Is handing over 50% of your wealth an inevitable outcome on divorce?
Many couples believe that on the breakdown of a marriage their assets will be divided equally between them. Hannah Sims, a solicitor in our family team, considers some of the circumstances when this approach is not appropriate.
An important consideration on the breakdown of a marriage is the division of joint finances following an often long period of pooled financial resources. One commonly held view is that such assets will inevitably be split in half, with each party to the marriage receiving 50% of the total matrimonial assets. Although the ‘equal sharing principle’ is the starting point and a fundamental principle in the consideration of matrimonial finances, there are numerous instances where such resolution is simply not appropriate.
The court’s ambition is to provide a fair outcome for both parties taking into consideration all the facts of the case. There are a set of statutory factors that are taken into consideration. The first consideration must always be given to the welfare of any children of the marriage. Following this, the factors to which the court should have regard include, but are not limited to, the resources of both parties (including capital and income), the parties’ ages and earning capacities, the duration of the marriage and each parties’ reasonable needs. It is this balancing act of each parties’ respective interests that often gives rise to a deviation from the 50:50 split.
Consider a young family where the wife has given up work to care for the three children of the marriage. On divorce, would it be fair to leave the wife ‘high and dry’ with only a 50% share of the couple’s modest assets and no income to rely on? Although the couple live a comfortable lifestyle, on one party’s income alone their assets will not stretch to setting up and maintaining two households.
In such a set of circumstances, the court’s first consideration is the welfare of the children and ensuring that they are securely and adequately housed. This would be what is commonly referred to as a ‘needs case’. The wife, as the primary carer for the children, has a housing need which needs to be met from the matrimonial assets. If there is insufficient capital to provide this on only a 50% share of the assets, the courts will not hesitate in giving the wife a greater share of the pot. It may be that, if the wife requires more than a fair proportion of the assets in order to rehouse, the husband can maintain an interest in any property purchased by the wife such interest being released to him on the youngest child of the family reaching majority; at which point the wife’s housing need is reduced.
In terms of income, it is likely the husband will have to maintain the wife at least until she has had a reasonable amount of time to become financially independent. The wife has indefinitely reduced her earning capacity in giving up her job to care for the children and this will be recognised by the courts. Such a contribution to the family is, in the eyes of the law, equal to the financial contribution made by the earnings of the father.
Next, consider a wealthy businessman who accrued a significant amount of capital pre-marriage. In marrying, is he really signing away 50% of this pre-acquired wealth?
In circumstances such as these, the husband may be able to argue that some of his assets are ‘non-matrimonial’ and therefore outside the pot for division. He may be successful in ring-fencing some or all of these assets. However, if the assets are mingled with matrimonial property, or treated as matrimonial in nature by the parties, then he may have an uphill battle in keeping his pre-acquired wealth entirely separate. Further, if his property was treated as the matrimonial home it is likely to be deemed matrimonial, irrespective of its heritage. The matrimonial home is considered to be at the centre of any marriage.
The same principle applies to assets acquired post-separation and to inherited wealth. Parties may argue that such assets should be kept outside the matrimonial pot. The argument that certain assets are ‘non-matrimonial’ holds most ground in so called ‘big money’ cases where the assets available for division exceed the needs of the parties. If the capital is required to meet reasonable needs, any argument that it is non-matrimonial will carry little weight.
Finally, consider an heiress to a successful family business, marrying on the basis of a pre-nuptial agreement. Surely the court would not disregard such an agreement and rule a 50:50 split of the total assets?
Although pre- (or post-) nuptial agreements are not yet fully enforceable in England and Wales, they are a factor which will be borne in mind by the courts. Recent case law dictates that nuptial agreements should be given effect by the courts provided that it would be fair to do so. If the pre-nuptial agreement was entered into freely by the parties, on the back of independent legal advice and it is considered fair, the agreement will likely be upheld. The husband would likely only receive any share of the wife’s assets as pre-determined and agreed between them in the pre-nuptial agreement.
In conclusion, although in many cases a fair outcome may be around the 50:50 mark this is certainly not the default position. Careful consideration must be given to the nature of each asset and the parties’ differing circumstances. The primary cause for deviating from the equal sharing principle on divorce is that of needs. It is important to seek legal advice from a solicitor prior to reaching any agreement with your partner to ensure that you receive a fair outcome.