For most people getting divorced their biggest concern will be what share of the matrimonial assets they receive. And as with so many things, there are a lot of misconceptions about how the law divides assets on divorce.
One misconception is that everything is always divided equally. Whilst there is some truth in this, the reality can be quite different.
The sharing principle
At its simplest, dividing assets on divorce is all about fairness. And that means fairness to both parties – each party to a marriage is entitled to a fair share of the available assets.
And the law also recognises that marriage is a partnership of equals. Each party makes their fair contribution, whether that being in terms of bringing money into the marriage, or in terms of looking after the home and bringing up the family.
In the light of these things the law came up with what is known as the ‘sharing principle’. The sharing principle says that when a marriage ends each party is entitled to an equal share of the assets of the partnership, unless there is a good reason to the contrary.
The sharing principle means that assets are often divided equally between the parties when they divorce.
But note the words “good reason to the contrary”. Sometimes equality simply won’t be appropriate.
Why equality may not be appropriate
A blanket rule that assets are divided equally whenever a couple divorce could obviously lead to unfairness.
The problem is that the financial position of each party is not always similar. For example, where one party has a far greater earning capacity than the other, equal division will leave the party with the lower earning capacity at a serious disadvantage.
And part of that problem is the question of the financial needs of each party. This is the thing that most often is a good reason why equal division is not appropriate, especially when the available resources are limited.
Financial needs come in different forms, but the main ones are a sufficient income and suitable housing.And of course these will be affected by whether or not there are children to look after. The income and housing needs of the party with whom the children are living will be greater than the income and housing needs of the other party.
The effect of needs on the outcome of a case can be illustrated by a simple example, involving a family with two young children.
It is agreed that the children should live with the mother. The mother has a small income, and little or no ability to raise a mortgage. The father, on the other hand, has a good income, and can raise a substantial mortgage.
In such a case one might expect the court to award the mother the lion’s share of the assets, so that she has enough to rehouse herself and the children. The father, on the other hand, will have less need for capital, as he can rehouse himself (in a smaller property), with the aid of a mortgage.
And there could be other reasons apart from needs why an equal division of assets may be unfair. For example, where one party has made a substantially greater financial contribution to the marriage, perhaps by bringing in significant assets they acquired prior to the marriage. That contribution might mean that that party will receive more than half of the assets on divorce.
In short, the sharing principle, or the ‘yardstick of equality’, as it is sometimes called (where it is used as a tool to measure the fairness of a proposed settlement) is very important, but it does not necessarily mean that equal division will happen in every case.