What actually happens financially when a marriage breaks down? What are the basics you should know in that situation? What are the common myths people hear when they think about divorce and money? In this blog, Senior Associate Adam Dunkley discusses some of the misconceptions that arise around finances and divorce.
If you would like to find out more about this topic, take a look at the Rayden podcast Family Law Unpacked, where Adam, alongside Partners Nicola Caffery and Rosalind Fitzgerald, sit down to disect the myths surrounding divorce and money.
Are finances always split 50/50 in a divorce?
People will be familiar with the concept that assets are divided equally on divorce. However, each case is fact specific and will first have regard to a party’s needs, for example, having a roof over their head and putting food on the table. This might require a departure from equality in favour of a financially weaker party. The court would also consider whether there are any assets brought in from outside of the marriage that should be ring-fenced from this sharing principle. The court will always have first consideration for any child of the marriage and ensuring that their needs are met. Ultimately, the settlement or outcome must be fair to both parties having regard to all the facts in the case.
What is a financial settlement?
This is the legal agreement resulting from the divorce and will often deal with assets, income and pensions. Most importantly, the financial settlement will usually include a clean break bringing the financial claims arising from the marriage to a close. A financial settlement is a must-have when couples divorce as without a clean break order, their claims remain open indefinitely, even when they may have been separated for many years.
Does the length of a marriage impact the division of assets?
The length of the marriage is important when considering the assets that have been accumulated together as a couple. It is also important when considering decisions made during the marriage such as one party giving up a successful career to care for and raise the children. In shorter marriages, we may expect each party to walk away with the assets they brought in provided they were not mingled or acquired together. In longer marriages, we are more likely to see a larger proportion of marital or shared assets. This is just one of the factors the court considers when dealing with finances on divorce as well as the needs of the parties, their financial resources, any potential adverse conduct and any children they may have between them.
Does cheating will mean you lose everything in a divorce?
Whilst conduct is a relevant factor the court will consider, it must be so serious that it cannot be ignored. It is not a court of morality and therefore behaviour that may include infidelity is unlikely to be taken into consideration in a divorce. Conduct that might be considered could include hiding or dissipating assets or not complying with court directions and so on.
Who gets the house in a divorce?
The house or former matrimonial home is often the most emotive topic in divorce as people may want to preserve continuity for the children or simply have an attachment with their home. The family home is an asset to be taken into account with all the resources available to the parties. This will be considered alongside the affordability of the parties to re-house and the realistic chance of someone being able to take over the mortgage (if there is one). A party is more likely to be able to remain in the home if they can show that they can take over the financial responsibility of the property and that the other non-remaining party will have sufficient capital to re-house fairly. Sadly, this is not an option for every couple and can result in the home being sold to free up capital for both parties.
How are pensions and savings dealt with during a divorce?
Pensions and savings are assets and interests to be considered on a divorce. The court will first consider how those interests were generated, either during or outside of the marriage. If they are seen as matrimonial, they are available for sharing in the normal way. If they came from outside of the marriage, the person who owns those interests may argue that they are ring-fenced and not available for sharing. However, the court will always have consideration to ensure that a party’s needs are met. This may mean that the court utilises those assets to meet needs regardless of how or when they were accumulated.
Summary
There are plenty of myths and common misconceptions when it comes to finances on divorce or separation. This blog only scratches the surface of how the court really deals with financial claims. It is therefore important that if you seek specialist advice at the earliest opportunity.
