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Dividing assets after divorce: a problem best met 'head on'

View profile for Amanda Rimmer
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Making good decisions when you are in the midst of life changing events isn’t easy - particularly when you’re trying to make the most of a difficult situation. Physically separating is one thing but when is a good time to divide your assets?

Experience has shown that we are all different – we all deal with things better at different stages.  Some want to sort everything out quickly and just move on. Others leave things alone for as long as possible, choosing to muddle through, putting thoughts of ‘who keeps what’ aside for another time.

Having seen all sorts of divorce cases however, I would argue that waiting or delaying the process of dividing your assets can affect what you actually get - paying more to your ex having less for yourself.

Questions around your financial settlement are not over until you have the security of a final order from the court.  That order sets out what your obligations, what you will keep and, in most cases, will put an end to any claims you might have against each other. In divorce law, we call this a ‘clean break’. Done. Dusted.

So what if you are one of those who chooses to wait to sort things out? In particular, what happens if your assets increase, or your assets increase in value, after you’ve separated?

The bad news is that any decision on ‘who gets what’ will not be based on the value of assets at the point of separation. Instead, the court will decide their monetary value when the final order is issued. What’s more, the division can include inheritance money, which is often a sore subject, particularly when there is a recent bereavement to cope with too. 

In short, until the deal is done, the vast majority of assets are ‘in the pot’ and there to be contested.

In law, a lot of thought has gone into this. It is what is referred to as ‘post separation accrual’ and falls into three categories:

  1. Money that has come about because of an entirely new venture and is not connected to the assets of the marriage.  This may be ignored by the court and protected if it was entirely created after separation and by your own personal expertise.  In very rare cases this may be shared.
     
  2. Money that has been made because of a ‘passive’ increase in value of an asset – such as a house, pensions, savings etc. – which was present during the marriage. This is usually shared equally.
     
  3. ‘Active’ economic growth of an asset of the marriage.  This is the most difficult category and needs careful analysis. If one person can successfully argue that something they have ‘actively’ done since separation has led to the increase in value, they may be allowed to keep it.

However, as with much around the division of assets, there are no hard and fast rules. If one party is in need of money then the money built up after separation can be shared – equally or unequally.  This is what is called the ‘needs argument’ and basically allows the court to use its discretion to do what is fair.

There can be no doubt that the assets which are in place at the point you separate are relevant and remain the property of the marriage and are open to being divided.  Any asset that comes into being after separation must also be disclosed and taken into consideration.  You can’t hide it away hoping it won’t be touched.  There is a strict duty to provide full and frank disclosure of your financial position and a failure to do that can result in costly penalties.  Everything needs to be ‘put on the table’ but whether it is shared in one way of another is a different issue.

My advice would be to avoid getting into areas of complication and get things sorted sooner rather than later.  Equally, take care to make sure any agreement is written into a final court order. That way it is legally binding and provides certainty.  A verbal agreement - no matter how intentional and well meaning – is not legally binding. 

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