How do you divide assets in a divorce?

One of the main practical challenges when you divorce is dividing up your money and property

Commonly known as ‘matrimonial assets’, these include everything you have jointly owned which needs to be fairly divided between you. In many cases ‘non-matrimonial assets’ also exist. These are assets from before the marriage or which have been inherited or gifted during the marriage.

What are matrimonial assets?

There are no fixed rules but they include:

• The house you both live in (even if only one name is on the deeds)
• Stocks and investments
• Other money, such as pensions and savings
• Furniture and household items
• Vehicles
• Other property bought during the marriage

What are non-matrimonial assets?

Again, there is no fixed definition but non-matrimonial assets cover:

• Things one spouse has inherited during the marriage
• Assets already owned by you or your ex-partner before the marriage
• Property bought by one spouse and solely owned by them (which is not the family home)
• Assets which were received as a gift by one of you

Where do we start with dividing our matrimonial assets?

The first step is to fully detail the financial position of both people. This is usually done through a (rather lengthy) form called a Form E which you and your ex-partner individually complete and then share with each other. It covers all aspects of your income and assets as well as a statement of your financial needs going forward.

There are other ways to exchange financial information but the Form E is considered very thorough and preferred by most lawyers. This form is effective in helping to secure a settlement both when pursuing a negotiated divorce through mediation or a collaborative solicitor and in court.

It’s important to set aside time to carefully research and complete your financial disclosure, as this information will have a significant bearing on your future position. Every detail will also eventually need to be backed up with documentary evidence.

What about non-matrimonial assets? Do they get split in divorce too?

Whether non-matrimonial assets will be included in a divorce will ultimately be ruled upon by a judge after full financial disclosure. A judge does have the power to exclude such assets from the divorce settlement – a process called ‘ring-fencing’.

Every case is judged on its individual merits and the focus will always be on meeting the financial needs of the poorer partner. If their needs cannot be met by dividing the matrimonial assets, then some non-matrimonial assets will also be considered.

What’s next after outlining our financial positions?

Often mediators and skilled solicitors can help you to move on to a financial settlement outside court once financial disclosure is complete. If this is not possible, the divorce will move into the courts, where hearings will be held to reach a financial agreement.

What is taken into consideration when splitting assets?

The aim of mediators, solicitors and ultimately a court is to make the division of assets ‘fair and equal’, based on your individual circumstances.

The factors considered include:

• Housing and income needs
• The financial assets available to each party
• The standard of living enjoyed prior to separation
• The welfare of any children
• The age of each party
• The duration of the marriage
• Any physical or mental disabilities
• Each party’s contribution to the marriage

It’s important to note on this last point that such contributions are not only financial but also include, for example, being the primary carer of the children. In the eyes of the law, caring for children is as valuable in terms of contribution as providing the lion’s share of the family income.

How are matrimonial assets usually split?

There really is no answer to this question, which is why the splitting of assets is often a hotly contested issue. As every marriage is unique, every divorce settlement is different, and the law is deliberately flexible to apply to each case.

It is a common misconception that assets will be split in half between a divorcing couple. While this is a good starting point (and sometimes a 50/50 split is a fair outcome), the factors above mean one party may be entitled to more than 50% of the marital assets. Skilled collaborative lawyers and mediators can be invaluable during the negotiations as it is a complex legal task.

What about debt – am I liable for my spouse’s debts?

The simplest answer is that you will be responsible for any shared debts. Loans, mortgages and credit card agreements where your name and signature are involved mean you will still owe that money and could be held liable for non-payment.

This highlights the need to work out a financial settlement without delay as, for instance, you could be liable to pay the mortgage on a property you are not living in.

We jointly own a business. How will that be split?

The court can include the value of a business as a matrimonial asset. This will usually be done as a joint valuation by a specialist forensic accountant. In practice, it is extremely unlikely that the court would order the business to be sold. The more common approach is for the business to be retained by one party and for the other spouse to receive other assets in lieu.

How will financial court hearings work?

Court proceedings to divide assets usually involve three formal hearings:

1. A First Appointment hearing which works out where there are disagreements and how hearings should progress.
2. A Financial Dispute Resolution (FDR) hearing where a judge will take an active part in trying to settle the case and often indicate an appropriate settlement.
3. If not settled in the FDR, a Final Hearing is held where the judge rules on the allocation of assets. The final outcome is often hard to predict and the orders made are at the full discretion of the judge.

What can a court order?

If you and your partner agree on the division of assets, you can apply for a consent order to make it legally binding. If you cannot agree, the case will go to court where financial orders will be made.

Court financial orders fall into three categories, but not all divorces include all three. Which are needed and how the various options interact is key to achieving a fair settlement. The categories are:

1. Capital orders which cover the transfer or sale of assets such as the family home, cars, shares, business ownership, etc. Using these orders, a judge can mandate a sale or transfer of assets from one person to another or from joint to sole ownership. They can also dictate lump sum payments from one person to another.
2. Maintenance Orders which deal with income and cover both spousal and child maintenance. For spouses, these are usually monthly payments that are calculated based on both the needs of the recipient and what the payer can afford. Child maintenance is a regular payment to help to cover a child’s day-to-day living costs. There is a useful government calculator that can help you start to work out what child maintenance you need/should offer here. If you require further assistance, the government-run Child Maintenance Service can also help with calculations and work out the logistics of payments.
3. Pension Orders are important, as pensions can be a significant future asset even where there are no significant cash assets involved. The court can split UK pensions in any percentage to ensure that a couple is fairly provided for in retirement. While not a liquid asset, during divorce, pensions are valued on the basis of their Cash Equivalent Value (CEV).