Are assets always divided equally in a divorce?

One of the most common questions we are asked in divorce cases is whether the financial assets are automatically divided equally. The short answer is no. The case of White v White emphasised the importance of equality when assessing fairness but this does not mean that an equal division is automatic or required.  Instead, it means that any departure from equality need to be justified, often referred to as “the yardstick of quality” or a “cross check against equality”, to ensure that any departures are fair.

However, to answer the question in more detail, it is important to understand that there are different types of assets and they are not always treated in the same way.

Different categories of assets in a divorce: income, capital and pensions

There are three main categories of financial claims arising from a divorce: capital claims, income claims and pension claims. The type of asset being considered makes a difference as to how it is treated upon a divorce and whether or not the starting point is an ‘equal division’.

For example, in respect of income claims, the starting point is not an equal division. A higher earner is not expected to share half of their income as a matrimonial asset to divide. The court can order spousal maintenance in circumstances whereby the lower earner cannot meet their needs through other means, but there is not an automatic starting point of an ‘equal division’ of a party’s income.

Similarly with pension claims, there is not an automatic entitlement to half of your spouses’ pensions. There will be lots of factors in play which are listed in section 25 of the Matrimonial Causes Act 1973, including the duration of the marriage and the age of the parties.  However if the pensions are not going to be divided equally, the decision to not equalise them should be justified for a particular reason. The law can also look at the pension pots holistically and compare it with other assets that the parties hold, it may be the case that pensions are not shared if a spouse is retaining other assets of value instead.  There is therefore not an automatic rule that pensions will always be shared equally.

In respect of capital claims, the usual starting point is equal sharing. However, parties can argue that they should receive a greater or lesser share of the assets depending on the section 25 factors. This might include, for example, unmatched financial contributions, inherited assets, pre-marital wealth, or the need for one party to retain more capital to meet housing needs.

Meeting needs versus sharing

Particularly when it comes to capital claims, the court will want to ensure that the parties’ needs are met, especially in terms of rehousing. If an equal division of the assets achieves that, then there may be no reason to depart from the starting point. However, if one party has greater needs than the other, perhaps because they are the primary carer of young children or because they have a significantly lower income, this may justify a departure from equality in their favour.

If there are assets surplus to needs, the court may then consider the sharing principle more closely. This is where the distinction between matrimonial and non-matrimonial assets becomes important. Assets built up during the marriage are more likely to be shared, whereas assets acquired before the marriage, after separation, by inheritance or by gift may be treated differently. That said, non-matrimonial assets can sometimes become part of the matrimonial pot, particularly if they have been used for the benefit of the family or mixed with matrimonial assets.

The starting point to divide assets in divorce

When looking at capital assets, the court often begins by considering whether an equal division would be fair. This is not because there is a strict rule that everything must be split 50/50, but because equality is an important cross-check. If one party is to receive more than half, there should usually be a clear reason for that outcome.

The court will consider all the circumstances of the case, including the parties’ resources, needs, ages, earning capacities, standard of living, the length of the marriage, contributions made by each party and the welfare of any children. In practice, this means that two cases with similar asset values can still produce different outcomes depending on the family circumstances.

Moving away from the presumption of equality

There are several reasons why the court may move away from an equal division. The most common reason is need. For example, one spouse may need a larger share of the available capital to purchase a suitable home for themselves and the children, while the other spouse may have a stronger income or greater mortgage capacity.

Another reason may be the nature of the assets themselves. Inherited wealth, assets owned before the marriage, business interests or wealth generated after separation may not always be shared in the same way as assets accumulated during the marriage. However, the longer the marriage and the more those assets have been used within family life, the harder it may be to keep them separate.

Is departing from equality fair?

Fairness is the court’s overarching objective. A departure from equality is not unfair simply because one party receives more than the other. It may be entirely fair if the outcome reflects the parties’ respective needs, responsibilities and financial positions.

The court will be cautious about arguments that one party should receive more simply because they were the higher earner and contributed more financially. Financial and non-financial contributions to a marriage are both important and considered to be of equal value. A spouse who cared for children or managed the home may have made an equally valuable contribution, even if they did not generate the same income.  Therefore contributions-based arguments to depart from equality will not always succeed depending upon the circumstances.

Finalising an agreement

Even where separating couples reach an agreement between themselves, it is important to record that agreement properly. A financial agreement is not automatically binding simply because both parties have agreed it informally. Usually, the agreement should be converted into a consent order and approved by the court.

A consent order can provide certainty and finality, including a clean break where appropriate. Without one, financial claims may remain open even after the divorce itself has been finalised. It is therefore sensible to take legal advice before agreeing how assets should be divided, particularly where there are pensions, business interests, inherited assets or significant differences in income.

Conclusion

In summary, assets are not always divided equally in a divorce. Equality is an important starting point and cross-check, particularly for matrimonial capital, but the final outcome depends on what is fair in the circumstances of the case. Needs, pensions, income, non-matrimonial assets and the welfare of any children can all affect the final division.  Couples may wish to enter into a prenuptial agreement if they wish to agree the division of their assets at the outset of the marriage. We have written a separate blog post about prenuptial and postnuptial agreements.

If you wish to discuss your situation or any issues raised in this blog our family solicitors are based in Wolverhampton, Cradley Heath and Sutton Coldfield and serve clients across the West Midlands.  For all new enquiries, please call 01902 328 355 or complete our online enquiry form and a member of our team will respond.