If a couple have been separated for a period of time before deciding divorce it is likely that their financial situation and the value of their assets will have changed. Perhaps the value of their property has increased, reduced or maybe one of the spouses has received an inheritance or the business has more market value.
When it comes to financial settlement negotiations, one common question is how the increase or decrease in asset value post-separation is considered. Solicitor Stuart Smallman explains.
Matrimonial Property
The court has the ability to distinguish between matrimonial and non-matrimonial property. Matrimonial property includes assets, such as capital and pensions, accumulated during the relationship. The starting point is to share these assets equally, ensuring both spouses’ needs are met on a 50/50 division.
Non-Matrimonial Property
Non-matrimonial property consists of assets acquired outside the relationship or from external sources like inheritance or gifts, kept separate by the recipient. This also includes assets brought into the relationship by one spouse but not jointly owned. Occasionally, assets acquired after separation can fall into this category.
‘Ring-Fenced’ Assets
Non-matrimonial assets are generally not shared with the other spouse and can be ‘ring-fenced.’ However, if the matrimonial property is insufficient to meet both parties’ needs, non-matrimonial property might be shared to ensure both parties are adequately provided for. The ability to ring-fence non-matrimonial assets often depends on the value of matrimonial assets and their sufficiency.
‘Post-Separation Accrual’
Assets acquired or significantly increased in value post-separation are termed ‘post-separation accrual.’ Depending on the circumstances, these may be classified as non-matrimonial property and ring-fenced. However, the court often shares such assets if they originated from matrimonial property, unless there was an unreasonable delay in starting the divorce and financial settlement process.
Add-Backs
A not unusual occurrence during separation is the use of matrimonial assets by one or either party which has the effect of reducing the matrimonial pot (the assets) and the court having to consider if having been used or spent , should those assets be brought back into the matrimonial equation, these are known as ‘Add-Backs’. The effect of bringing the assets spent ‘back to life ‘ has the effect of re-balancing the financial pot and of course meeting the parties needs , particularly the party who may have lost out and seen the pot reduced by the dissipation of those assets by the other party.
Seek Specialist Divorce and Finance Legal Advice
Given the complexity of the law in this area, it’s crucial to seek specialist advice from a family solicitor early on after separation. Understanding how the law applies to your specific situation can make a significant difference in the outcome of financial settlement negotiations.
If you need assistance with financial settlement negotiations or valuing your assets during a divorce, please contact our Family Law Team. We offer a free half hour consultation to understand your unique situation. We are here to help.
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