With divorce rates on the rise and the increase in the value of family assets, experts suggest it’s in a couples best interest to face up to financial affairs and be open to making financial agreements at the marriage outset.
According to the latest figures from the ONS, the overall rate of divorce has increased for the first time since 2009, with couples aged 45-49 making up the larger percentage of these figures.
Wealth statistics published by ONS show that by 2014 half of all households had a total wealth of £225,100 or more. Increased family assets mean there is more at stake, making negotiations over finances and family arrangements ever more complex during divorce proceedings, particularly for middle-aged couples.
Considering pensions in divorce negotiations
Family property tends to be considered as the biggest asset, where pensions were once easily overlooked. Yet, the statistics show pension wealth was the largest component of aggregate total wealth, due to a surge in value thanks to stock market increases. In addition, amendments in legislation have created greater flexibility in accessing pension pots. It is because of this that many more partners are seeking a share of pension arrangements on divorce.
What about equal sharing?
In recent times, it has been increasingly common for spouses to expect an equal share of all assets when divorcing after a long marriage, irrespective of needs or whether or not one was the stay-at-home spouse.
Yet, we may be seeing a shift in attitude, as seen in a recent Court of Appeal ruling in Hart v Hart. In this particular case a wife was awarded £3.5m, out of total resources of just under £9.4m. The judgement considered “an equal division of the assets would be unfair” given the husband’s pre-marital wealth, despite the 23-year long marriage. The wife’s settlement had been calculated by reference to the wife’s needs, which was not considered to be an equal share of the assets.
Family law expert Katy Osbourne of Howell Jones Solicitors explains, “This was a complex case highlighting the issues surrounding pre-marriage property and division of assets after a long marriage. It is unusual to see a greater weight given to pre-marital wealth in marriages of this length, during which there would have likely been a mingling of assets between the parties.
“Cases such as this should encourage new couples to look into pre-nuptial, or even post-nuptial, agreements, particularly those who may have increasingly complex financial backgrounds or those embarking on second or subsequent marriages. Although such agreements are not currently legally binding in England and Wales, they are likely to be upheld following the 2010 landmark case of Radmacher v Granatino.”
She added: “It is necessary for couples to have a frank and open discussion early on in the marital relationship so that each person is aware of the financial affairs and will know what to expect in the event of any later division of assets. Preparedness today may help you to cope in more difficult times in the future."