The division of a couple’s assets is often one of the most challenging aspects of divorce cases, and it can become especially taxing in relation to the assets that each party owned prior to their wedding.
The law makes a distinction between non-matrimonial and matrimonial assets, with the former defined as assets that one party either had at the time of the marriage, or inherited or received by gift during it, while the latter are those ‘acquired by the labours or endeavours’ of one or both parties during the marriage.
However, while it might seem likely that there would or should be, there is in fact no automatic disregard of non-matrimonial assets in the process of working towards a divorce settlement.
Courts consider the nature and value of the assets, as well as when and how they were acquired, and have a great deal of discretion in how they are then assessed in each individual situation.
In many instances, it would only seem fair that the person who owns the non-matrimonial assets should be allowed to keep them, but this depends on whether their spouse’s needs, as defined by the court, can be met from assets acquired during the marriage.
Different courts have taken different approaches to resolving this issue, and there is no ‘one size fits all’ formula that they will follow.
In one instance, a husband argued that his wife should not receive a 50% share of the couple’s assets at the end of their 20-year marriage and that she should receive only an award based on needs, because most of them were pre-acquired non-matrimonial assets derived from the husband’s property owning business, which was set up before the marriage.
The judge ruled that, while this was not a case in which the wife’s award should just be confined to her needs, the husband’s pre-marital wealth justified a 60/40 division in the husband’s favour.
In another situation, the couple in question enjoyed an extremely modest standard of living despite the very substantial amount of shares held by the wife in a family company.
Neither party generated any earned income during their 21-year marriage, living instead off the dividends paid on the wife’s shares.
The husband sought a lump sum divorce settlement of £18m, but was instead awarded £5m by the court on the basis of needs. He appealed, but was unsuccessful as the shares, which had always been ring-fenced in the wife’s name, were the source of the parties’ entire wealth.
Given these clear complexities, there is a strong case for all couples to sign a pre-nuptial agreement before they wed or a post-nuptial agreement during the marriage, to provide added protection for both sides.
While not currently completely legally binding, the details of such agreements are taken into account as one of the circumstances of a case if either of the divorcing parties applies to the court for a different settlement.
Nobody wants to go into a marriage with their focus on what might happen if things don’t work out, but if you wish to preserve assets that have been inherited or gifted to you by your family, it is far better to put a pre/post-nuptial agreement in place to at least establish a reference point in case one is required in the future.
By Nicola Matthews, partner and head of the specialist family law team at Hay & Kilner Law Firm in Newcastle