Going into a divorce, it’s likely tensions are high and emotions charged. After all, the decisions you make during this process could have significant consequences for you, your family and your finances. Let’s run you through the financial aspects of divorce and make sure you know exactly what to expect.
Parting ways isn’t just about physically separating and starting again. It means untangling your finances, working out how to handle your assets and reaching an agreement that doesn’t just make you and your ex-partner comfortable, but makes financial sense too.
As you might have guessed, the word “divorce” comes from the word “divide”, and that’s exactly what the financial side of divorce is designed to do – divide everything, allowing you both to make a clean break.
When it comes to the financial assets that will be considered in a divorce settlement, they can be divided into matrimonial assets and non-matrimonial assets.
- Family home
- Savings and Investments
Any of the above can be considered a non-matrimonial asset if it was acquired before or after the marriage.
Despite what the name might suggest, there’s no guarantee that a non-matrimonial divorce asset won’t be considered in your divorce settlement, and it certainly doesn’t trump the issue of future needs, particularly for dependents, which we’ll come onto shortly.
Right, those are the assets typically considered during a divorce settlement – here’s a guide to what you and court will need to consider during the process:
This doesn’t always mean “equal”, but rather that both parties should be able to begin the new chapter of their lives on an equal footing – there’s no special treatment for a breadwinner versus a homemaker for example.
Just because you generated more or less income, it doesn’t mean you’ll be entitled to more or less of the financial settlement.
Welfare And Needs Of Children
If you have any dependent children, they’ll be a big factor in the financial arrangements.
Practically, children obviously need somewhere to live, and if one parent is going to take the lion’s share of the childcare on, they’ll need to live with them.
Often this means that that parent keeps hold of the matrimonial home, but a court will also be looking to ensure that both parties are able to be accommodated; finances permitting.
Equal division of assets (taking into account Section 25)
As mentioned above, a court will seek “Fair Division”, but that doesn’t always mean “equal”.
Section 25 of the Matrimonial Causes Act 1973 states that the court must consider “all the circumstances of the case”, which effectively allows it to take any factor it sees as relevant into account when dividing assets.
Typically, here are some of the factors a court will consider when dividing assets:
- The welfare of any dependents
- The income, earning capacity, property and resources of both parties
- The financial needs, obligations and responsibilities of both parties
- The standard of living the family was used to before the marriage broke down
- The duration of the marriage
- Each party’s age
- Physical or mental disability
- Each party’s contribution to the welfare of the family (including house-keeping and child-raising)
- Each party’s conduct – if it was bad enough that it’d be unreasonable to ignore it
- Any significant disadvantage to either party as a result of the end of the marriage
Let’s break down some of the key factors:
1. Welfare of any dependents
Simply put, the welfare of any children comes before anything else, and the court will use this maxim when weighting assets.
2. Financial needs, obligations and responsibilities
As above, if one parent has principal responsibility for children, their accommodation needs will be met first, and if there are assets left, the court will then look to ensure accommodation for the second parent.
3. Income, earning capacity, property and resources
How much you and your spouse earn, and are likely to earn, as well as the assets you possess, are hugely important considerations for the court, mainly because they have a significant influence on mortgage capacity, which ties back into providing accommodation.
Typically, any future inheritance is not considered when dividing assets, as it is not guaranteed. However, if the available assets aren’t able to meet the needs of the dependent children, inheritance can be considered.
Your pensions will be valued on their Cash Equivalent Value, but because the funds from the pension aren’t readily available, they’re viewed differently to other assets like property or investments.
Nonetheless, a pension is a critical part of many people’s financial makeup, and the court will want to ensure that each party is able to make a clean break, with all assets – including pensions – divided fairly.
There are three ways that this is typically achieved:
- Pension off-setting – the party with the smaller pension (or without a pension) will retain a more significant share of other assets, while the party with the larger pension retains sole right of it.
- Pension sharing order – the court orders that the pension is shared now, and a new pension fund is set up for the spouse receiving his or her share of it
- Pension attachment order – the pension company pays a percentage of the monthly pension payments to the other party, once the pension is payable
Do You Need To Appoint A Solicitor To Get Divorced?
Marriage matters can sometimes be settled without going to court, saving both parties money, time and stress.
But even when you feel you’ve come to a fair casual agreement, it’s still a good idea to run it past a solicitor. You can’t be too certain that you haven’t put yourself in a vulnerable position when it comes to divorce. Circumstances change, feelings change and having a solicitor in your corner when they do could make all the difference.
Whatever your need, and wherever you’re at in the process, there’s a divorce solicitor near you that can help.
Find A Divorce Solicitor Near Me Now