How Are Assets Divided In A Divorce?

The end of a marriage or civil partnership is a stressful period that can often prompt difficult questions about the division of assets. When matrimonial assets include the likes of privately-owned businesses, the need to answer these issues can become more pressing. Therefore, you might wonder how to protect your assets from divorce. 

No matter how difficult your current situation might appear to be, there are practical steps that can help to clarify your options going forward.

Protecting premarital assets

The first thing you’ll need to do is define what is matrimonial and what is non-matrimonial. This definition is often incorrectly viewed as a question of timing, with premarital assets being anything acquired before marriage and matrimonial assets being anything you’ve both purchased together. However, it’s more complex than that. 

In reality, the most important factors are the length of the marriage and how dividing assets will meet the needs of all family members. Additionally, how assets are perceived to have ‘mingled’ over time will also be taken into consideration. Mingling basically describes the process whereby, over time, assets become viewed as being matrimonial because of the length of the relationship.

Matrimonial Assets

Premarital/ Non-Matrimonial Assets

Premarital assets in divorce are any items acquired before the marriage began. If you’re considering ring-fencing non-matrimonial assets, you will need to request that they be excluded from the financial settlement. The most common premarital assets in divorce cases are the likes of personal inheritance, family businesses, and any properties that were inherited or gifted to one spouse before wedlock. 

This will only be taken into consideration if there are sufficient assets from the marriage to meet the needs of all parties, but especially children. The Court also has to give regard to the assets that the parties have.

Wherever possible, it’s advisable to reach a shared understanding about what you want to exclude from the settlement. If this isn’t practical you can request that the courts exclude them.

Handling divorce and business assets

Divorce and business assets can be the most complex characteristic of a relationship breakdown. Starting with an accurate business valuation, there are some essential steps to work through. It might be possible to offset the division of your business with other assets, such as cash, properties, or high-value possessions like cars and jewellery.

Post-evaluation, several factors can influence how divorce and business assets are handled. They include:

• Other Assets: The courts’ default position is usually for the business to remain with its founder. This is made easier when other high-value assets can be divided to offset a spouse’s entitlement to a share in the company.
• Origins of the Business: The courts will take into account when the business was founded and how much it has grown during wedlock. It may be considered fair to equally divide any increase in value since the marriage began.

To give you a clearer picture of your business’s liquidity and future income, while also helping to manage tax implications, you should enlist comprehensive legal advice and assistance from tax experts and forensic accountants.

Using Pre and Post Nuptial Agreements

If you’re wondering how to protect your assets from divorce, pre and post-nuptial agreements are widely seen as good options for ring-fencing non-metrimonial assets. While not legally binding, nuptial agreements are often used as a reliable guide by the courts.

The differences between the two are:

Other strategies for protecting pre-marital assets

When it comes to how to protect your assets from divorce, there are a few approaches to consider. Along with pre and post-nuptial agreements, you can also use trusts and loans to safeguard family wealth. This is often a major factor if you want to ensure that your loved ones are provided for should your relationship end.

However, if you’re ring-fencing non-matrimonial assets with loans and trusts, there are a few things to know in advance:

• Loans can be contested: In effect, a loan will be viewed as something that needs to be paid back, meaning it can’t be divided on divorce. However, a spouse could claim that the loan was a gift that was never intended to be repaid. Because of this, the loan agreement should detail the amount being lent and any Ts and Cs, as well as be signed by both the loaner and the recipient.
• Set it up correctly: A trust must be set up correctly to offer genuine protection. Speaking to a legal professional will give it a much better chance of standing up to scrutiny.

All of these strategies are more likely to succeed if you have legal representation. Reliable guidance can help to draft watertight agreements while also discouraging you from doing anything likely to cause further issues, such as trying to transfer or hide assets.