Financial Provision on Divorce

Matrimonial property

When a couple are divorcing, their money, most property and other assets owned either individually or jointly are legally defined as ‘matrimonial property’. This includes everything acquired during the marriage but not before it (with the exception of a house bought as a family home and its furnishings), and not after the final date of separation (the ‘relevant date’).

Gifts or inheritance received during marriage are not matrimonial property, but if they are used, for example, to buy a house, the house is matrimonial property.

Couples can enter into a prenuptial agreement when they marry. This sets out what will happen to their individually owned assets in the event of divorce. These are legally binding and will be accepted by a court so long as neither party has been forced or misled into making the agreement.

How matrimonial property is divided in Scotland

Section 9 of the Family Law (Scotland) Act 1985 sets out five principles that guide the court’s decision on division of matrimonial property. Any order for financial provision must be justified by one or more of these principles, and have regard to the resources of the parties:

1. the net value of the matrimonial property should be shared fairly
2. fair account should be taken of any economic advantage or disadvantage suffered by either party
3. the cost of caring for children under the age of 16 years should be shared fairly between the parties;
4. someone who has been financially dependent on their spouse should be awarded financial provision to allow them to adjust to the loss of support
5. financial provision should be made to prevent someone suffering serious financial hardship

Valuation

When assessing the value of matrimonial assets, it is the net value that must be used, which means that debts must be taken into account too. All assets must be vouched for with some form of evidence such as a receipt or surveyor’s report. In the case of a house, the value will be the market value.

The relevant date

Before agreement can be reached about division of property, it needs to be valued at the point in time when the parties finally separated,. A precise separation date can be difficult to pin down but a date will need to be agreed for the purposes of valuation. The relevant date is important as the value of individual assets can change significantly between that date and the court action for divorce, or certain assets may not be included at all because of when they were acquired.

“Going through a divorce is hard and just having someone to listen helped. Fiona Rasmusen protected my rights and guided me through the pitfalls of divorce court.”

Mrs K

Fair sharing

The most important and most commonly applied principle for dividing matrimonial property is that it is to be divided ‘fairly’ between the parties. This does not necessarily mean equally, but that is the starting point. The special circumstances that will justify unequal sharing of property are:

1. Prenuptial agreements
2. The source of funds used to acquire matrimonial property
3. One party losing matrimonial property or somehow putting it out of reach
4. Whether matrimonial property is used for business
5. Expense of valuation and transfer of property

Fault or behaviour will not be taken into account when dividing matrimonial property, except to the extent that one party has caused the total net property to be reduced through, for example, gambling or drug use.

One party might try to put assets out of reach so that they cannot be counted as matrimonial property (‘alienation’ is the legal term for this). This can be done by putting money into a company or giving it as a gift to a third party.

Even if the matrimonial property is to be divided equally, it still has to be decided how exactly it will be split and who will get what.

The other principles

The most common example of economic advantage and disadvantage is that of one spouse stopping work to look after children. A periodical allowance can be ordered for the care of children until they are 16 but this will only apply if child maintenance is not deemed sufficient. A periodical allowance can also be made for helping a financially dependant spouse get back into work, for up to three years. Finally an indefinite periodical allowance can be made to help one party avoid serious financial hardship.

The family home

The largest matrimonial asset is usually the family home and there are a number of ways it is typically dealt with when dividing matrimonial property. If there are children who remain resident with one party, it is often the case that they will retain full ownership of the family home. The other party may need to be compensated for this in some way if the home represents the bulk of the assets to be divided. The party retaining the home may then need to sell it and buy a cheaper one to release the funds they need.

The court order

As explained in the introduction, parties usually seek to avoid being in the position where a court order is necessary, so this only applies to cases where a court action has been pursued for financial provision.

The courts aim to achieve a financial ‘clean break’ between parties when making orders for financial provision. Capital sums and property transfers are therefore more likely to be given than periodical allowances. The types of order the court can make are:

• Transfer of property (such as a house or share of a house)
• Financial payment (of a capital or lump sum)
• Periodical allowance
• Splitting of pension fund
• Incidental orders