The division of assets is one of the main issues to resolve during a divorce. While there is no one typical divorce settlement, here we look at how a divorce settlement is decided and practical things to consider.
Note: this article considers the law in England and Wales only. If you are getting divorced in Scotland, the laws are different.
- How to reach a fair financial divorce settlement
- How will my assets be valued and divided in a divorce settlement?
- What counts as assets in a divorce settlement?
- What about Income?
- Are assets split 50/50 in divorce?
- How is debt divided in divorce?
- Can you be held responsible for your former partner's debt after a divorce?
- What happens to the family home?
- Pre-nups to protect assets
- What can I do if my partner hides their assets during divorce negotiations?
- High-net worth divorce
How you reach an agreement over the division of your assets will depend on the circumstances of the case. If your assets are straightforward, you may be able to come to an amicable agreement directly or through mediation. For more complex matters, you may need the services of a specialist solicitor, or to take the matter to court. Whatever route you take, you will want to ensure that the agreement you are reaching is fair and meets your needs.
It is advisable to agree a list of assets and values and a mediator will require this. If you are in a court process, detailed financial disclosure is needed and the court will then look at all of the circumstances to decide how these assets should be divided between you.
You will need to find current values for your:
- Bank and savings accounts
- Residential property (including any outstanding mortgage)
- Debt – this includes loans, credit cards and overdrafts and can include any tax which is due to be paid
- Investments, endowments, insurance policies
- Pensions – these can be complicated and it’s crucial to get the right
- Belongings – vehicles, jewellery, furniture, art
- Business assets – if either or both of you own a business or have a share in one
- Any other assets – for example share options, trust interests
- Any asset that is likely to be received in the foreseeable future.
As well as capital assets, such as those listed above, your income will also be relevant.
- Earned income (from employment and self-employment)
- Investment income – ‘dividend’ income from any shareholdings
- Pension income
- Income from any trust of which you are a beneficiary
- Rental income from any ‘buy to let’ property you own
The first consideration for dividing thee assets listed above will be the welfare of any children, the allocation of assets will reflect this, taking into account where they will be living and with whom.
Assets are not automatically split equally in a divorce. The court will look to formulate a fair financial settlement taking into account all of the circumstances in the case and in particular the following factors.
- Income and assets (now and in the future)
- Financial requirements – often termed ‘needs’
- The standard of living during the marriage
- Your ages and how long the marriage has lasted
- Any physical or mental disability
- Any financial contributions you have made to the marriage
- Your conduct, noting this is rarely considered relevant
- Any benefit you would lose because of the divorce
The first consideration will be the welfare of any children of the marriage. In many cases, the court will order a settlement that is driven by meeting both parties’ needs and those of any children. This may involve dividing the assets equally or by making an adjustment to an equal division to reflect how needs will be met going forward.
Any debts that either party has (or the parties jointly have) must be taken into account when dividing the assets on divorce.
Your financial documentation should evidence any debts you and your partner have and whether they are held individually or in your joint names. The court can consider if debts in one party’s name should be treated as joint debts.
For many, the largest debt is a mortgage on the family home. It is important that when you list the value of your assets you factor in any debts you may have, including your mortgage. Otherwise, you might be overstating the value of your assets. If you are to retain the family home, will you be able to afford the mortgage repayments after you divorce?
You will also need to decide who is responsible for other debts such as loans, credit cards and car finance after divorce. If you are unable to come to an agreement, the court can state which of you is responsible for the debt. The court is likely to consider any loans you took out during your marriage, such as loans for home improvements, as a joint responsibility.
Where you have assets available, the court will generally expect you to use them to settle your outstanding debts. However, the level of debt each party has will be important to the financial settlement because it will affect how they meet their respective needs.
If your partner took out any debts during your marriage that are solely in their name, then you are not responsible to pay the debt. However, you could be held responsible if, for example, a loan has been taken out against the value of a house which is in joint names. Or, if you have joint debts and one of you stops the repayments, the other will be responsible for these repayments. Remember that if the loan repayments are discontinued, it could affect your credit rating.
Even if you are not responsible for repayment of a debt, it might affect the division of the assets. This is because the debt a party has to repay may affect their ability to meet their needs going forward, and this is relevant to the court’s determination of a fair financial settlement.
It depends. In some cases, parties decide that one party will retain the family home as part of the divorce settlement, or live in it for a certain period (such as the children’s minority) before it is sold and the proceeds divided. In other cases, the family home will need to be sold immediately and the proceeds divided between the parties to enable them to each meet their needs going forward. The court’s first consideration will be the welfare of any children and how their needs will be met. This may result in the children and the parent with whom they live continuing to live in the family home as part of the divorce settlement.
It is important to consider if (and how) the party retaining the family home can meet the mortgage repayments and have the mortgage transferred into their sole name. If not, there are ways of structuring a settlement – such as continuing joint ownership, additional maintenance support or a trust arrangement – to avoid the property having to be sold immediately.
Pre-nuptial agreements (pre-nups) are used increasingly often as a way of agreeing in advance of a marriage how assets would be divided in case of divorce. (It is also possible to have a post-nuptial agreement, after you’ve married.) Pre-nuptial agreements are not currently strictly binding in England and Wales but are likely to be upheld if certain formalities are completed and provided they are fair. They can therefore be effective in protecting assets, and avoiding dispute and legal costs, in the event of divorce.
For those entering into a marriage with significant pre-existing assets, such as business or farming assets, or those who are due to inherit in the future and want assets to pass down the generations, a pre-nuptial agreement can provide protection. Parties entering into a second marriage may also find a pre-nuptial agreement helpful in ringfencing assets they would want to pass to the children of their first marriages if they were to divorce.
The court process is rigorous in its requirements for parties to disclose assets and answer questions the other party (or the court) has about the information given.
The court takes any attempt to hide assets during divorce very seriously. To protect the interests of both partners, the court has various powers – including the power to stop the sale or transfer of matrimonial assets during the divorce process and issue penalties for hiding assets.
If you are worried that your partner has hidden some of their assets and not disclosed them, or even transferred them to spend before they are discovered, you should alert your solicitor or mediator as soon as possible.
Your case can be re-opened if this comes to light after settlement has been reached.
If either you or your ex-partner has significant wealth, your divorce process may be more complex and require lawyers with specialist expertise. These complexities may concern the number of properties owned (both at home and abroad or whether it involves farmland), financial investments, pensions, international assets,tax.
Sally Powell, Family and Divorce Partner at Tees, comments “We are often able to help divorcing couples divide their assets quickly and amicably, helping them make their financial agreement legally binding with a Consent Order. However, there are occasions where the couple’s situation is more complex, and our Family Law solicitors will be called upon to use their expertise to ensure that assets are split fairly, taking all relevant factors into consideration.”
We’re here to help
Our family and divorce lawyers are based in:
Chat to the Author, Sally Powell
Executive Partner, Bishop's Stortford officeMeet Sally
- Areas of expertise
Legal 500 UK 2022
"Sally Powell is bright, tactical, has brilliant client care and is a superb all-rounder. A leader in her field and a go-to for difficult private law or financial family disputes."
"Sally kept me fully informed at every stage of the process and undoubtedly went ‘the extra mile’ to complete the matter on time. Overall a very professional service for which I am extremely grateful"