Dividing up finance and property

Dividing up property

Property and personal possessions – from houses and pets, to cars and collectibles – can carry with them significant emotional attachment. This can make it especially difficult if one party in a divorce does not keep the things that he or she feels entitled to.

An effective approach to dividing property can be to draw up a list comprising all the (potentially) contentious items and considering them against the arrangements under which both parties will be living. Also, it is generally recommended that property and possessions are treated collectively. For example, the house a couple has together should not be treated in isolation if there are various other assets, internal or external, to be considered. Instead it is suggested that they be treated as a whole, in other words put in ‘the pot’, so that it is easier to come to a reasonable and equitable agreement when dividing them between both parties.

Moreover, certain possessions can be animate, living things such as family pets, which need caring for. Budgeting your time and money relative to your spouse’s should therefore become an important consideration. Particularly where animate property is concerned, the welfare of that property should be prioritised over and above anything else. It could be important to contemplate what the law says.

What the law generally says:
  • the person who bought an item owns it and, thus, has possessory rights to it;
  • if an item is bought equally between two parties, or with one paying more, it is then owned between the two parties – in such a case it is common that this is how it will be divided, or with one party buying the other out of their share;
  • if something was given to one party by the other as a present or gift, it is thereafter considered the possession of the recipient.

Dividing up finances

Many assume that because the other party has left, the law will be more favourable to the remaining one, but this is not necessarily the case. Nor are there laws stipulating that everything must be divided 50/50.

Considering how a court splits assets could help both parties in fairly dividing their property and finances by giving them an insight into the factors that are taken into consideration.

A court will generally consider:
  • how long the parties have been married and their respective roles in the marriage,
  • the standard of living as well as the living expenses for both parties,
  • the age of both parties,
  • and their ability to earn.

If you agree on certain aspects between yourselves this does not make these agreements legally binding. This means a court is not able to enforce it in the rare event that one party later takes the other to court making certain claims conflicting with your prior agreements regarding property and finances. If you do want to make the agreements legally binding, a solicitor is generally needed to make this possible meaning you incur further costs for the privilege. In the eyes of the law, the document seen as officially and lawfully binding the agreement is called a consent order and details how you are going to divide up the assets you have between you such as money, savings and investments.

Spouse maintenance

With spouse maintenance, much like with child maintenance, regular payments are made by one party to the other.

Fundamentally, the purpose is for the financially weaker party to receive an equitable income on which he/she can survive after the divorce. Spouse maintenance is sometimes referred to as alimony. The exact amount payable will be unique to your case but can depend on various factors.

Factors include:
  • any current income received by the party receiving maintenance payments, for example from a salary or benefits;
  • how much the party actually needs to live on;
  • any future earnings
Term order

The length of a marriage can sometimes influence how much and for how long such maintenance payments will be made. If married for a period of less than 5 years, for example, these maintenance payments may not need to be made at all by the financially stronger party. Alternatively, they may only be paid for a certain period of time, what in legal terms is called a term order.

Spouse maintenance will usually stop in the event that one of the parties dies, the aforementioned term order comes to an end, or the party receiving spouse maintenance remarries.

Lump sum payments

In some divorces, one party can choose to buy the other out. This is typically achieved by one party paying a lump sum to the other for a clean break, which is a complete break of all the financial ties between the two parties. This means they will not be liable for spouse maintenance payments.

Generally speaking, one party paying a lump sum to the other is analogous to them buying the other, financially weaker party out of their rights to spouse maintenance payments. It is done when the financially stronger party has enough money to do so and the amount is commonly agreed by calculating a sum that the financially weaker will be able to invest and receive income from instead of receiving that income through maintenance payments. Perhaps it is helpful to see it as all of the spouse maintenance being paid in a lump sum – though it can also be paid in instalments.

Pros of Lump-sum payments

  • you receive the payment upfront, meaning you can do more than if you were to receive monthly payments;
  • the money received could be invested to achieve a higher rate return than would be achieved being paid in instalments.

Cons of Lump-sum payments

  • you do not enjoy the security of receiving continuous payments;
  • any potential investments you make are not guaranteed to succeed.

This option depends on a number of different factors, but if both parties are unable to come to this agreement between themselves, the court in England and Wales can impose a ‘buy out’ on one of the parties which, ultimately, could end up being unfavourable to one of them.

Nominal maintenance order

Sometimes a nominal maintenance order means that the party being bought out will receive a small sum every year (per annum). This could be as small as one pound, but the general idea behind this order is that it gives the financially weaker party the legal ability to retain their right to request an increase in maintenance payments at a future date if their circumstances were to change.

This can be an important option for those with young children and on low income and is relevant because it prevents a clean break in the complete sense mentioned above. Instead, the case remains open with the courts and claims are easier to make at any prospective date. For example, as a divorcee with children but on an income, you are safeguarded in the event that you find yourself out of work (your circumstances ‘change’), and if paying such an order, you are not paying over the odds, only what is reasonable regarding the current circumstances of both parties.