Emily Cannell, partner and head of family at Mincoffs Solicitors, advises divorcing couples to consider how different kinds of assets may be divided in court.
Many people do not realise that during a divorce, the family courts in England and Wales can distinguish between ‘matrimonial’ and ‘non-matrimonial’ assets.
This can add a layer of complexity to financial proceedings, because they may be treated differently when the financial pot is divided.
What is the difference between matrimonial and non-matrimonial assets?
‘Matrimonial assets’ are financial assets that spouses have obtained and built up during a marriage, which can, and should, be divided between them on divorce. This can include the family home, savings and investments, pensions and business interests, to name a few. It does not necessarily matter who accumulated the wealth – the general position is that the assets gained during the marriage also belong to your spouse and so they shall be entitled to a share.
‘Non-matrimonial assets’, on the other hand, are assets which have not been acquired from matrimonial endeavour. Instead, they may have been obtained before the marriage or after separation, or may have been acquired unilaterally, such as inheritance or gifts from a spouse. The exception to this is the family home which is, in principle, often shared equally between the parties regardless of whether it was purchased by one spouse before the marriage.
It is important to bear in mind that often, non-matrimonial assets should remain separate from matrimonial wealth to preserve their ‘non-matrimonial’ status. Any assets which have been mingled or entangled with joint assets may be more likely to be considered as matrimonial, regardless of their source.
Whilst the starting point for matrimonial assets is they should be shared, non-matrimonial assets are unlikely to be divided on divorce, unless one spouse can validate a claim based on ‘need’.
In what circumstances may non-matrimonial assets be taken into account?
The first step when considering finances is the exchange of ‘full and frank’ disclosure of financial information, to include both matrimonial and non-matrimonial assets. Once the assets and their values have been determined, parties can assess whether a fair financial outcome can be achieved in the first instance, out of the matrimonial assets alone.
It becomes more complicated when there is not enough in the matrimonial pot to meet both spouse’s needs. Where there is a shortfall, the court has a wide discretion to invade non-matrimonial assets in order to meet those needs. It is not routinely the case that non-matrimonial assets would be shared equally in such circumstances – rather, the spouse in a weaker financial position would be awarded a proportion based on their need.
Therefore, whilst it is often the case that non-matrimonial assets are excluded from settlements, this is not guaranteed. Each case will be considered on its own facts and assessed based on fairness and need.
How to protect non-matrimonial assets
Drawing up a nuptial agreement may be an effective way to try and protect non-matrimonial assets in the event of a divorce. A nuptial agreement is a formal agreement between spouses that sets out the division of assets if the relationship later comes to an end. Such agreements can be signed before marriage (pre-nuptial agreement) or after marriage (post-nuptial agreements).
Although not strictly legally binding in English courts, often they will carry significant weight, provided certain criteria is met. The terms of a nuptial agreement can include provisions specifically relating to non-matrimonial assets, to determine how they should be divided if spouses later separate.
The division of assets on divorce can be complex. The general principle is that matrimonial assets will be shared, whereas non-matrimonial assets will not be. However, this isn’t set in stone. If one party’s needs cannot be met from their share of matrimonial assets alone, the court can, and will, invade non-matrimonial assets.
While it is impossible to prepare for every outcome, seeking specialist advice early on can help you to understand how your assets might be treated by a court on divorce and avoid any surprises down the line.