Tag: Cost of living crisis

With the United Kingdom on the cusp of a cost-of-living crisis and inflation at record highs, divorcing couples will likely face concerns now more than ever as to how finances are to be treated upon divorce. The biggest question on the minds of divorcing couples is often, ‘what will I stand to get out of the matrimonial assets?’ Here, Aaron Williams looks at what the court considers when looking at how to divide assets on divorce and how they aim to meet the ‘needs’ of each party involved.

So, what does the Court consider when looking at how to divide assets on divorce?

As with many things, there is no one size fits all answer to separating matrimonial assets. The principal aim of the court is to ensure that there is ‘fairness’. Unfortunately, fairness has a broad horizon in the context of family law, and it is largely left to the discretion of the judge as to the outcome of the matter.

The court has a duty to consider all circumstances of a case, this is done so using the principal piece of legislation in divorce; that of the Matrimonial Causes Act 1973, in particular the factors listed in section 25(2)(a) – (h) which can be found here: – https://www.legislation.gov.uk/ukpga/1973/18/section/25

The phrase ‘needs trumps all’ is often cited when assets are limited assets in matrimonial finance cases. The starting point in any matrimonial finance case is to consider an equal division of what has been built up by the parties during the marriage; however, an equal division of assets is not always appropriate in every case to achieve fairness.

So where does that leave separating couples? Well matters largely come down to the circumstances of the parties, the standard of living and the resources available to meet needs. What was enough to meet the needs of one household may not necessarily be enough to meet two.

When settling the matrimonial assets, there is no discrimination between separating couples regarding their respective roles in the relationship. For example, where one party has typically taken the breadwinner role, whilst the other party is the home maker, their roles are to be regarded as equal irrespective of what they have contributed financially.

So, how does the court implement section 25 of the matrimonial causes act?

When assessing how to separate who should have what proportion of the assets of the marriage, the first consideration of the court is that of the needs of any children.

The court then look to meeting the needs of both parties, principally looking to ensure that each person’s housing needs, and income needs are met.

Looking at the matter holistically the court will principally consider the financial needs, obligations, and responsibilities which each of the parties to the marriage have or is likely to have in the foreseeable future (s.25(2)(b) MCA 1973). The court will look at the general resources of the parties and will broadly separate the needs of parties into capital needs and income needs. Capital needs, is often that of significant single capital outlays, purchasing a property, furnishings, replacement car etc. Income needs is that of the day-to-day costs that parties require on a monthly basis to live.

When trying to determine whether the parties have the means to meet these needs, the court will consider Income, earning capacity, property and other financial resources which each of the parties to the marriage has or is likely to have in the foreseeable future. Commonly referred to as the financial disclosure process, the parties are expected to provide ‘full and frank’ financial disclosure. This includes determining through the assistance of expert evidence or agreeing by consent, the value of any assets owned by the parties, including property, businesses, trust assets, chattels, and pensions. The court will also need to ascertain the parties’ respective incomes, whether they have to capacity to increase their income, receive a bonus etc. The process ultimately aims to ensure that no stone is left unturned.

With all this in consideration the court has a great deal of flexibility to in their approach to financial settlement, which in turn allows the court to ensure (as far as possible) that an outcome reached is fair to both parties, and that neither party nor dependent children are left in need. However, this level of flexibility also carries its own disadvantages as it can be difficult for parties to envisage how a judge may determine the respective parties’ needs.

 

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