What happens if your marriage is on the rocks and you receive a windfall? Does your soon to be ex-partner have a claim on this stroke of good fortune? How much of your partner's pre-acquired wealth are you entitled to on divorce? The article highlights some real life examples.
What's mine is yours: The tale of N v. F
How does the court treat pre-acquired assets on divorce? In N v. F, the husband had pre-acquired assets worth £2.16 million. The parties divorced in 2009 with total assets of £9.714 million. The wife claimed it would be unjust for the husband's pre-marital property to be excluded from the division of assets arguing that an equal division of the total assets was a fairer outcome.
The marriage had been long and the preacquired assets had been mingled with marital funds. However, the court considered that it would not cause any prejudice if some of the husband's premarital wealth was excluded from the sharing principle. The court excluded £1 million from the divisible funds, satisfying the justice of the sharing principle and the wife's needs. The wife received 44.7% of the total divisible assets.
How does this apply to you? The court will consider the following in relation to preacquired assets:
- The value and nature of the wealth and the circumstances under which the preacquired asset was introduced
- The longer the marriage, the easier it is to say that by virtue of the mingling of that property with other marital assets, the contributor of that property has (in effect) agreed to share it with their spouse
- The extent of the pre-acquired property to be excluded from the matrimonial 'pot'
- The court will check the resulting percentage split against the figure which would have resulted from a 50:50 division
Touché! The tale of K v. L
To a certain extent, inherited assets can be ring-fenced. In K v. L the wife inherited shares before the parties were married which were worth approximately £700,000 at the date of marriage. After 21 years the parties separated. By the time of the hearing the wife's shares had rocketed to £57.4 million. The shares represented the parties' wealth as neither had earned any income during the marriage. The husband sought a payment of £18 million but was awarded £5 million. He appealed.
The court considered it fair to acknowledge the "substantive difference" in the financial contribution made by both parties.
Where an inherited asset is diminished it will be considered matrimonial property. The contribution may be diminished where, for example, the contributor of the non matrimonial property has chosen to invest it in the purchase of the matrimonial home or where the initial contribution is intermingled to the extent that it becomes difficult to distinguish from the other marital assets.
As the matrimonial assets were not diminished, the husband was awarded a sum which satisfied his needs and the source of the wife's wealth was ringfenced in her sole name.
Just the ticket: The tale of S v. AG
How does the court treat pre-acquired assets on divorce? The parties in S v. AG married in 1984. In 1999, the wife and her friend won £1 million and £500,000 was paid into the wife's bank account. In May 2000 the wife spent £390,000 on a property bought in her sole name which became the 'matrimonial' home. The parties divorced in 2007. The husband applied for financial relief.
The wife had contributed to the winning ticket from her own earnings and the husband had been wholly ignorant of the wife's participation in the lottery. The proceeds of the ticket were therefore nonmatrimonial property. However, when the wife purchased the house in 2000 she converted that part of her non-matrimonial assets into matrimonial property. The husband had lived in that house for a relatively short period so the Judge decided that the husband was not entitled to an equal share in it. A sharing of 15 - 20% was considered fair.
The following guidelines are applicable in similar circumstances:
- Whether or not a lottery prize is regarded as matrimonial or non matrimonial property is fact specific.
- Where parties are aware that the lottery tickets were purchased, and both agreed to their purchase, the prize is matrimonial property.
- Where one party unilaterally buys the tickets from their own in come, without the knowledge of the other party, the prize is non-matrimonial property.
Each of these tales involve non matrimonial assets and similar issues. The differences are reflected in the subtle ways in which the courts have decided to divide the non matrimonial property. Nevertheless, one very simple principle is apparent in all three: the more equal the marriage partnership is, the more likely the assets will be divided equally on divorce.
Originally published in www.life-mags.com
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.