Until a financial order is obtained within divorce proceedings either spouse can make a financial claim against the other. When considering what a fair financial claim is, a judge will look at all the assets owned by the couple at the time they divorce. What if one of the couple has significantly increased their assets since separation? Will their spouse benefit from this just because they did not divorce sooner after they separated?
Partner Fiona Wood, who is particularly accomplished at dealing with divorce cases where there are substantial and complex assets, explains further.
When marriages end the couple are not always in a rush to get divorced. Emotionally it is often a very difficult time and many people wait until after they have been separated for some time before formalising their separation by obtaining a divorce and a financial order within their divorce proceedings.
Until a financial order is obtained within divorce proceedings either spouse can make a financial claim against the other. When considering what a fair financial claim is, a judge will look at all the assets owned by the couple at the time they divorce. What if one of the couple has significantly increased their assets since separation? Will their spouse benefit from this just because they did not divorce sooner after they separated?
There are no strict rules regarding how a judge should divide the assets when a couple divorce
There are no strict rules regarding how a judge should divide the assets when a couple divorce, only guidelines. Judges therefore have a lot of discretion regarding the financial orders that they make. However, the main factor that judges must consider is the needs of the couple and their children (up to the age of 18). Need is usually having somewhere to live and money to live on, although how much is required to meet these needs will vary from case to case. If the couple’s needs can only be met by taking into account all of the assets, including those acquired after the couple separated, then all of the assets will go into the matrimonial pot for distribution between the couple.
Ring-fencing assets
If there are more than sufficient assets to meet the couple’s needs, it may be possible to ring-fence some or all of the assets that have been acquired after the couple separated. For example if one spouse started a new business after separation and at the time of the divorce this business had a significant value, if there are more than enough assets to meet the couple’s needs without taking the business into account, a judge could ignore some or all of the value of this business when dividing the other assets between the couple.
What if the asset existed at the time the couple were together, but it has increased in value significantly since separation? If the growth in value is just latent growth, such as an increase in value of a property owned by one of the couple as a result of a general increase in property prices, a judge is unlikely to say that this asset should be ring-fenced before the assets are divided between the couple.
If the growth in the asset since separation is as a result of significant efforts by one of the spouses since separation, for example a business increasing significantly in value over a period of time after separation due to a change in direction taken by the business owner, a judge may ring-fence some of the value in the business before the assets are divided between the couple. Some of the value of the business is likely to be included in the matrimonial pot as the business that existed at the time of separation provided a springboard for the growth of the business.
A judge’s discretion
When calculating how much should be ring-fenced, the Court of Appeal in Hart v Hart (2017) used both an arithmetical and a broad-brush approach to make this decision, which gives judges quite a large discretion regarding how they deal with this issue.
With regard to earnings that one spouse has earned after separation, again provided that there are sufficient assets to meet the couple’s needs without using money saved from post-separation income and bonuses, this money is likely to be ring-fenced. The case of Waggott v Waggott (2018) removed earning capacity from the matrimonial pot, allowing income received after separation to be treated differently if there are sufficient assets to meet the couple’s needs without having to use this money.
