July 13, 2016
In an ideal world, everyone contemplating moving in with their partner and/or getting married would seek legal advice before doing so and ensure that each party’s financial interests were protected and accounted for in the event that the relationship was to break down at a future date.
But despite the fact that pre-nuptial and post-nuptial agreements are more commonplace in modern conversation, and consistently relied upon by courts in determining financial provision post-break up, most people still shun the idea, not least because it seems antithetic to the process of forging a joint future life.
That being the case, when it comes to divorce, the process by which financial provision is determined relies very heavily on two terms: openness and fairness.
Fairness, in particular, can often be a hotly contested subject within divorce finances but it is the key to determining what provision will be made. Generally, the accepted starting point is to consider whether an equal division (50:50) of the marital assets would provide a fair settlement.
In broad terms, ‘fair’ to a judge means ensuring that both parties’ needs (for housing, capital and income) are adequately met out of the available matrimonial assets, and although the starting point is an equal division, that does not necessarily mean that everything each party owns will be split down the middle: here, the court makes a clear distinction between matrimonial assets, non-matrimonial assets, and post-separation accruals.
Examples of non-matrimonial assets include: gifts (of value) to one party, inherited assets, business assets acquired before marriage and, in some cases, assets acquired post-separation.
Pre-marital assets are common in second marriages as well as in cases where one party’s family has significant financial interests in which that spouse is involved.
Whether an asset is deemed to be a non-matrimonial asset is a matter of fact according to the circumstances surrounding ownership and enjoyment of the asset. In many cases, the longer the marriage, the more likely the presumption that the asset will have become intermingled with other marital assets and therefore will become a matrimonial asset.
In other words, the court will consider whether the wealth went into the matrimonial pot during the marriage or whether it was kept specifically outside of the parties’ other assets as a distinct and untouchable asset. The party asserting the existence of pre-marital assets must prove they are such by clear documentary evidence, evidence of the existence of this asset prior to the marriage and, also, evidence that this was not intermingled as an asset during the marriage. If the argument is sustained that a particular asset is a non-matrimonial asset, then in high net worth cases, it may well be excluded from any financial settlement.
The situation is similar when it involves assets accrued after the parties have separated: to be considered a non-matrimonial asset, the benefiting party needs to show that the assets in question were acquired entirely independently of existing matrimonial assets – for example, when a new business venture is established using independent financing. Where an existing matrimonial asset gains value between separation and the determination of financial claims, the court may well treat the increase in value as a non-matrimonial asset.
As with most legal arguments, there is no absolute answer. What a person sees as theirs and theirs alone may well be deemed by a judge to fall within joint marital assets to be divided between the parties, and this can include business assets and interests, too, so to be protected means taking proactive rather than reactive legal advice from an expert.