A guide to protecting non-matrimonial assets in divorce
A key consideration in any divorce is how to divide your assets. Assets which are acquired or built up during the marriage (matrimonial or marital assets) are generally divided equally. But what if you came into the marriage with significant premarital wealth or received a substantial inheritance before or after your separation? You may feel that it is unfair for these assets to be divided at all, and you may want to protect them in the event of a divorce.
In England and Wales, the law differentiates between two types of assets: those which are ‘matrimonial’ and those which are ‘non-matrimonial’. This guide explores the difference between the two and the court’s approach to splitting assets on divorce. We will also consider the various ways in which you can protect non marital assets following a marital breakdown.
What are matrimonial assets?
Matrimonial or marital assets are those which you and your spouse built up during the marriage. This may include:
- The family home;
- Other real estate;
- Furniture and other contents;
- Stocks and bonds;
When you’re married, the law in England and Wales considers that any assets you acquire during the marriage are available to be shared on divorce. Whether that division will be equal depends on all the other factors of the case, including the parties’ needs and financial resources.
What are non-matrimonial assets?
Non-matrimonial assets are unlikely to be shared between the parties on the breakdown of the marriage or civil partnership unless required to meet needs. Generally, non-matrimonial property is:
- Acquired by one party before the marriage or after separation;
- Gifted to one party;
- Inherited by one party.
Are non-matrimonial assets excluded from divorce settlements?
The short (and very lawyer-like) answer is: not necessarily. Some non-matrimonial assets may be excluded from the divorce settlement, but this is not an automatic right. Each case must be considered on its own facts and assessed on the basis of fairness.
The crucial thing to remember if you don’t have a prenuptial agreement and want to exclude non-matrimonial assets from the divorce settlement is that they must not have ‘mingled’ with matrimonial assets during the period of marriage. Let’s take some examples:
- A collection of classic cars owned before the marriage would be considered non-matrimonial, but if the cars are sold during the marriage and the funds are used jointly to invest in shares, the non-matrimonial funds from the car sale will become ‘mingled’ with a matrimonial asset (the shares) and therefore, much harder to exclude from any financial settlement.
- If you owned a property in your sole name before marriage which is then sold and used towards the purchase of a family home which you and your spouse live in, the non-matrimonial source of funds is ‘mingled’ and is likely to become ‘matrimonialised’.
- In contrast, in the recent case of WX v HX , the wife had a very significant trust fund worth £14 million which she brought into the marriage. In this case, even though her husband had managed the trust fund in his capacity as an investment banker, the court found that it was a non-matrimonial asset which had not been mingled with their other assets. The fund had always remained in the wife’s sole name and had not been mixed with other wealth at all during the long marriage. The wife was therefore entitled to keep the entire fund to the exclusion of her husband.
How to protect your assets in a divorce
Dealing with non-matrimonial assets in divorce can be complicated. All assets - both matrimonial and non-matrimonial - must be declared. You can then ask the court to exclude non-matrimonial assets from any financial settlement, but this is not guaranteed. The judge has a wide discretion.
It is unlikely that non-matrimonial assets which have not been mingled with marital assets would be shared on divorce in the absence of need. However, if the needs of the parties are not adequately met by dividing the matrimonial assets, then the non-matrimonial assets may well be divided as part of the financial settlement. Needs trump all.
Prenuptial and postnuptial agreements can, however, protect your assets in a divorce if properly executed.
Prenuptial and Postnuptial Agreements
Prenuptial agreements are entered into before marriage, whereas postnuptial agreements take place after marriage. Neither of these agreements are strictly legally binding, but over the years they have been given increasing weight by the courts of England and Wales. Both types of agreement can provide protection for either spouse who wishes to ring-fence non-matrimonial assets such as property, family inheritance or gifts given prior to the marriage. Provided that the agreement was entered into freely, there was full financial disclosure and independent legal advice, so that each party understood what rights they were potentially giving up, the agreement is very likely to be upheld by a court in the event of a marital breakdown unless it is unfair.
Non marital property can also be put into a trust which may protect it.
Protecting owned property
Property can be owned jointly, by one spouse only or by a third party. If the family home is jointly owned during the marriage, it will be considered a marital asset and will usually be divided equally on divorce. If just one spouse owns the family home, this would still generally be considered a marital asset and divided equally. However, if a spouse owns another property in their sole name which was acquired outside the marriage and is not the family home, this would typically be considered non-matrimonial, and you can argue that it should be ring-fenced in the event of a divorce and retained entirely by the person who owns it.
As stated above, a pre or postnuptial agreement could be considered as a means of protecting personal, non-marital property.
The division of assets on divorce can be complex. The general principle is that matrimonial assets will be shared, whereas non-matrimonial assets will not be, but judges have a wide discretion to do what they consider is fair. Each case will turn on its own facts and if one party’s needs cannot be met from their share of matrimonial assets alone, the court can (and will) invade non-matrimonial assets. A key consideration for the court when faced with the question of excluding non-matrimonial assets is the extent to which non-matrimonial property has been intermingled with other property and how it has been used during the marriage. Getting specialist advice early on can demystify the process and help you to understand how your own assets might be treated by the court on divorce.
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