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How are marital assets divided in divorce?

The answer to this question is often ‘with great difficulty’. However it does not have to be difficult but it is often a very complex task made more difficult by several factors such as the amount of wealth, high, medium or low, the complexity of the marital assets and by the respective positions adopted by the divorcing couple as to how their assets are to be shared.

In matters where the Court is asked to decide the division of assets between divorcing couples, a complicating factor is the wide discretion that a Judge has in deciding the extent of the division. ‘Marital assets’ are the property that has been built up during the marriage and have been described as being ‘the financial product of the parties’ common endeavour’. More often than not the assets are the former matrimonial home and pensions, however they can also include more complex assets such as business interests and family trusts.

The starting point for dividing marital assets in divorce is one of equality. However the division of marital assets is often different in each case because it is specific to the individuals circumstances and depends on the needs of the parties and any children of the marriage. When considering and dividing marital assets it is possible that one spouse will receive a greater share.

Section 25 of the Matrimonial Courses Act 1973 provides the framework which the Courts of England and Wales apply when deciding financial claims involving property, savings, pensions and maintenance.  It should be noted that section 25 also provides that ‘it shall be the duty of the Court in deciding how to exercise its powers to have regard to all the circumstances of the case with the first consideration being given to the welfare and needs of the dependent children’. It therefore follows that the presence of minor and dependant children in a marriage will influence how the Court exercises its discretion on the division of assets. This does not mean however, that the needs of the non resident parent will be ignored.

In dividing assets, the Court will have regard to the following s.25 ‘factors’:

  1. 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;
  2. The financial needs, obligations and responsibilities which each of the parties to the marriage has or is likely to have in the foreseeable future;
  3. The standard of living enjoyed by the family before the breakdown of the marriage;
  4. The age of each party to the marriage and the duration of the marriage;
  5. Any physical or mental disability of either of the parties to the marriage;
  6. The contributions made by each of the parties to the welfare of the family, including any contribution made by looking after the home or caring for the family;
  7. In the case of proceedings for divorce or nullity of marriage, the value to either of the parties to the marriage of any benefit (for example, a pension) which, by reason of the dissolution or annulment of the marriage, that party will lose the chance of acquiring.

In the event that divorcing spouses are unable to agree a division of their assets between them then the Court has the power to make a number of different orders:

  1. The Court can order one party to pay the other a lump sum or a series of lump sums.
  2. The Court can order the sale or transfer of a property usually the former matrimonial home, to one spouse. It is quite common for the home to be transferred to one party on the basis that a lump sum is paid to the other spouse for their interest in the property. Where there are minor children and the property is required by one spouse to house the children it can often be the case that the other spouse will secure a financial interest in the property to be realised at a later date, for example when the children reach majority or complete full time education.
  3. The Court can make pension sharing orders. In long marriages where pension funds have accumulated it is often the case that one spouse will have a much greater fund value than the other, a common example being where one spouse has stayed at home to raise the children and the other has been the main earner. In such circumstances the spouse with a greater pension fund could be ordered to transfer half or part of their pension to the other, in order to equalise pension fund values or to provide a pension fund for them.
  4. The Court can also order one party to pay the other maintenance. This is called spousal maintenance or periodical payments. Such an order can be paid for joint lives, until one of the parties’ remarries or for a fixed period of time. Such orders tend to be case fact specific and are not necessary or appropriate in all cases. It is quite common for there to be what is called a ‘Clean Break’ between divorcing spouses which means that no maintenance is or will be paid by one to the other.
  5. As with spousal maintenance the Court also has the ability to order child maintenance. Ordinarily issues relating to child maintenance are either agreed between the parties or assessed by way of application to the Child Maintenance Service. The Courts powers are somewhat limited with regard to child maintenance but it can make an order for child maintenance payments and can also approve within a Court order, the level of child support that may have been agreed between spouses.

In situations where divorcing couples are unable to agree the division of their marital assets either between themselves, through mediation or via Solicitor negotiations, the last resort will be to make an application to the Court for financial remedy. Whilst Court is often classed as the last resort it should not be viewed as a hostile tactic. Often in these situations parties could have been separated for a considerable period of time and the process of trying to agree a division of their assets has taken many months. It can often be the case that making an application to the Court is actually beneficial because it provides them with a timetable for concluding the matter and focuses minds on their being an end point to their divorce. Furthermore, making an application to the Court does not mean that the parties hand over control to the Court. In actual fact the parties retain complete control up to the second hearing in the process and the Court will actively encourage both spouses to try to reach agreement. The Court does not want to impose a decision on spouses dividing their assets unless it is asked to or there is no prospect whatsoever of the parties reaching agreement.

Due to the complexity and importance of dividing marital assets it is vital that you obtain expert legal advice. For more information or general Family Law advice please contact our award winning Family Law team on 0345 20 73 72 8 or info@thursfields.co.uk.

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