Married couples/civil partners
- What is matrimonial or partnership property?
- Division of partnership or matrimonial property
- Family Homes & Pensions
- Business interests
One of the big worries after separation is money. Two households are going to be more expensive than one. There may be debt already, and even if there isn’t, there is a real risk that some will start mounting up unless you are both able to be realistic.
There are two separate money issues to tackle. One is the question of immediate ongoing finances including weekly or monthly support, division of responsibility for existing debt and how each of you will meet commitments like mortgage payments and utility bills.
The other is how to split up fairly the property that you have built up during the marriage or civil partnership (known as matrimonial property or partnership property), decide if differences in income merit some further adjustment and sort out child support.
It is possible to ask the Court (or the CSA/CMEC in the case of child support) to sort out the ongoing finances at any time but it is generally only in an action for divorce or dissolution that you can force a decision regarding division of matrimonial property or partnership property by asking the court for the orders you believe are justified by the legal rules.
In practice, couples often want to sort out both of these aspects as soon as possible, even if they are not wanting an action for divorce or dissolution at once. You can use mediation, the collaborative process or negotiation to work out terms for a Separation Agreement taking into account the rules that would apply on divorce. When you are dealing with matter by agreement, the legal rules are guidelines and not a straightjacket. Before the rules were introduced there was a lot of consultation and so the basic legal rules do reflect what the majority of people felt would be a fair approach. It can be helpful to have that objective benchmark after a separation.
The two areas, ongoing finances and the division of matrimonial property or partnership property, tend to be bound up with one another. You can’t really take anything in isolation.
Matrimonial or partnership property is all the property belonging to you both at the time you stop living together as a couple (which occasionally can happen when you are still under the same roof but start leading separate lives) or raise proceedings for divorce or to end your civil partnership (whichever is earlier and is the date referred to as the “relevant date”) and which you acquired during the marriage or civil partnership (or any house or furniture you bought before then to use as or for a family home) including any business interests either of you built up after your marriage or civil partnership but before the separation.
It includes the proportion of pension or life policy interests which accumulated during the time of the marriage or civil partnership up until the separation. It excludes inherited assets or money and personal gifts from third parties (and assets you owned before the marriage or civil partnership, subject to the rules about family homes mentioned earlier).
The question of whether or not a particular asset counts as matrimonial or partnership property is not always clear-cut, and if agreement can’t be reached occasionally has to be decided in Court.
The Family Law (Scotland) Act 1985, which has been amended to cover both married couples and civil partners, encourages the “clean break” principle. Lump sum payments, known as capital sums, and a later addition of orders allowing pension sharing, were encouraged to take the place of ongoing payments to a former partner and the circumstances in which ongoing support would be payable were restricted.
The basic principle set out in the Act is that the net value of the matrimonial or partnership property should be shared fairly between you. “Fairly” usually means equally. There are no circumstances which will automatically guarantee an unequal division in one person’s favour but there are circumstances where that may be justified.
The starting point is reasonably straightforward but there have been some areas which have proved more difficult in practice.
One overriding principle is that although the way someone behaves might be the reason a divorce or dissolution of a civil partnership is granted, that behaviour will usually not be taken into account when the money side is considered. You might be surprised by this. You might think, for example, that your partner should be penalised for having walked out on you to go and live with someone else. It is perhaps not easy to accept, but it is important to realise that even though the ending of the relationship may be achieved by proving fault, the financial division will not be.
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. The other general point to remember is that if the financial things have to be sorted out in Court rather than by Agreement, it doesn’t matter which of you raises the action, the other one can normally get their entitlement sorted out in the same action.
In many cases, the most valuable assets will be the family home and pension interests which may include Additional State Pension interests. If a couple have been together for some time, the value of the house and pension may in fact be quite similar. Pension interests are usually valued by the Pension Schemes who provide the date of separation (“relevant date”) cash equivalent transfer value (CETV) which is the amount to be taken into account as matrimonial or partnership property. If the position started before marriage, that value has to be apportioned for the period from the date of marriage or civil partnership to the date of separation. That value is included as part of the matrimonial or partnership property. Of course, the value can’t be used like a cash sum of money although it is a valuable asset which will generate an income at some future point.
In some cases another significant asset will be the value of any business interests which either or both of you have acquired after the date of the marriage or civil partnership. The business might be run as a sole trader or a partnership or a limited company. How it is run can make a big difference in whether the business interests are matrimonial property. There are a number of ways in which businesses can be valued. An expert is usually asked to assess the correct approach and value. There can be disagreement over which approach is correct. There can be complications if a business was in existence at the date of marriage or civil partnership and if so, about how much, if any, of the value of it should be considered matrimonial or partnership property.
Once all the assets including any other properties such as holiday homes, investments, the value of any policies which has accumulated during the marriage or civil partnership or any other asset acquired has been worked out then all the debt which has accumulated at the relevant date has also to be identified. The debt is taken away from the assets and the amount left is the net matrimonial or partnership property.
Examples of why division might be unequal in favour of one of you could be:-
- One partner gave up well paid employment to accompany the other person who had to work abroad to further their career.
- One partner has not pursued their career fully because of childcare commitments.
- Where a slightly unequal division would allow a family home to be retained for children to live in.
- One partner is unable to work because of a combination of age and poor health.
- If business assets or shares in a company which were owned by one partner before the marriage, excluding then from being matrimonial property, have increased significantly during the marriage because of efforts, direct or indirect of the other partner.
None of those circumstances would automatically guarantee an unequal division but might justify it, particularly if more than one element was present, although only if an equal division failed to balance those factors. Some of these examples could justify financial support after divorce, rather than extra capital.
Another factor which might affect the decision is if assets from before the marriage or civil partnership had been used to acquire assets after the marriage. For example if you had savings, then married, then bought a painting with them then the painting is matrimonial property though you could ask for the source of the funds used to buy the painting to be taken into account in your favour. Although the rules specifically say that the source of funds can be taken into account, that argument is weaker if the relationship has been quite a long one and the funds have been used to buy a family home, particularly if it is put in joint names.
Once all these factors have been taken into account the approach to division can be either by offsetting assets where one person keeps for example the house and the other the pension fund or by dividing assets such as selling the house and sharing the pension. In other cases a capital sum can be paid by one person to the other to result in a fair overall division. Quite often there is a mixture of approaches, depending on the value of the assets.
Quite apart from the division of matrimonial or partnership property there is the question of the need for ongoing financial support. During a marriage or civil partnership if you are not working or earning much less than your partner you can ask for weekly or monthly support called aliment (separate from support for any children you might have).
If your partner wants you to live with him or her and this offer is reasonable you may not be able to get aliment for yourself. The amount of aliment has to take into account the needs and resources of both parties.
To continue receiving ongoing financial support after divorce (this time called periodical allowance) you must
- Be hampered from being self supporting because of looking after any children of the relationship under 16
- Have been financially dependant on your partner for financial support in which case support can go on for up to 3 years after divorce (or earlier settlement by agreement)
- Be likely to suffer serious financial hardship as a result of the divorce. This is difficult to establish but there is no maximum fixed period if you are in this category
If you want to claim periodical allowance you have to show your partner can’t pay a lump sum instead. Sometimes the fact that a claim could be made for periodical allowance can be used to justify an alternative higher capital settlement which could involve for example the transfer of the family home.
If either of you undergoes a major change in circumstances during the period the support is payable, you can ask the Court to review the level of financial support.
The overall amount of a capital sum on the other hand cannot be changed, even if it is payable by instalments.