Families and divorce

Typical UK divorce settlement

divorce how to divide assets | divorce and property | divorce assets

The division of assets is one of the main issues to resolve during a divorce. A divorce settlement is likely to be the final stage in your divorce process and marks the point at which both of you have agreed on how to separate your finances and are ready to move on with your lives. While there is no one typical divorce settlement, here we look at how a divorce settlement is decided and practical things to consider. 

How to reach a fair financial divorce settlement

How you reach an agreement over the division of your assets will depend on the circumstances of the case. You need to create a list of assets and their values. 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. Both parties to a divorce will need to complete Form E, your solicitor or mediator can send this to you.  Otherwise, it is available from Gov.uk website here. 

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How will my assets be valued and divided in a divorce settlement?

It is only in very exceptional circumstances that the conduct of each person is relevant when dealing with financial matters. The factors influencing how your assets are divided include:

  • Whether or not you have children– their financial needs as well as other factors that may affect their future wellbeing
  • The length of time you have been married
  • Your age
  • Your property and money including pensions
  • Your current earnings and ability to work into the future
  • Health issues affecting either you, your spouse or any children; 
  • Your living expenses
  • The standard of living you are used to
  • The financial and non-financial contributions (such as caring for children and running the house) that each of you has made to the marriage.

What are matrimonial assets? 

Matrimonial assets are any assets that you, and your partner, acquired during the course of your marriage. They can also be assets acquired during any time you lived together before you got married (‘pre-marriage cohabitation’). Your combined assets must be divided fairly in the divorce - even if one partner earned more or contributed more financially during the marriage.

Common examples of matrimonial assets include:

  • The family home (including any outstanding mortgage)
  • Your pension – these can be complicated and it’s crucial to get the right valuations from the pension companies
  • Financial assets, such as your savings and current accounts
  • Investments, endowments, insurance policies 
  • 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
  • Debt – this includes loans, credit cards and overdrafts and can include any tax which is due to be paid.

What are non-matrimonial assets? 

Non-matrimonial assets are assets acquired before you got married or after the date of your separation.  It is often the case that such assets have not been mingled during the marriage with the person’s husband or wife.   

Non-matrimonial assets can also include assets acquired after the marriage.  Assets might be gifts, an inheritance or as simply as capital acquired through earnings or investments. However, it is not always easy or straightforward to agree on what assets should be considered non-matrimonial. There is no standard definition on what is considered a non-matrimonial asset. The way your assets are divided and defined depends on your individual circumstances, the needs of both partners and any children you may have. 

Non-matrimonial assets can be included in the divorce settlement discussion, and shared between both partners, if there is a good reason to do so. For example, they may be included in order to meet the needs of either partner.

Is my partner entitled to half of my inheritance?

A judge will not necessarily include an inheritance in your financial settlement, but will consider the needs of those involved. If you received your inheritance while you were married, the courts are more likely to include it as part of the settlement, but if it was received after your marriage broke down, they are more likely to exclude it.

What about income in a divorce settlement?

As well as capital assets, such as those listed above, your income will also be relevant.

‘Income’ includes:

  • Earned income (from employment and self-employment)
  • Investment income – ‘dividend’ income from any shareholdings
  • Pension income
  • Benefits
  • Income from any trust of which you are a beneficiary
  • Rental income from any ‘buy to let’ property you own

Are assets split 50/50 in divorce?

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 - the allocation of assets will reflect their welfare needs, taking into account where they will be living and with whom. 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.

Can I stop my assets being included in the divorce settlement? 

If you think something should be considered a non-matrimonial asset during your divorce, you can make a request to the court for it to be considered such and potentially excluded from the settlement. This might be appropriate if:

  • you received an inheritance, or are due to receive an inheritance, after you separated from your partner
  • you owned property before you were married, such as buy-to-let rental properties, share portfolio or other assets that have not been integrated into the marital assets
  • you had a valuable pension before you were married
  • you set up or owned a company/business before you were married. 

Your request is more likely to succeed if:

  • your matrimonial assets adequately cover the needs of both partners to provide for themselves and any children
  • you have been open and honest in your financial disclosure from the beginning you have been married a comparatively short time. 

Will my partner get a share of my pension if we divorce? 

If you paid into a pension during your marriage, your spouse may be entitled to some (or potentially all) of it through a ‘pension sharing order’. Pensions are often seen as joint ‘savings for retirement’ and so fall within the savings and investment part of the matrimonial assets. 

A pension sharing order (PSO) is issued by the Court, and states how much of your pension your spouse will receive, or how much of their pension you will receive. The amount of pension is shown as a percentage of the transfer value.

How is debt divided in divorce?

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, that you factor in any debts you may have, including your mortgage. Otherwise, you might be overstating the value of your assets.  You need to consider 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.

Can you be held responsible for your former partner's debt after a divorce?

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.

What happens to the family home in a divorce?

It depends.  Divorce settlement negotiations start from the point of a broad equality in division of assets. If one spouse wishes to retain the family home, they will need to have enough other assets to be able to offset the value of their spouse’s share of the home, by transferring assets of that value to their spouse. If not enough assets are available to achieve this, then the family home may have to be sold so that the equity contained within it can be split. 

In some situations, particularly if there are children, it can be possible to be more creative, for example, one spouse could stay in the family home with the children, and the spouse leaving the home could retain a defined financial interest in the property, which they will realise at an agreed future date. 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 until the children reach 18) 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.

