As a divorce lawyer in my mid-thirties I am increasingly conscious of the divorces and dissolutions (I will use the terms inter-changeably) involving people around my age. These short marriages or civil partnerships by relatively young people can create particular problems either personal or financial, which are often overlooked by more experienced colleagues and legal commentators.
These are shorter marriages, typically of 5 years or less in length and are couples in their late-20s or early to mid-30s. During their lifetime so far they may not have been able to muster the mini-fortune required to purchase a property or if they have it has often been with the assistance of parents or help-to-buy schemes. These couples might have some savings and investments which they now need to disentangle themselves from after the end of their relationship.
Quite often they cannot afford the contested court proceedings to resolve their financial and they sensibly do not want to see their savings go on lengthy and expensive litigation.
These types of clients are on the rise and in my experience they want quick practical advice. Their prime objective is usually for a just, fair and cheap outcome for them and their former partner so that they can move on with their lives.
How should they split their finances?
Unfortunately there is very little in the public domain to assist these couples. English family law is partially based on legal precedent, Judge-made law. The family justice system is becoming more open and it is now a lot easier to find legal resources. But the cases which hit the headlines and which can be found in a Google search often deal with long marriages, cases involving children and often the very wealthy.
These legal resources are all very interesting, scholarly and sound in theory, but they offer little to no practical guidance for the increasing number of clients I have described.
These issues have been taxing me recently and so I decided to put my mind to a practical guide. So what should you be thinking about if you find yourself in this situation? Here are a few tips:
- Assets: What are your assets? What property, savings and investments do you own? The first step is to ascertain what you and your spouse each have;
- Matrimonial Assets: Which of those assets are “matrimonial?” This may sound technical. But in effect you need to ask: what of those assets have been obtained or improved upon during the marriage or civil partnership?
This includes any properties, savings and investments. If one of you owned a property before the marriage/civil partnership which was then lived in whilst together, this would have become “matrimonial.”
It is important to make this distinction as any non-matrimonial assets (such as assets owned before the marriage/civil partnership or inherited assets) can be “ring-fenced” and not touched in any division on divorce/dissolution.
Quite often we find that couples marrying in their late-20s or beyond have built up capital prior to the marriage. Those funds, or any assets, if kept separate and not mingled, can often be ring-fenced.
- Sharing: The starting point is for you and your partner to share equally the matrimonial assets, including the properties, savings and investments built up during the marriage. This is even if those assets are held separately in you sole names. There are exceptions to this rule;
- Financial Contributions: This is often the key issue.
The financial contributions of one partner tend not to be given special treatment under English law, particularly after long marriages/civil partnerships and where there are children. These unions are seen as a partnerships, the fruits of which should be shared equally at the end.
However, this is not always the case and particularly for short childless unions. In 2017 the Court of Appeal said in a case known as Sharp that the sharing principle can be affected where the marriage/civil partnership is short and where the couple have not mixed their financial affairs.
This means that if you and your partner have kept your financial affairs broadly separate then your “matrimonial assets” may not necessarily be shared equally. If one of you brought a significant amount more into the marriage/civil partnership or had a higher income, then you may need to move away from a simple equal sharing of the matrimonial assets.
- Home: If you and your partner owned a property which you lived in during the marriage it will have taken on the characteristic known legally as the “family home.” This is even if the property is legally owned by only one of you.
You may have pooled financial resources to raise the deposit or to pay the mortgage. One of you may say that they contributed more than the other. Maybe because they owned the property before the marriage or maybe because they sunk their savings into the purchase.
Ordinarily this would not matter; the starting point would be an equal division. But for short marriages a practical and fair solution is often needed.
I often approach this issue by looking at the value of the contribution at the start of the marriage and the “value added” during the marriage. There are other options of course and this is purely a simplified guide.
For example, Sarah owns a property with £50,000 equity. She marries Paul. They divorce after 4 years and as a result of the mortgage payments made during the marriage and the better state of the property market the equity is now £80,000. The marriage “added” £30,000. Paul could seek £40,000 (half the equity) but Sarah is likely to want to limit Paul’s entitlement to £15,000 (half the value added).
Richard and Tom marry. After a year of marriage Richard puts £20,000 of savings toward the purchase of a property. Richard and Tom divorce after 4 years and the equity is now £40,000. Tom could seek £20,000 but Richard will say he should only get £10,000.
English family law allows for a lot of discretion and so these are not hard and fast arithmetic answers. There is often a bracket of sensible potential outcomes.
You should consider whether the property should be divided equally or whether one of you should take away a larger share of the property.
You will need to decide whether the property should be sold or whether one of you can “buy-out” the other’s share. Think laterally and consider all options to work out the best deal for you.
- Family and help-to-buy: Before any of the above, the first bite of the cherry from any home is likely to fall to any third parties who have contributed to the purchase. You should think about how to liquidate the property from any help-to-buy scheme and whether any contributions from friends and family need to be returned.
This is often a major issue in these scenarios. When family or friends have provided funds, it is important to establish whether those funds were a gift or a loan, and if the latter what expectation there is of repayment. Documented loans with clear terms are more likely to be upheld as hard loans due for repayment. The less formal the arrangements the more difficult it may be to establish the requirement to repay.
- Maintenance: Following divorce/dissolution one of you may be required to pay maintenance to the other from income. Again, this is more likely in longer unions but it still needs to be thought about. If, for example, one of you has a lower income and has a need for support after the divorce/dissolution, they may be able to seek maintenance. Any maintenance is likely only to be paid for a short period. It should only be paid if there is a real financial need.
- Children: All of this guidance changes in the event that there are children involved. The interests and needs of any child will be of utmost importance.
This guidance isn’t exhaustive, however its aim is to give a broad understanding of the main issues that couples of a short term marriage of civil partnership will be facing.
I should add that even if there is not going to be any financial adjustment after a divorce/dissolution, you should obtain a court order dismissing any current or future financial claims from your former partner. A “dismissal order” will effectively say that neither you nor your partner can make a claim against the other owing to the divorce either now or in future.
The well-publicised case of Vince v Wyatt showed that even 25 years after a divorce a spouse can make a financial claim if there is not a dismissal order in place. In that case the former wife sought a share of the many millions of pounds made by the husband after the divorce. The Supreme Court found that she had the right to bring a claim as there had been no dismissal order, although her claims were limited. So be careful and make sure you wrap all your affairs up with a court dismissal order.
Each situation is different and often what is needed is a practical and fair solution for both people. I am involved in a number of cases where people need to navigate through the complexities of divorce law toward a resolution. If you have any queries regarding this guidance please do not hesitate to contact me on firstname.lastname@example.org / +44 (0)203 178 5668.
Stuart Clark is an Associate Solicitor at iFLG. He has a wide breadth of experience in all issues arising from the breakdown of a relationship but particularly specialises in financial and forum matters. His work involves complicated trust and partnership issues when often quick advice needs to be obtained from a specialist lawyer in another jurisdiction to run concurrently to his cases in hand.
The International Family Law Group LLP
© 11 June 2018