There is no single definition of financial needs in divorce. The needs of the parties are a question of fact to be determined by the Judge. This means that a Court has a great deal of flexibility and discretion to make whatever divorce financial settlement they deem to be a fair on the particular facts of each case. Given that there is no legal definition of needs, or a set formula to calculate needs, you could have an identical set of case facts and receive 5 different divorce settlements from 5 different Judges based on their individual discretion.
This makes it is very difficult for the public to understand their responsibilities and know what needs are required to be met following divorce or separation. This guide aims to explain more about the concept of financial needs in divorce, and how financial needs are decided.
What are financial needs on divorce?
In practice, the main “financial needs” will be the need for a home, an immediate income stream, and income upon retirement.
From previous cases financial needs have also been assessed as follows:
- Provision for a main home.
- Removal expenses.
- Improvement and decoration works.
- Furniture for a home.
- The discharge of debts.
- The provision of course fees or retraining fees to be able to return to work.
Although there is no set formula for calculating financial needs, there are guidelines that Judges must take into account following a divorce or dissolution. These are contained in Section 25 of Matrimonial Causes Act 1973. This Act directs Judges to have regard to various factors, with the first consideration being given to the welfare of any child of the family who has not attained the age of eighteen. A Judge will base their decision on the following different factors:
- how long the parties have been married or in a civil partnership.
- their ages
- their ability to earn.
- the living expenses of both parties
- the standard of living enjoyed during your relationship.
- both parties’ financial needs and responsibilities
- the available assets
- any health conditions or disabilities that either party may have.
A Judge will decide on the fairest way to divide the assets. Each situation will be unique, but generally matrimonial assets are regarded as items such as:
- Money, including savings and investments.
- Property, including the family home and any property that is owned individually.
- Life insurance policies
- Business assets
- Furniture and appliances
To reach a divorce financial settlement, a Judge will also need to consider the division of any debt, loans, or credit cards that the parties may have.
The concept of fairness does not necessarily mean an equal division of the assets (50/50). What it does mean is that marriage/civil partnership is seen as a shared enterprise and there must be no discrimination between the respective roles of breadwinner and homemaker both of which are regarded as equal. The strong presumption is that each spouse has an equal “sharing entitlement” to assets built up during the relationship and a Judge will begin with a 50/50 starting point. This avoids any discrimination between a breadwinner and a homemaker.
In some cases, the assets of the marriage may be enough that the needs of the parties can be met by a 50/50 split. In others, a Judge will depart from an equal split in order to meet the needs of both parties.
The concept of needs is also viewed in the context of the lifestyle the parties have enjoyed during the marriage. The Court will take into account the standard of living the parties enjoyed during the marriage and whether that standard can be maintained post-divorce/dissolution. In some cases, the standards enjoyed during the marriage may have to adapt and change.
Wherever possible a Judge will try to arrange a clean break between the parties, so they no longer have any financial ties to one another. To achieve a clean break the Judge must be satisfied that both spouses will be able to survive financially without the assistance of any spousal maintenance from the other.
Each situation will be unique and based on the assets available and the facts of the case.
Non-matrimonial assets are treated differently to matrimonial assets. These include financial assets that were acquired before or after the marriage. It is however important to note that where there are insufficient matrimonial assets to meet the needs of both parties, their needs may be met and “topped up” from non-matrimonial resources and assets.
As can be seen from above there really is no hard and fast rule as to exactly how financial matters arising from divorce or dissolution are decided. This is decided by the Courts, using only general principles which are subject to a huge amount of discretion by the Judges.
Frequently asked questions about financial needs in divorce:
How do I calculate my financial needs?
To calculate your income needs you should prepare a Schedule of current and future monthly outgoings to ascertain how much you need to live on each month. This should include expenses that you cannot avoid like:
- Health and life insurance
- Food and other essentials like toiletries
- Child care
- Loan repayments
Once you have done this, you should also prepare a Schedule of monthly income and include all income you receive on a regular basis. This should include:
- Any benefits you receive
- Any child maintenance you receive
- Bonuses or commission
- Income from investments
Once you have prepared both schedules you will be able to see what your total monthly income is versus your monthly outgoings. If there is a deficit between the two – this is your financial need in respect of income.
Is my husband entitled to half my savings UK?
Matrimonial property comprises those assets that have been acquired during the marriage from the joint enterprise of both parties. Most assets in most divorces comprise entirely of matrimonial property and this will usually include assets such as savings. The law will seek to divide your assets (and debts) equally, unless there is a good reason not to do so. This is often referred to as the ’50/50 starting point’.
