Dealing with the finances following a divorce is usually complex. The legislation, developed by case law, allows judges to use their discretion when deciding how spouses’ assets should be split, this means there is no correct answer but rather a band of acceptability, so it is challenging for us to advise clients with any certainty as to the likely outcome of their case.
The principle aim of any court is to try and achieve a fair outcome, which typically means splitting the assets so that each spouse has a relatively equal start on the road to independent living following their divorce. This does not necessarily mean an equal division although this is the court’s starting point.
The legislation, set out in the Matrimonial Causes Act 1973, provides a statutory checklist of factors (known as the section 25 factors). The court have regard to these factors when determining how financial assets should be split. After considering the welfare of any minor children of the family, the court will consider:
- the income, earning capacity, property and other financial resources which each spouse has or is likely to have in the foreseeable future, including, in the case of earning capacity, any increase in that capacity which it would in the opinion of the court be reasonable to expect a party to the marriage to take steps to acquire;
- the financial needs, obligations and responsibilities which each spouse has or is likely to have in the foreseeable future;
- the standard of living enjoyed by the family before the breakdown of the marriage;
- the age of each spouse and the duration of the marriage;
- any physical or mental disability of either spouse;
- the contributions which each spouse has made, or is likely to make in the foreseeable future, to the welfare of the family, including looking after the home or caring for the family; and
- the conduct of each spouse, if that conduct is such that it would be inequitable to disregard it.
The court draws a distinction between matrimonial assets and non—matrimonial assets. Matrimonial assets are those which are normally acquired during the marriage, whereas non-matrimonial assets are assets typically acquired outside of the marriage. Non-matrimonial assets are ordinarily to be retained by the spouse to whom they belong, although there are occasions when any pre or post-acquired assets, might be deemed ‘matrimonial’ and therefore taken into account when reaching a fair outcome. The most common situation is where the case is a “Needs” case so the non matrimonial asset will be drawn in to help meet need.
Prenuptial and postnuptial agreements are an option for those entering a marriage (prenuptial) or those who are already married (postnuptial), where there is an agreement between them as to how assets ought to be split should the marriage end. Case law has established that a well-drafted, regularly updated nuptial agreement shall be persuasive in determining how assets should be split on divorce and considered alongside the section 25 factors to determine a fair outcome. Importantly, nuptial agreements are not binding in the UK.
So, what is on the agenda to change?
The Matrimonial Causes Act 1973 has been criticised by many as uncertain and unpredictable, with spouses often turning to costly litigation due to a lack of clear guidance on how their assets should be divided. This has been made worse, particularly for those with very few assets, by restricting access to legal aid for most family law matters.
The emphasis on ‘fairness’ and the aim to put both spouses on an equal footing, has been criticised as being unlike other countries where financial awards are less generous.
Baroness Ruth Deech, a crossbench peer in the House of Lords, has called for reform of the Matrimonial Causes Act 1973 and the section 25 factors, saying:
“There can be no doubt that the state of the current law is unacceptable… [the legislation] is lagging 50 years behind nearly every other country in the western world, including Australia”.
There has also been wide debate as to whether nuptial agreements should be put on a statutory footing and enshrined in law.
Now the UK government is set to commission an extensive review of the Matrimonial Causes Act 1973 and, whilst we do not yet know when this will be, or the extent of any changes, it is definitely something all family lawyers and their clients shall be eagerly awaiting.
If you are going through a divorce and would like advice on the finances following separation, please do not hesitate to get in touch with one of our expert Family Law solicitors.