Dividing the marital assets - timing is everything

January is commonly known as the most popular month for couples to start divorce proceedings with January 10 in particular hailed as D-Day for 2011 – the Monday of the first full working week after New Year.

Debra Emery, partner in the Family Department at Moore Blatch, says that more couples seek to end their marriages in early January than at any other time of the year. “We find that over Christmas people will reflect on their lives and decide to either make a go of their marriages or take the first steps to divorce.’’

It’s estimated that around 1.8 million married couples consider splitting up over the festive period and the majority of splits are initiated by women. While the emotional aspects are not to be under estimated, Debra says the financial repercussions are also crucial to consider.

When contemplating a divorce it’s important to understand how the financial aspects of a marriage breakdown will be dealt with, the potential outcomes and how timing can impact on this.

Debra comments: “The courts begin by considering an equal division of the “marital assets” - these are assets acquired during the marriage or are a product of the marriage.”

“Sometimes it is possible to depart from equality and some assets should be distinguished as non-marital assets, such as inheritances, pre-marriage pensions or property acquired before the marriage or after the marriage has come to an end, which will not be shared,” she explains.

But how do you distinguish whether an asset is marital or non-marital?

As Debra says: “This is not necessarily a straightforward process – where a business has been set up post marriage breakdown it is easier to argue that it is a non-marital asset.

“One that was started either prior to or during the marriage and which has continued operating during marriage as well as post marriage breakdown becomes more difficult to differentiate as a non-marital asset. Similarly an inheritance achieved early in the marriage where the estate has become ‘mingled’ in with other marital assets is difficult to ring-fence. Further, if marital assets are very limited and will not themselves provide for the basic needs of the other spouse and any children e.g. accommodation, the court may require part of the ‘non marital’ assets to be used to meet ‘need’.

Couples also need to be aware that courts do not calculate the value of assets at the point of marriage breakdown - instead the value is calculated at the point at which the court is asked to consider a financial settlement on divorce. In the case of a separating couple, this may be years after the actual marriage breakdown.

Debra says: “A divorce can take time and the value of assets can change, this can affect how much couples receive in any final settlement. Sometimes this can seem unfair to the spouse who has, for example, continued to grow the business value post separation, as unless that spouse can demonstrate good reason why their estranged partner should not benefit in that growth they may end up sharing it. This is often true of couples who separate amicably and hence put off the divorce trusting the other spouse to go along with whatever separation discussions take place at the time. Sometimes the spouse stands by those discussions, but sadly not all do. Equally of course, assets and in particular businesses can go down in value over the course of post marriage separation”

So how could couples prevent what are essentially non marital assets becoming part of the marital assets?

Debra says; “I’m afraid there are no cast iron ways to prevent assets being taken into account as presently each case is likely to be looked at on its own merits. However, putting in place a properly constituted pre-nuptial agreement prior to marriage might assist and would help to identify the couple’s individual financial assets at the point of marriage.

“If couples are unable to agree to a prenuptial agreement, we would instead recommend that people at least draw up a dated schedule of assets which identifies and values the individual assets on marriage and their source and that they keep all documentation relevant as to source and value. Remember that the marital home will be regarded as a marriage asset regardless as to who owned it pre marriage or how its purchase was funded.”

“Equally whilst the court wont look at the value of business assets at point of marriage breakdown to determine sharing, asking the company accountant to value the business at this point is a good benchmark from which to launch an argument as to why any specific post separation growth in the business – other than any natural, organic or general market sector growth - should not be shared.”

Isolation of any inheritance from general family assets may also assist if you don’t wish it to fall into the marital pot. You may wish to place the inheritance outside of the marriage by distributing it to family members such as children from an earlier relationship at point of receipt or to consider making a family trust. Specialist advice in this regard is recommended however to ensure any plan is tax efficient.

Debra concludes: “Deciding when to proceed with a divorce is incredibly important. As well as being emotionally ready, it is important to receive the right advice as the timing of any settlement could have significant consequences and simply leaving matters post separation does not always lead to the desired outcome. If you want to be sure that you will share in what assets are worth following separation, the best advice is to get on with the process once you are sure that the relationship is definitely over and you feel able to cope with the process”.

Moore Blatch is one of Hampshire’s leading law firms with offices in Southampton and Lymington, as well as Richmond-upon-Thames. The family law team, led by Debra Emery, provides advice on a wide range of family matters including, divorce and separation, pre-nuptial and co-habitation agreements, finances and issues involving children. The team specialises in high net worth divorce cases and is, each year, recommended by the independent directory of law firms in the UK, the Legal 500.

They are currently offering individuals an early chance to review their options at an initial hour long meeting, which will cost a fixed fee of just £100 plus VAT and have also arranged a discounted thirty minute coaching session for just £25 with Karen Morley, an accredited divorce coach and relationship counsellor, to give support to those contemplating a divorce. Appointments for 18 January in Southampton can be booked by calling Moore Blatch.

For more information, please contact: Debra Emery T: 023 8071 8057 E: debra.emery@mooreblatch.com