Is a wife entitled to half of everything UK?
The starting point is an equal division of the assets irrespective of whether you are the husband or wife. This is often referred to as the ’50/50 starting point’. The law will seek to divide your assets (and debts) equally, unless there is a good reason not to do so. The Court is under a duty to consider all the circumstances of the case and in particular the Section 25 factors and then apply these to the facts of the particular case. Having considered the Section 25 factors, the Court may order an unequal division of the assets in reaching a divorce financial settlement. However, the general rule is that assets should be divided equally unless there is a good reason to the contrary.
What is a fair divorce financial settlement?
Fairness does not necessarily mean an equal division. What it does mean is marriage/civil partnership is seen as a shared enterprise and there must be no discrimination between the respective roles of breadwinner and homemaker both of which are regarded as equal.
The Courts primary objective is to meet the needs of both parties. Needs should be met at a level as close as possible to the standard of living enjoyed during the marriage. A court may depart from the 50/50 starting point if one spouse’s financial needs are not met.
It is important to note that although there is a process for the division of financial assets, divorce finance is decided is not governed by a code or tariff and therefore it is difficult to predict the exact outcome of the case. The reason for this is that Judges are given a very wide discretion in determining what is a ‘fair’ outcome to a case.
Can my ex-wife claim half my new house?
If you have a clean break order your spouse will not be able to claim on your new house.
A clean break consent order is a legally binding agreement reached by both parties to a divorce or dissolution which provides a “clean break” between you and your ex-spouse/partner. It confirms that neither party wishes to make financial claims against the other in the future. This would include any property such as a new house.
The intention behind a clean break consent order is that it provides finality. It allows both parties to move forward and to be financially independent of one another.
You should always consider getting a consent order as part of your divorce. It is the only way to guarantee a clean break between you and make any financial agreement you have reached legally binding and enforceable. Without a clean break consent order, you could have a future claim made against you for any inheritance, business success or financial windfalls at any point, even many years after your divorce has finalised.
How can I protect my money during divorce UK?
One of the fundamental principles of resolving financial matters following divorce in England and Wales (whether through Court proceedings, mediation, or negotiations) is that both parties must give ‘full and frank’ financial disclosure of their financial positions and assets. This obligation to provide complete financial disclosure continues right the way through until matters are concluded – so if there are any material changes in your circumstances after the initial disclosure stage, you should bring it to everyone’s attention.
The importance of full and frank disclosure of assets is that if either party deliberately misleads the other as to their financial position or does not disclose assets, then it may be possible to overturn any agreement reached based on this non-disclosure or concealing assets.
I am now cohabiting – will my partners income and assets be taken into account?
If you are cohabiting or have remarried, a Court is likely to take into account your new partners income and assets insofar as what contributions they can make towards your outgoings and financial needs.
So for example if you are paying for a mortgage on your own, a Court would expect your partner to make some contribution to reduce your outgoings.
Does length of marriage affect divorce financial settlement UK?
If the marriage has been very short there may be a departure from an equal division of assets.
What is a reasonable divorce financial settlement?
It is important to note that the division of financial assets is not governed by a code or tariff and therefore it is difficult to predict the exact outcome of the case and what is considered “reasonable”. The reason for this is that Judges are given a very wide discretion in determining what is a ‘fair’ or “reasonable “outcome to a case.
This discretion can manifest itself not only in differences between two Judges sitting in the same court, but also in geographical differences from Court to Court. For example, some Courts are ‘pro’ clean break, or ‘anti’ ongoing spousal maintenance, whilst others will not end spousal maintenance when there are minor children to the marriage.
It is always a 50 50 split with divorce UK?
Not always. A 50/50 split is only a starting point. In some cases, the assets of the marriage may be enough that the needs of the parties can be met by a 50/50 split. In others, a Judge will depart from an equal split in order to meet the needs of both parties.
Are debts shared in divorce UK?
To reach a financial settlement, a Judge will also need to consider the division of any debt, loans, or credit cards that the parties may have. The usual starting point is an equal sharing/discharge of any debts accrued during the marriage.
What financial information will I need to give for divorce?
In referring to divorce, this means resolving the financial side of divorce. You will need to provide full financial disclosure of your assets, income and liabilities. This is usually done by completing a Form E.
My spouse has stopped paying essentials while we sort out the divorce, what can I do?
As a last resort you could apply to the Court for Maintenance Pending Suit. A Maintenance Pending Suit order requires one spouse to pay maintenance to the other until a final financial settlement is ordered.
A maintenance pending suit order can be made at any time after divorce proceedings have been issued.