Don’t Expect an Equal Division of Wealth on Divorce, Lawyers Warn

Separating couples expecting an equal share of assets on divorce could be in for a nasty surprise divorce lawyers warn, after a recent Court of Appeal case saw a judge cut a wife’s share of assets in her divorce by £20 million.

Many spouses still assume that they will be entitled to half the couple’s combined assets, but this principle only applies to wealth accrued during the marriage, with pre-existing wealth and inheritance excluded.

The case – Standish vs Standish – takes this principle a step further, finding that even money transferred into the other partner’s name can still be ring-fenced if generated before the couple tied the knot. In this case the husband had transferred assets worth approximately £77 million into his wife’s name, but the court held it did not mean the funds had automatically become matrimonial as the source was pre-marital.

Hodge Jones & Allen family lawyer Vanessa Friend explains: “On divorce, the courts will apply the sharing principle to assets generated during the marriage, which means the starting point will be equal division. In contrast, they will start from the premise that non-marital wealth should be retained by the owner and only shared to meet needs. This may come as a shock to the less wealthy spouse, who may assume they are automatically entitled to an equal share of all the assets.”

“The courts have provided important clarification on the mingling of assets, making it clear this should be a very limited exercise, with the original source of the wealth all important. Those who have brought earned or inherited assets to their marriage are now more likely to be able to claw it back, even if it has been transferred into their husband or wife’s name, as occurred in the Standish case.”

Ms Friend explains the importance of couples being honest and upfront about the wealth, or indeed the debt, they are bringing to their marriage or civil partnership and ensuring they have a conversation about what would happen should they split.

“Often I speak to couples who had no idea about each other’s financial situation when they got together,” she says. “At the wealthier end of the spectrum in particular, they may not have had full knowledge of their partner’s assets. For many of us talking about money just feels too awkward and is not the done thing.

“This can store up problems for the future and make for a messier divorce should the marriage breakdown. One half of a couple may have put all their money into the marital assets, paying for holidays, furniture, building works and home improvements, while the other has their own savings or investments put aside, accruing interest. The recent Standish case will make it far easier for the wealthier spouse to hold on to that savings pot in the event of a divorce.”

Ultimately the best way to have certainty about how assets will be split on divorce is to draw up a pre-nuptial agreement.

Pre-nups are drawn up before a couple marries or enters into a civil partnership. They detail how their assets would be split should they divorce and can cover property, pensions and other assets. Couples can stipulate any property or assets that will be ring-fenced in the event of a split.