requirement as the existing farm then had to be sold and influenced Martin’s valid need to keep on farming.
On appeal, the argument was that, had Pamela been a business partner, she would have been entitled to a much larger share. This court awarded her a further £700,000.
Still, neither of the parties was happy. Martin wanted the original order reinstated, and he appealed. Pamela cross-appealed, as she wanted an equal share in all assets.
Lord Nicholls of Birkenhead found at the second appeal that both parties made an equal contribution throughout the marriage. He said that Justice Holman made a mistake focusing on the ‘needs-based’ approach. He said the objective must be a ‘fair outcome’ and that there should be no bias favouring the money-earner. There was no reason why the surplus asset had to go to Martin.
This landmark decision made ‘equality’ the consensus. It is not to say that everything had to be split 50/50, but judges should use the ‘yardstick of equality’ in future asset settlement rulings. There should be an equal division of assets unless there is a good reason for it to be unequal.
‘The Matrimonial Pot’
What can be divided?
In family law, there is a distinction between divisible and indivisible things.
Divisible things can be divided into two or more pieces without losing functionality or original purpose. It can be personal items, household items, consumables, land, or even a herd of domestic animals such as sheep or cows. Judicial practice shows that most things can be divided.
Indivisible things are things that will lose purpose if divided. Examples are cars and trucks, musical instruments, paintings, collections of wine or stamps, furniture sets and more.
It is not always straightforward in which category things fall – for instance, a piece of land might be considered indivisible if it is too small to constitute an independent piece of land for a specific use. In controversial situations, the Court will appoint an independent examinator.
Let’s look at a few typical assets:
The marital home
An apartment, a house or land.
These objects are usually the most valuable marital asset in any marriage, and the largest number of cases arises out of how one should handle its division.
The Court will first look after minor children and make sure they have suitable accommodation.
As long as this requirement is adhered to, there are various options: A house can be sold, and the proceeds split, one can transfer the home to one person, or it can be kept until a child reaches the age of eighteen or finishes education. But, of course, all of this depends on what both the parties can afford once they live separately or how much equity there is in the home.
Every situation differs. For example, a large house or apartment with separate bathrooms can be considered divisible if one can convert it into two flats. It will be challenging to do but is not impossible.
Dividing up your pension
‘Pension sharing’
One partner might be entitled to a part of the ex-partner’s retirement pension in the case of divorce. A common way to share pension is to move a part of it to your own scheme.
However, it can only be done when a judge grants a specific order for ‘pension sharing’ during the process of your divorce.
Are you unsure of how to go about this? It is never as simple as halving any CET Value. Different pensions in different schemes bring different results on retirement. It is best to get advice from one of our solicitors at Robertsons Family Law, or you may want to speak to a financial advisor.
Personal savings
‘A fair split.’
Individual and joint accounts are usually added to the pot. The first step would be to find out the balances of all saving plans, credit card bills and more. Once you know the total, you and your ex can start forming an opinion of what you own and how to divide it. Once this is done, it is usually straightforward, as one can simply transfer money from one account to another.
How to divide savings is different in each divorce. A 50/50 split is the starting point, but other factors such as income, earning capacity, property, the number of children, etc., will be considered. Therefore, a fair split of personal savings might not mean an equal split.
However, some assets might not be treated the same. Examples are if one partner inherited or owned money before marriage. An inheritance can be set aside, and if the marital assets are sufficient to meet the needs of the parties, it may be that the one that received the inheritance could keep it. It will all depend on if the inheritance has been ‘intermingled’ into the marriage.
Should you and your partner share debt, remember that both of you are liable for the whole amount. Therefore, there should be a plan for paying shared debt – otherwise, if your ex-partner stops paying and walks away, you’ll have to settle the debt by yourself. Talk to us if you are worried about this.
Business assets
A business is an asset.
A business is generally considered to belong to both parties in the marriage in terms of value. In coming to a settlement, the Court will consider what the company is worth together with other family assets. One can sell a business, but the division of assets will often be realised by paying out a lump sum to one partner or paying out ongoing maintenance payments.
White goods, furniture, jewellery and pets
Make a list.
Who owns what? Deciding can be tough. The only way to get to a solution is to sit down with your ex-partner and go through your list of items. It is good advice to try and agree here as much as you can. It is not worth going to court to decide who gets to keep the fridge or the lounge set – you can quickly end up spending a lot on solicitors’ fees.
Stick a value to each item. If one person wants a more expensive thing, the other can take several smaller articles to the same value.
(You should estimate the ‘new item’ value of furniture and white goods. Your 15-year-old sofa might only be worth £150, but you’ll pay much more if you need to replace it.)
What about the family pet?
Pets under UK law are considered ‘property.’ It would be best to reach a mutual decision of what to do with the family pet and think about your pet’s best interests.
Should you decide to go down the legal route, the Court will probably rule in favour of the party who has ‘proof of ownership’ of the pet. (Aspects that the Court will consider are who is registered with the vet, who bought the animal or who the key provider is.) For example, in one 2011 case, a judge awarded the dog to the husband, as he was the one who mostly fed it and took it for walks.
Conclusion
Every marriage is unique, and therefore the way that assets will be divided upon divorce will depend on individual circumstances. Nothing about asset division is ‘automatic’ or easy. The Court will try to meet the needs of both parties and, most importantly, ensure that the children are looked after.
‘What if we can’t agree?’
Sometimes couples can’t agree about asset division, and the Court will intervene. However, this comes at a considerable cost. Outside help, such as mediation, might help, but you’ll need legal advice if you believe you are not getting a fair settlement.
Do you have any questions about your divorce case and the division of assets? Our family law team have years of experience and will be happy to help. You can also read more about divorce here.
