Why Isn’t Divorce Always 50/50? When Financial Settlements Can Depart from Equality
One of the questions we hear regularly in financial mediation is:
“Surely everything is just divided 50/50?”
The answer is: not necessarily.
When a marriage ends, equality can be an important reference point, particularly when looking at assets built up during a marriage. But family finances are not dealt with by simply putting everything into a pot and dividing it down the middle.
The court's task is to achieve a fair outcome having regard to all the circumstances. In many ordinary family cases, the most important question becomes:
What do each of you actually need to move forward?
That is where mediation can be particularly valuable.
Equality does not always mean an equal division
The starting conversation may be about 50/50, but the outcome can legitimately be different.
Official judicial guidance explains that where an equal share would meet both people's needs, equal sharing may well produce a fair result, particularly following a long marriage.
However, in cases where there is not enough money to comfortably meet both parties' needs, needs can justify moving away from equality.
The factors considered can include:
each person's income and earning capacity;
property, savings and other financial resources;
housing requirements;
present and future financial needs;
the standard of living during the marriage;
the parties' ages and the length of the marriage;
health or disability;
contributions to the family, including caring for the home and children; and
pension and retirement provision.
Being the higher earner does not automatically mean that person made the greater contribution to the marriage. Looking after children and the family home is also an important contribution.
Example 1 – One parent needs more capital to house the children
Imagine a couple have a home with £250,000 of available equity.
A straightforward 50/50 division would give each person £125,000.
But suppose the children are going to live mainly with Mum. Mum earns £25,000 and can only obtain a relatively small mortgage.
Dad earns £75,000 and has significantly greater mortgage capacity.
If Mum cannot buy suitable accommodation for herself and the children with £125,000 plus her available mortgage, while Dad can adequately rehouse with a smaller share of the equity because of his borrowing capacity, the parties may want to explore an unequal division.
For example, they might discuss Mum receiving 60% or 65% of the available capital and Dad receiving 35% or 40%.
That does not mean that 60/40 or 65/35 would necessarily be the outcome a court would order. It demonstrates why looking only at percentages can sometimes miss the real issue:
Can both households actually be adequately housed?
Example 2 – One person has the income, the other has the housing need
Consider a 25-year marriage.
One spouse has spent significant periods caring for the children and working part-time. They now earn £24,000.
The other spouse has developed a career throughout the marriage and earns £90,000.
They may have contributed equally to family life, but they leave the marriage with very different financial positions.
The higher earner may be able to obtain a substantial mortgage and rebuild savings relatively quickly.
The lower earner may have limited mortgage capacity and considerably less opportunity to increase their income.
An equal capital division might therefore leave one person able to purchase a suitable home and the other unable to do so.
In mediation, we can model the practical effect of different divisions rather than simply arguing about percentages.
Example 3 – The pensions are very different
Housing is only one part of the financial picture.
Imagine:
Husband's pension: £500,000Wife's pension: £80,000
but the parties have broadly similar shares of the available cash and property.
A proposal that divides the house equally but ignores the pensions may look equal today while producing a very different position at retirement.
Pensions can therefore be a significant part of financial discussions.
Depending upon the type and value of the pensions, specialist pension advice may also be needed. A £500,000 pension cash equivalent does not necessarily mean that it should simply be treated as though it were £500,000 sitting in a bank account.
Mediation allows pensions, property, income and future needs to be considered together as part of the overall financial picture.
Example 4 – Assets owned before the marriage or inherited money
Another possible reason for departing from an equal division is the existence of non-matrimonial property.
This might include:
a property owned before the marriage;
savings accumulated before the relationship;
an inheritance;
a gift from a family member; or
certain assets acquired after separation.
Whether those assets should be included, excluded or partly shared can depend heavily upon the circumstances.
For example, someone may have entered a short marriage already owning a mortgage-free property.
That can be very different from a 30-year marriage where a property originally owned by one spouse became the family home, was used throughout the marriage and family finances became completely intertwined.
Importantly, needs can still be relevant. An asset's non-matrimonial origin does not necessarily mean it can simply be ignored if the available matrimonial assets are insufficient to meet reasonable needs.
Example 5 – A short marriage
The length of the marriage can also make a difference.
Imagine a marriage lasting three years, with no children.
One person entered the marriage owning £400,000 of assets and the other had £30,000. Both continued working and remained financially independent.
That is potentially very different from a long marriage in which assets have been accumulated through decades of shared family life.
In an appropriate short-marriage case, the source of the assets and the parties' respective contributions may become particularly relevant once reasonable needs have been considered.
What about a pre-nuptial agreement?
A pre-nuptial or post-nuptial agreement can also be relevant.
Its existence does not mean that financial disclosure or consideration of needs disappears. The circumstances in which the agreement was made and its effect will matter.
Where a pre-nuptial agreement is likely to be significant, obtaining independent legal advice is particularly important.
Needs versus sharing
This distinction is important.
In a case where there is substantial wealth, both people may be able to buy appropriate homes, maintain a reasonable standard of living and provide properly for retirement from an equal share.
In a case where the family's resources are much tighter, dividing everything equally may simply mean that one person's essential needs cannot be met.
Judicial guidance recognises that in these more typical cases, meeting needs can be more important than mechanically pursuing equal sharing.
So instead of asking only:
“What percentage am I entitled to?”
it can be more productive to ask:
“What resources are available, what does each of us reasonably need, and how can we use those resources to allow two households to move forward?”
That is exactly the sort of conversation financial mediation is designed to facilitate.
How does financial mediation begin?
At Family Mediation Online, the process normally begins with an individual Mediation Information and Assessment Meeting (MIAM).
This is a private meeting between you and the mediator.
You do not begin by sitting down with your former partner and negotiating.
At your MIAM, the mediator will explain:
how mediation works;
the different ways mediation can take place;
what financial disclosure will be required;
whether mediation appears suitable for your circumstances;
any safety or communication concerns;
whether joint or shuttle mediation may be appropriate; and
what happens next if you both wish to proceed.
If mediation is suitable and both parties wish to continue, each person provides full and open financial disclosure.
That will usually include information about:
the family home and any other properties;
mortgages;
bank accounts and savings;
investments;
pensions;
debts and liabilities;
income;
expenditure;
business interests where applicable; and
future housing, income and retirement needs.
The mediator can then help you identify where you agree, where you disagree and what options might realistically resolve the outstanding issues.
We do not decide the outcome for you and we do not take sides.
The decisions remain yours.
What happens when an agreement is reached?
Where appropriate, the mediator can prepare documents recording the financial disclosure and the proposals reached through mediation.
A mediated financial agreement is not, by itself, the same as a court order. Parties are generally encouraged to obtain independent legal advice and, if they want their financial agreement to become legally binding, it can be incorporated into a consent order and submitted to the Family Court for approval.
You don't have to agree on everything before starting mediation
In fact, disagreement is usually the reason people come to mediation.
You might agree about selling the house but disagree about the percentage split.
You might agree that pensions need to be addressed but have completely different views about how.
One person might want a clean break while the other believes maintenance is necessary.
Those are precisely the issues that can be explored in financial mediation.
The aim is not to establish a winner and a loser. It is to help both people understand the financial picture, identify the issues that genuinely matter and explore whether an outcome can be found that allows everyone to move forward.
Ready to start?
If you are separating or divorcing and need to resolve property, pensions, savings, income or other financial arrangements, you can start by arranging your individual MIAM with Family Mediation Online.
Visit www.family-mediation-online.co.uk to find out more and begin the mediation process.
Family Mediation Online – helping separating families find practical ways forward.
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