Divorce - Who owns what?

By Gerard Davis

Division of matrimonial and non-matrimonial assets on divorce

The Court has a great degree of discretion and flexibility when determining the appropriate division of matrimonial assets on divorce.  The factors the Court uses when deciding division of the matrimonial assets is contained in section 25 (2) of the Matrimonial Causes Act 1973 and section 25 (2) (a) outlines the factors as "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..."  Whilst these factors are not listed in any particular order of importance, it is widely acknowledged that the parties' resources, income and capital are the determining factors.  Section 25 (2) (f) makes provision to consider the contributions which either of the parties has made or is likely in the future to make to the welfare of the family which includes any contribution  by looking after the home or caring for the family.

Lawyers have argued that certain assets should not be classed as matrimonial but non-matrimonial and therefore should not be included.  These could include assets acquired by one party to the marriage prior to the marriage, gifts received or by inheritance.  It could be argued that in fairness, where this property still exists, the party to whom it was given should be allowed to keep it.

However, this can carry little (or any) weight if a claimant's financial needs cannot be met without recourse to the non-matrimonial property.  Section 25 (2) is not limited to assets acquired during the marriage.  The Court has power to deal with the resources of both parties regardless of whether they were acquired before or during the marriage.

It all depends upon the circumstances of the case including the length of the marriage. Where financial resources are limited then non-matrimonial assets may be called upon to meet the financial needs of the parties even if one party was the beneficiary of an inheritance.

In R v R [2009] EWHC 1267 (Fam) it was clear that the way in which inherited money is spent during a marriage can influence the way it is dealt with on separation. Someone who inherits a lump sum during a marriage and physically ring-fences it in a separate and unused bank account is more likely to successfully argue it is outside the matrimonial assets.  Conversely, someone who spends the sump sum on the family or spouse effectively forfeits any future claim to retain it.  This may be considered unfair.

It is important to stress that all recent decisions provide general guidance on the treatment of inherited assets. These decisions were made in the context of the facts of each particular case.

To try to protect a pre-owned or inherited assets a couple may decide to enter into a Pre-Nuptial Agreement.    Despite the judgment in Radmacher v Granatino [2009] regarding pre-nuptial agreements they are not legally binding but they can be persuasive to the Court.  The enforceability of pre-nuptial agreements is not yet written down in statute but is just one of the factors to be taken into consideration by the Court.  Its weight has been increased since Radmacher v Granatino but ultimately the Court has to look to the ever present and overriding issue of needs of the parties and the family.  Future legislation may come into force changing the position as to pre-nuptial agreements further and there is the possibility that this will include specific guidance on how to deal with non-matrimonial assets such as inherited property.  Europe has a formulaic approach which provides for greater certainty of outcome and we may be heading that way but, in doing so, may abolish the overriding concept of "fairness".