If you have decided to end your marriage, one of the next steps you must take is agreeing how to split your assets. There’s no fixed formula for deciding on a settlement and the Courts will take a range of factors into account.
When it comes to divorce settlements, there’s a common misconception that everything will be automatically be split 50/50. While this is the starting point, the Court has to consider many factors and will ultimately seek to make a settlement that is fair to both spouses, and often that means there will be a move away from equality.
If you have children, their wellbeing will be given top priority, particularly in respect of their housing needs.
Beyond that, there are some general guidelines that a judge will follow when deciding how your financial affairs will be split. These are laid out in Section 25 of the Matrimonial Causes Act 1973 and include the following.
How is a divorce settlement decided?
1. Income and earning capacity
The Court will look at the current earnings and future earning potential of both spouses, bearing in mind their ages, time out of work and the job market. If one of the spouses has a much higher income than the other, this will be taken into account. The Court will also have regard to any loss of prospects resulting from marriage, for example, jobs or promotions sacrificed if one party gave up work to look after the children.
2. Standard of living before the breakup
This includes things like where you live, how many cars you have and what kind of holidays you take. In the event it is impossible to maintain the same standard of living the aim is to ensure that both spouses experience any reduction in living standards equally.
3. Financial needs and responsibilities
The Court will take into account the financial needs of each spouse, including housing costs, food and clothing, as well as responsibilities such as loan repayments or school fees. Both parties are required to disclose their full financial position to the Court, including an estimate of their living costs, to ensure the parties can negotiate with full transparency and understanding of the assets.
Someone with a disability may require greater resources, such as a larger house or extra income to meet their needs. This will be factored into the divorce settlement.
4. Age and how long you were married
The shorter the marriage, the more likely it is that both of you may simply walk away with whatever you brought to the marriage. An older person who has been married for many years generally will find it harder to achieve financial independence after a divorce than a younger person with good career prospects.
5. Contributions to the marriage, both financially and emotionally
Contributions to the marriage can be difficult to quantify but a common example is where one partner stayed at home to look after the children. The non-financial contributions of a ‘homemaker’ are generally considered equal to the financial contributions of a ‘breadwinner’, since the homemaker’s contributions freed their partner to make all that bread.
6. Conduct during the marriage
The Court does not set out to penalise someone for their behaviour during the marriage but they will take it into account if it would be unfair to disregard it.
7. Potential financial loss
Finally, the Courts will consider any benefits a party might lose when the marriage is terminated, such as a share of a pension. Here, the Court may offset the value of a pension by giving the party without the pension a bigger share of other assets such as the family home.
Do we have to go to court?
Most couples reach a financial settlement between themselves, sometimes by using an independent mediator to help them find a way forward if they are stuck.
If you are both in agreement, there’s no need for a court hearing. However, the agreement will not be legal unless it is approved by the Court. If the judge believes the split you’ve agreed is unfair, they can alter it and have a new consent order drawn up. Before you apply divorce in court you should know how much divorce cost in Court.
The bottom line is, what you think is fair may not be what happens legally. It’s always best to speak to a solicitor about your individual circumstances to make sure your settlement is fair in the eyes of the court.
