It is important that significant consideration is given to the financial implications of divorce. It can often feel overwhelming for parties to determine what should happen in relation to the matrimonial finances, but it is important to think about what you would want to happen to assets such as the family home, businesses etc. Matters can become complex, and consideration may need to be given to tax implications, inherited assets, trusts, family businesses, and there may also be international elements to consider.
It may also be necessary to consider immediate remedies, such as maintenance pending suit (interim spousal maintenance) or freezing injunctions, whilst ongoing discussions are undertaken as to the finances generally.
Which of my assets will be affected in my divorce?
The Court will approach financial matters by considering capital, income and pensions. In terms of capital assets, this will normally include the family home, but any other property held in the sole or joint names of the parties will need to be disclosed. Other capital assets include savings, investments, shareholdings and valuable items such as vehicles or artwork. Pensions can be a very valuable but complicated asset and the parties will be required to obtain a Cash Equivalent Transfer Value (CETV) in order to place a value on them. Careful consideration will need to be given to this. Debts of the parties will also need to be considered, including whether a party has received loans from family members or friends which must be repaid.
What if I am divorcing and I own a business?
If your business interest was acquired during your marriage, then it is likely to be considered a matrimonial capital asset. If there is a value attributed to your business, and it is not simply an income producing asset, the other party could have a claim over your share of the same. It may sometimes be necessary to instruct an expert to value the business. As a minimum, you are likely to need to disclose business accounts for the last two financial years and a copy of your last tax assessment.
What happens to debt during divorce?
Debt can be taken into account when deciding on the asset split if it was used for the benefit of you both during the course of the marriage. If your partner has debt that you were unaware of, you would argue that you should not be liable for the same. However, consideration will be given as to how the debt was accrued. The Court is generally reluctant to get in to a forensic examination of bank statements to ascertain who spent what during the marriage. It is more about what the funds were spent on rather than whether the other party was aware of them or whose name the debt is in.
I own a property in my sole name which was acquired before the marriage.
Property in the sole name of a party is not automatically excluded from the matrimonial pot. Whilst you can try and ring fence the property (and if the property is rented, also ring fence the income received), if the needs of the parties are not met by assets in the matrimonial pot, then the Court can dip in to “non-matrimonial assets”. If the property has been utilised at one time as the family home, or if rental income received from the property has been utilised for the benefit of the family, the asset has effectively been “mingled” i.e. used for the benefit of the family which now forms part of the overall matrimonial pot to be shared between you. The non-legal owner spouse could also make an application for a Matrimonial Home Rights Notice, which would provide them with a right of occupation at the property.
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Published 04/05/2020