Is a house bought before the marriage considered non-matrimonial or matrimonial property? 

If you bought a house before you got married, it may be considered matrimonial property if:

  • You and your partner lived in the house together during the marriage (i.e. it was the family home)
  • The property was improved by resources accrued within the marriage (for example, if your partner contributed financially or physically to an extension or renovation)
  • The property generated income which was used to support the marriage (for example, if you let the property out and used the money to pay for you and your partner’s living expenses).

    People often assume that what becomes the matrimonial home should be shared equally. However, even if the matrimonial home is in joint names, it might not be shared equally if it is the case that the source of the property is from what might otherwise be considered ‘non-matrimonial’. 

Prenups to protect assets

Prenuptial agreements (prenups) 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.)  Prenuptial 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 prenuptial agreement can provide protection.  Parties entering into a second marriage may also find a prenuptial agreement helpful in ringfencing assets they would want to pass to the children of their first marriages if they were to divorce. 

What can I do if my partner hides their assets during divorce negotiations?

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. This is known as ‘concealing assets’ and, if proved as being a deliberate attempt to mislead the court, is perjury. This affects the credibility of the partner attempting to mislead the court and can result in a poorer outcome for them in the divorce settlement. They may also be liable to pay costs.

If one party attempts to dispose of (sell or use up) or otherwise conceal assets with the aim of frustrating the court’s jurisdiction to dispose of the assets of the marriage fairly, the court can issue an injunction preventing disposal and freezing bank accounts and can also award a higher share of the remaining assets to the other party in compensation. 

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. It is worth knowing also that your case can be re-opened if this comes to light after settlement has been reached.

One party is living with a new partner – is this relevant to a divorce settlement? 

It is often an emotive issue; however, because cohabitees (unmarried couples) do not have the same rights at law as married couples, the Court does not automatically treat cohabitation as a reason for a lower financial award. It can however be relevant if cohabitation is taking place, as household expenditure in that household is shared – reducing the demands on income. It's not possible for matrimonial claims between spouses to extend to a new partner. The new partner’s financial position may be relevant, but only to a limited extent and there can be no claim made against the new partner’s personal assets or income.

High-net worth divorce

If either you or your ex-partner has significant wealth, your divorce process may be more complex and require lawyers with specialist expertise. High value assets present extra challenges during a divorce and reaching a fair settlement relies on honesty and transparency between both partners. Examples of high value assets in a divorce include:

  • businesses or shares in a business
  • financial investments and pensions
  • high level remuneration package with Long Term Incentive Plans and shares-based incentive schemes
  • international assets
  • fine art, antiques and classic cars
  • property investments, such as rental properties, second homes in the UK and abroad or ownership of farmland or land with other uses. 

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.” 

What if we can’t agree on how to separate our finances?

If an agreement cannot be reached, possibly due to one or both parties being uncooperative or unreasonable, then it is likely one party (or both) will submit an application to the court. However it's still possible to reach an agreement within the court process. The majority of court applications are resolved amicably, before a judge needs to make a decision at a final hearing. However, if you and your spouse still cannot agree, ultimately a judge will make a decision at a final hearing.

Do we have to go to court to get a divorce settlement?

No, many financial cases are resolved amicably. You can agree the division of assets between yourselves and it is likely to be approved by the court, provided it is fair. 

You may require the services of a mediator who will help you reach an amicable agreement, or a divorce solicitor who can act on your behalf - particularly if you are unsure of your entitlements. Take care not to agree to something unless you’re sure it’s fair – it’s best to take legal advice to ensure you get your fair share.

If you need help agreeing a divorce settlement you can use services such as mediation, collaborative law or negotiation using a solicitor. At Tees we offer the full range of these services to try and help you to resolve your situation without the need to go to court which can be very stressful.

Divorce settlement agreements still need to be approved by the court, to ensure it is reasonable and to make it legally binding. You should apply to the court for a consent order which will detail your financial settlement and your current financial positions. These papers go before a judge and, if deemed acceptable, they will approve the order.  

Is a divorce settlement legally binding?

The consent order approved by a judge, becomes legally binding once your Decree Absolute has been granted in your divorce. This will prevent either of you from making a claim for more money at a later date. With a Consent Order in place, your settlement should not be affected if either you or your former partner remarries or cohabits.  However, if you are paying or receiving maintenance, you might need to reapply to the court to reflect your new position.

How long does a divorce settlement take?

Once you have reached a financial agreement, it is possible to obtain your Consent Order and Decree Absolute within six months.  If you have not come to an agreement or if your finances are particularly complicated, it could take up to two years.

Can you appeal a divorce settlement?

If you believe that your former partner has concealed some of their assets during the settlement process, you can appeal.  You may also need to appeal if you feel the judge clearly made a wrong decision.  Be prepared - appeals generally take a long time to be heard.

Who pays the legal fees for a divorce settlement?

In most cases, both parties will have their own solicitor and will be responsible for their own legal fees. Only in unusual circumstances will the court consider conduct in the proceedings or the process of disclosure as a justification for an order for costs being made against the other party.

Civil partnerships

In broad terms these answers will be equally applicable for divorce and the dissolution of a civil partnership so words such as divorce and spouse can be interchanged with dissolution and partner. Find out more about dissolving a civil partnership here.

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Partner - Families and Divorce, Cambridge office

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