Getting a divorce is a stressful and emotional time for anyone going through it. One of the most concerning issues for spouses getting divorced is how the divorce settlement is calculated.
In this guide, we’re explaining how divorce settlements are calculated and what the factors that cause settlements to vary.
How are divorce settlements calculated?
Divorce settlements are calculated by dividing assets into two categories: matrimonial and non-matrimonial assets.
Matrimonial assets
Matrimonial assets are financial assets that the spouses have built up during the marriage. This can include many things such as the family house (and any other properties owned), savings, vehicles, furniture, businesses, mutual funds, and even pensions.
As well as the above, debts accrued over the marriage are also taken into account and will be part of the overall financial settlement between the spouses.
Non-matrimonial assets
Non-matrimonial assets are assets that were acquired before or after the marriage. This can include assets brought after the spouses have separated. This can include items listed above as well as any inheritance received.
However, sometimes non-matrimonial assets are not excluded from the divorce settlement. This is because a non-matrimonial asset can be used to purchase an asset during the marriage, so it is considered a matrimonial asset. An example of this is a spouse using their savings before marriage to buy a property after marriage.
Pets
In regard to family pets, ownership is determined by who funded the purchase of the pet, whose name is registered to the pet and who has paid for various expenses such as pet insurance.
Pensions
Pensions are also part of the divorce settlement and can be dealt with in one of three ways by the court.
- The first is that a percentage share of the former spouse’s pension is transferred to another
- The value of the pension can be offset against other assets
- The pension income can be shared
Business assets are also included, and like all matrimonial assets, the courts will decide what is fair based on the personal circumstances of both spouses.
Are assets split 50/50 in a settlement?
Most people assume assets are split 50/50; however, this is not always the case. Most settlements use a 50/50 split as a starting point, but the assets will be calculated by the courts based on several factors, which are:
The needs of each party
A spouse in a significantly weaker financial position will be judged as requiring more of the assets to reach a fair settlement. This will also depend on other factors.
Children
The spouse who is responsible for caring for any children of the marriage as their primary carer might be awarded more to accommodate expenses relating to the child/children.
Future earnings
If a spouse has sacrificed career progression while married to care for children, they could be awarded more of the assets on divorce. This is because that ‘sacrifice’ will impact the future earnings of the individual and the financial settlement will reflect this.
It should be noted that the court will aim to split matrimonial assets as evenly as possible in the event of a divorce and all assets will be considered equally based on individual circumstances.
How to determine what your assets are
It is important to try and work out what your assets are in the eyes of the court before proceeding with discussion on divorce settlements. This should be discussed with a family law expert and should include:
- Total debts – This can include credit cards, car finance, student loans and any other financial commitments.
- Savings accounts – Ensure that you have up-to-date bank statements for any savings accounts.
- Property value – Find out what your mortgage balance is and how much equity you have in your home for all properties that you own.
- Total household income – This includes the total disposable income of your entire household.
- Investments – Seek advice from an independent financial advisor to get your investments valued.
- Items of value – Ensure that any expensive items are valued. This can include jewellery, watches, furniture, vehicles, etc.
Both parties must give full and frank disclosures to all their assets and failing to do so can lead to serious consequences.
Does the old divorce law affect the financial settlement?
Under the old divorce laws – pre-April 2022 – the grounds for a divorce were to prove that the marriage had broken down irretrievably via either adultery, unreasonable behaviour, desertion, two years separation with consent or five years separation.
Therefore, as a rule, all financial settlements should be fair and prioritise any needs and welfare of any children involved. Due to this, instances of unreasonable behaviour or adultery rarely come into the settlement.
However, if extreme behaviour or violence are involved and are deliberately impacting a couple’s financial position, this will be considered.
How Davisons Law can help
It is important when going through a divorce settlement to use a family law expert to make sure your assets are correctly determined. Get in touch with our expert family solicitors today on 0808 3036 987, and our team will help put your mind at ease during a difficult time.
