DIVISION OF ASSETS

DIVISION OF ASSETS

When you separate, you will undoubtedly be thinking about money- both in the short term and in the medium to long term.  Your family income may be already stretched as two homes are more expensive to run than one.

As I have mentioned before, there are two distinct sets of issues you need to tackle:

The first is the immediate- how are you going to manage monthly commitments such as  mortgage payments, utility bills and school fees? How are you going to service debts such as car loans and credit cards and if there is going to be a deficit who is going to pay for that?

We may need to consider a payment of spousal support (aliment). If your finances are really stretched, you may decide to carry on living together in the family home until the bigger property issues are resolved and you can both afford to move on.

The second  issue is deciding how to split  the property that you have acquired during the marriage (known as matrimonial property or the pot) and toconsider ongoing spousal support, if necessary, and child support if you have children. You may also wish to look at longer term finances such as your respective retirement funds and future expenses for your children such as school fees and university costs.

What is matrimonial property?

Matrimonial  property is the net value of property belonging to you  owned either individually or in joint names at the time you stop living together or start leading separate lives (if you stay in the same house) or raise proceedings for divorce  (whichever is earlier).  This date is  referred to as the “relevant date” or “date of separation”.

Matrimonial  property needs to have been acquired during the marriage. Property you owned pre marriage or acquired after the relevant date is not matrimonial property with the exception of any house or furniture you bought pre marriage to use  or live in as a family home. Gifts from third parties are not matrimonial property and money you have inherited is also exempt.  All property acquired during the marriage is matrimonial and it doesn’t matter who acquired it. This includes any business interests, pensions and life policies.

All debt acquired during the marriage is also matrimonial and again it doesn’t matter who acquired it or in whose name it is in.

The question of whether or not a particular asset is matrimonial  property is sometimes open to interpretation. The above is a basic overview, however it is always best to seek advice. Sometimes assets that you don’t think are matrimonial such as redundancy/ accident payments which are paid after the relevant date may  in fact constitute matrimonial property.

How much matrimonial property am I likely to get?

The law in Scotland is governed by two Acts- The Family Law (Scotland) Act 1985, and  The Family Law ( Scotland) Act 2006 . Scots law encourages the “clean break” principle. Lump sum payments, known as capital sums,  pension sharing orders and property transfer orders tend to be made and ongoing support following divorce is generally only awarded for a short period of time after divorce, if at all.

The basic principle  is that the net value of the matrimonial  property should be shared fairly between you. “Fairly” usually means equally although there are arguments that can be advanced to tip the balance slightly.

Examples where division might be unequal in favour of one of you could be:-

  • One party gave up their career in order  to further their spouse’s career.
  • One party gave up work to look after children.
  • An unequal division would allow a family home to be retained for children to live in.
  • One of you is unable to work  due to age, lack of skills for today’s job market and/or poor health.
  • If business assets owned pre marriage by one party have increased significantly during the marriage because of direct or indirect efforts, of the other party.

Any of these factors or even better a combination of a few of them would mean that we could advance an argument for “unequal division” however just because you have a stateable argument this is by no means guaranteed. The court may also elect to address any imbalance by awarding  spousal support  known as “periodical allowance” for a finite period instead.

It is only in very restricted circumstances that conduct can be taken into account. The cases where this is a factor are very rare and mainly focus on circumstances where quite extreme behaviour such as gambling has had a significantly negative effect.  Another factor which might affect the division of assets is where non matrimonial property has been used to purchase property after the marriage. For example if you had a house before you married and you sell it during the marriage and use the proceeds to buy another house, then the new house is matrimonial property. As a proportion of the new asset which is matrimonial came from non -matrimonial property, it would be open to you to advance a  source of the funds argument. Although the Act says that the source of funds can be taken into account, the argument becomes weaker the longer the marriage and if the funds have been used to buy a family home. Many people  choose to enter into prenuptial and post- nuptial  agreements to protect themselves in such circumstances.

HOW WE GO ABOUT THE ASSET SPLIT

We ingather all financial information as at the “snapshot” of the relevant date and that allows us to assess the extent of the net matrimonial property. We work out or agree who is keeping each asset  such as the house and pension and who is taking on responsibility for debt. We then work out a fair division and if one of you needs to make a counterbalancing payment to the other to even you up.

It is only in very restricted circumstances that conduct can be taken into account. The cases where this is a factor are very rare and mainly focus on circumstances where quite extreme behaviour has had a significantly negative impact on the finances such as gambling.

SPOUSAL SUPPORT – ALIMENT AND PERIODICAL ALLOWANCE

ALIMENT- REGULAR PAYMENTS PRE DIVORCE

Husbands and wives/civil partners have a legal duty  to financially support one another.  This duty continues in the form of aliment after separation until divorced or the civil partnership is dissolved.  Aliment normally arises in situations where one party has been the main earner and therefore supported the other during the marriage/civil partnership.  This support can be fundamentally important where the parties decide to live separately after separation and one party will struggle to cope with the financial burden. If agreed or granted by the Court it is usually paid in regular monthly amounts. Regard is had to:

  • The parties’ needs and resources;
  • The parties’ earning capacities; and
  • All the circumstances of the case.

The duty to pay aliment  ends on divorce or earlier if mutually agreed.

PERIODICAL ALLOWANCE- REGULAR PAYMENTS POST DIVORCE

It is far less common to be awarded a periodical allowance. The law in Scotland favours a “clean break”  The party seeking it will need to show that the financial settlement reached upon separation still leaves them in a situation where after divorce/ dissolution they are still struggling to adjust to the loss of support previously given.   There are a number of factors to be considered when determining if a periodical allowance is payable and this will wholly depend on the parties’ circumstances.  These factors go way beyond those considered for aliment.  Any award of a periodical allowance will end three years after the date of divorce/ dissolution however awards of a year are far more common.