Financial Complexities in Divorce

What constitutes a ‘complex’ divorce can vary tremendously. In financial matters, the complexity can arise out of how best and to what proportion ‘additional’ assets can be divided once both parties’ needs are met.

The Sharing Principle

The historic case of White v White in 2000 introduces the ‘Sharing Principle’ which is based on the notion that both parties contribute equally to the marriage (in its entire context, with no distinction between raising children and financially providing for the family,) there should be at first an equal division of assets, unless there is a very good reason to depart from that. That said, the court’s objective will be to achieve a ‘fair’ outcome by taking into account all considerations and it still has a wide discretion in discerning orders, paying particular regard to those listed in S25 (2) of the Matrimonial Causes Act 1973:

  • the income, earning capacity, property and other financial resources which each of the parties to the marriage has or is likely to have in the foreseeable future, including in the case of earning capacity any increase in that capacity which it would in the opinion of the court be reasonable to expect a party to the marriage to take steps to acquire;

  • the financial needs, obligations and responsibilities which each of the parties to the marriage has or is likely to have in the foreseeable future;

  • the standard of living enjoyed by the family before the breakdown of the marriage;

  • the age of each party to the marriage and the duration of the marriage;

  • any physical or mental disability of either of the parties to the marriage;

  • the contributions which each of the parties has made or is likely in the foreseeable future to make to the welfare of the family, including any contribution by looking after the home or caring for the family;

  • the conduct of each of the parties, if that conduct is such that it would in the opinion of the court be inequitable to disregard it;

  • in the case of proceedings for divorce or nullity of marriage, the value to each of the parties to the marriage of any benefit . . . which, by reason of the dissolution or annulment of the marriage, that party will lose the chance of acquiring.

Inherited Wealth / Family Money

Where there is a surplus of assets and some include property or other inherited assets, the court will likely seek to keep these with the spouse who was beneficiary. Difficulties arises however, when other assets take a more complex or convoluted form, such as a trust or business that involves other parties’ interests, or when the assets are simply less divisible in a straightforward or off-setting manner. In these cases, both the source and nature of the assets will be important factors in helping the court decide on a fair outcome. Similarly, assets acquired, inherited or gifted to one spouse before the marriage at first glance may set it outside the realm of what is considered fairly to be a ‘marital asset’, but should those assets have been used, reinvested, and enjoyed by both parties during the marriage, the boundaries of what is deemed ‘marital property’ becomes less clear. Professional legal advice that takes account of all the assets will be needed at an early stage for these types of financially complex cases.

Special Contributions

In a long marriage departure from equality is rare, and something the court is very reluctant to do, however, in truly exceptional circumstances, an argument for one party’s ‘Special Contribution’ can be heard, (and certainly should be explored for merit with your legal advisors in advance). The important cases of Miller v Miller; McFarlane v McFarlane and Charman v Charman provide guidance on what constitutes a ‘Special Contribution’. This includes:

  • The special contribution by one spouse is unmatched by the other

  • The departure from equality as a result of the special contribution being recognised does not discriminate the home-maker spouse

  • Exceptional earnings can be considered, but only when it would be inequitable to proceed otherwise

  • The characteristics or circumstances are of a wholly exceptional nature such that it would be very obviously inconsistent with the objective of achieving fairness for them to be disregarded

  • The party claiming the basis for ‘special contribution’ applies to them, will need to successfully establish their exceptional or individual quality (by way of some form of genius) that was responsible for the generation of vast wealth.

  • It is not enough that vast wealth is achieved by way of a financial windfall, for example.

Whether the details of what makes your financial matter complex lies in a difficult pension sharing arrangement, a substantial inheritance (either already received or shortly anticipated), an involved business structure that includes the interests of third parties or trustees, we recommend that you seek early professional advice.

Contact us to arrange your appointment with our specialist team.