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Capital – Divorce and Money

In a financial application in Divorce Proceedings all of the parties’ assets are taken into account; regardless of who is the legal owner.

Divorce in England and Wales

The starting position for the split of capital in a divorce settlement is an equal division of assets in cases of a long marriage where assets exceed needs. This is as a result of a House of Lords’ decision in White v White in 2000. The House of Lords stated that this was not to establish a legal presumption of equal division of capital in divorce settlements but that Family Law Courts should consider the division of assets against a yardstick of equality.

In practice this has resulted in an equal division being used as a starting point and then other factors being considered to vary it.

Splitting Up – Who Gets What

There are reasons for departure from a 50/50 split which the divorce courts take into account. They include:

1) Children and Divorce

The first consideration of the Family Law Courts is the welfare of any children of the family under the age of 18, which includes step-children. It is not more important than the other matters but it is the priority.

If one spouse has the responsibility of caring for the children, their needs will be considered first, and their capital needs may be greater as they will need a bigger property in order to house the children.

However, the overriding objective is a “fair outcome” and the court will not leave the parent without care of the children destitute in order to maintain the children in the former matrimonial home.

2) Duration of the Marriage – Short Marriages

If a divorce petition is filed in a short, childless marriage (normally less than 5 years duration) it is unlikely that a 50/50 division of assets will be ordered particularly if one spouse brought substantially more assets to the marriage. Normally assets acquired prior to the marriage will be retained, or returned to the spouse who originally had them, and assets accumulated during the b will be divided on a 50/50 basis when the parties divorce.

The divorce courts will now take into account periods of cohabitation, in the past they did not. If there has been a long, seamless period of cohabitation this may be added to the total years of the relationship and may change a classification from a short-to-medium or even long-term marriage.

This will be particularly relevant when civil partnership agreements are dissolved as some couples have cohabited for decades prior to being able to formalise their relationship.

The Family Law Courts will consider whether there are children involved and this may be a factor which allows the parent with care more of the available capital in a divorce settlement and may outweigh a short marriage.

3) Inherited Wealth

In some European Countries inherited wealth is excluded from divorce settlements.

In Scotland inherited wealth is generally excluded.

In England and Wales it is a factor which the Family Law Courts can take into account but the judge has a wide discretion. In some divorce cases the Family Law Courts have left the inheritance, such as the family farm, with the spouse who inherited, particularly if it has been in a family for generations. However, the former matrimonial home has particular importance and the divorce courts will seek not to exclude this as an asset of the marriage if possible.

Different factors take priority as to whether assets exceed needs.

4) The Parties’ Reasonable Needs

In most divorce settlements there are insufficient assets to meet both parties’ reasonable needs, the standard of living enjoyed during the marriage will need to drop and the capital is allocated in order to cause the least hardship to both parties. The divorce courts then have to allocate assets on a needs and affordability basis, for example the wife may need more capital to re-house herself as she has a lower earning capacity and the husband is able to fund a higher mortgage for himself.

This is called a needs approach, the needs of the economically weaker spouse are given priority and the capital is allocated accordingly.

5) The Earning Capacity and Earning Potential of the Parties

After a long marriage, a wife in her 50s who has stayed at home to look after the children has a low earning capacity and a low earning potential. The husband may have insufficient income to meet her needs and therefore some of the capital may need to be allocated to fund her income needs.

A wife with young children may have a low earning potential if she is caring for the children herself, but she may have an earning capacity for the future, she may require additional capital to fund her retraining, or to purchase a property large enough for an au pair so that she can return to work full-time.

6) Expectations

The divorce courts will consider any income or property which a party is likely to have in the foreseeable future. This will include such things as damages for personal injury or share options. It also includes inheritance prospects.

In order to be included, the expectation needs to be a real and imminent prospect, testators can make a new will whenever they wish and the court cannot order a third party to reveal his intentions nor stick to them. Furthermore, share prices can go down as well as up.

7) Whether any of the Parties has a Disability

This is relevant when calculating earning capacity and earning potential.

8) Age of the Parties

Again, this is relevant to a calculation of the parties earning capacity and earning potential.

9) Contributions which each party has made and is likely to make in the foreseeable future to the welfare of the family including any contribution by looking after the home or by caring for the family.

If one of the parties has looked after the children while the other has worked, each role is given equal weight in assessing contribution to the marriage.

If a party seeks departure from equality on the basis of contribution he/she must show that he/she has made an exceptional, stellar contribution, beyond the ordinary and the Court of Appeal in Lambert v Lambert (2002) stated that this would succeed in only exceptional circumstances.

10) Behaviour

In rare cases behaviour can be considered as a factor in determining the division of assets. However, the behaviour must be severe, for example, in Jones v Jones (1976) the husband attacked and disabled his wife, thereby limiting her earning capacity, and it was considered unfair not to award her more of the available capital as a result.

The recent high profile case of Miller v Miller has not re-introduced behaviour in the breakdown of the marriage as a relevant factor in the distribution of the assets.

11) The Standard of Living during the Marriage

The Family Law Courts must have regard to the standard of living enjoyed by the family before the breakdown of the marriage. In most cases the divorce court will aim to ensure that the standard of living of one party does not fall to a great extent in comparison to the other.

Different considerations take priority in short marriages and in big money cases.

12) The value of benefits lost through divorce

For example widowers’/widows’ pension rights.

13) All the circumstances of the case

Recently divorce courts have taken pre-nuptial agreements into consideration. The judges are not bound by them, but they are one of the factors which they can take into consideration.

There are certain conditions which must be met in order to ensure they are considered, such as each party having legal representation and full and frank disclosure taking place.

Finally, no one factor is more important than any other. Each case is decided on its own facts and the judges have a wide discretion to reach what they deem a fair outcome.

Lynne Bastow - Divorce Solicitor

Meet Lynne Bastow

With over 20 years experience, Lynne can provide excellent and valuable advice and has a friendly, positive approach towards all her clients, ensuring you get the best service possible. If you would like my help you can contact me here. Contact Lynne

Read Lynne's Books

If you need more information on divorce, Lynne has published two informative guides on divorce, which you can purchase from Amazon.

The Little Book of Divorce

The Little Book of Divorce

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The Little Book of Divorce Dilemmas

The Little Book of Divorce Dilemmas

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