Division of assets is, along with arrangements for children, fundamental to divorce and civil partnership dissolution. And it’s easy to see why. Following separation what was a single household becomes two – introducing a whole series of budgetary repercussions and constraints.
One of the most important roles a family law solicitor has is to provide realistic advice on what way assets might be divided if a case goes to court. When you have a realistic impression of what to expect you can negotiate sensibly and with your eyes open. In most cases couples are able to agree financial arrangements and avoid the expense and uncertainty of asking a family law judge to make a financial order.
So how do judges make decisions on family finances following divorce?
The Section 25 Factors: Deciding Divorce Financial Orders
As in all areas of law English judges rely heavily on previous cases to reach decisions. They also use legislation, and in divorce the Matrimonial Causes Act, 1973 is a critical tool.
Section 25 lists a range of factors that judges must take into account when deciding financial matters. Over the years the way judges apply the rules develops. In WC v HC, 2022 the judge provided a useful, up to date guide as to how the factors are interpreted by judges. We summarise the main points below.
What Is A Fair Divorce Settlement?
When deciding on how to divide assets like the family home and pensions the courts will first tally up the value of the assets and then decide how to distribute them. The court’s guiding principle is to find an outcome that is as fair as possible in all the circumstances. In doing this the courts won’t discriminate between spouses or attach more or less weight to the roles each has played in the marriage or civil partnership. They will always put the interests of children first.
The judge in WC v HC (Mr Justice Peel) makes clear firstly that under Section 25 the preferred type of order for the courts to make is one that gives the parties a ‘clean break’. If periodical payments like maintenance are to form part of the final order the court will consider making these for a defined period.
There are three principles at play when family court judges look at making financial orders: needs, compensation and sharing. Of these, the principle that settlements should meet the needs of the spouses is the first consideration. Once needs have been met – and only if there is a surplus of assets will the sharing principle be engaged.
In contrast the principle that one spouse should compensate the other financially as part of a divorce settlement is rarely triggered.
What Does ‘Sharing’ Mean In Financial Cases?
When the sharing principle comes under consideration it usually means that:
- Marital assets are divided equally
- Non marital assets are kept by the party who owns them
The court may insist that non marital assets are shared – usually when they are required to meet the needs of the other party.
Marital v Non-Marital Assets
Usually, property will be treated as non-marital when it is:
- property brought into the marriage by one or other party
- property generated by one or other party after separation
- inheritances or gifts received by one or other party
What Is Meant By ‘Needs’?
Peel J described the concept of needs as ‘elastic’. A parties’ needs extend not just to their own requirements but to a range of factors, including their financial obligations and responsibilities, the standard of living enjoyed before separation and the parties’ ages.
It is generally accepted that it’s not desirable for the divorce to lead to a sudden and dramatic downward turn in the parties’ lifestyle. Many judges will use the standard of living during marriage as a reference point or benchmark when assessing needs.
Arriving at a financial settlement that you are satisfied with and that is fair is key to your divorce. As you can see from this short article the way assets are divided is not straightforward. Legal advice from a specialist family solicitor at an early stage is a worthwhile investment.