How to deal with assets acquired after separation
When advising clients on the resolution of finances on divorce, one question which occurs from time to time is how the law deals with any assets which have been acquired by one (or even both) of the parties since the date on which they separated or have risen in value since that date.
The matrimonial 'pot'
This non-technical phrase is used to describe the assets owned by each party separately and/or both of them jointly.
These assets are automatically taken into account unless:
- it can clearly be shown that some of the assets have arisen since the separation and
- it is not necessary to include them to achieve a fair solution.
Calculating the assets
The starting point is that all the assets are valued, or the values are agreed. A decision then has to be made as to whether any of the assets have been acquired since the separation or whether the value of any of the assets has increased. If so, whether all or any part of the assets acquired after the separation, or the increase in value should be taken into account.
Take the case of a husband and wife, called, for the sake of this example, Bill and Jill.
Bill and Jill separated in 2014. Neither of them had taken any steps to obtain a divorce or to resolve financial matters between them until 2017.
At the time of their separation in 2014:
- Bill had assets in his sole name of £500,000
- Jill had assets owned solely by her valued at £300,000
- The parties jointly owned a house which was valued at £800,000 in 2014
- The assets in Bill’s sole name have increased in value to £600,000
- The assets in Jill's sole name have increased in value to £360,000
- The value of the jointly owned house is now £1,200,000
It is not suggested by either party that the increase in the value of the assets is in anyway attributable to any special skill or enterprise by either party: such increases are merely a reflection of market changes.
The answer is that, short of an exceptional feature, such as a serious and debilitating long-term illness being suffered by one of the parties, resulting in a particular requirement for a higher share of the assets, they will otherwise be divided equally.
Suppose that between 2014 and 2017, Jill, who is a scientist, had invented and patented a battery for mobile phones which trebled the phone's battery life.
All the work on her invention took place after the separation in 2014. Bill knew nothing about Jill’s work and success until the divorce proceedings started in 2017.
Jill has sold her invention for £3m – the value of her assets has thus risen from £300,000 in 2014 to £3,360,000 in 2017.
Although the usual rule is that all assets are to be valued at the time the financial matters are dealt with (i.e. 2017 in the above example), it is inconceivable that the court would not credit Jill with all or, at the very least, the vast majority of the £3m which arose purely from her own efforts, with no contribution from Bill. Such an approach means departing from the usual rule that everything is divided equally on the grounds of overall “fairness’ and in recognition of Jill’s sole contribution to the value of this asset.
Evidently, these issues have the potential to be very complicated and often the subject of disagreement. They often require a detailed analysis and explanation of the derivation of some of the assets which have to be divided as part of the divorce process.