In England and Wales, there is no one formula for dividing assets upon divorce. Instead, how assets are divided will turn on the particular facts of each case, which allows for a ‘bespoke’ outcome.
The courts can rearrange assets in almost any way imaginable via a toolkit of powers set out in the statute.
Even if settlement is achieved outside of court proceedings, all settlement negotiations take place in the shadow of our law, which provides guidance. Section 25 of the Matrimonial Causes Act 1973 lists a set of helpful factors that the court must consider, starting with the needs of any minor children of the family.
The landmark case of White v White [2000] provides that any proposed settlement must be held up against ‘the yardstick of equality’, inferring that settlement should provide for an equal division of matrimonial assets without discrimination between the roles played during the marriage.
The case of Miller and McFarlane from 2005 provides that to achieve fairness, we must consider three strands, namely needs, sharing, and compensation. In any case, the priority is that settlement must meet the needs of each party (albeit needs is a concept that changes according to the circumstances of the case).
Such wide discretion enables spouses who are negotiating a settlement an opportunity to tailor it to their needs. As such, given the intersection of legal, personal and financial issues, advice from a lawyer and a financial adviser should be considered in tandem to secure the best possible outcome and avoid any surprises along the way. There are a number of key financial considerations for spouses and civil partners dividing their assets upon divorce.
Valuing assets
The computation of all assets is a crucial first step in any case; one must know what assets are available before they are divided. However, the value of assets is often not what it first seems; consideration must be given to the tax treatment of each asset on disposal, so that a net value can be ascribed. This approach is most prevalent in cases involving the following assets:
