Eri Horrocks examines whether post-separation assets can be shared on divorce

Will post-separation assets be shared on divorce?

In proceedings or negotiations concerning financial arrangements following divorce, the parties must disclose current values for all of their assets. However, where assets have increased in value since the parties separated, it may be possible to argue that this post-separation accrual should be considered non-matrimonial and not shared with the other party.

Matrimonial and non-matrimonial assets

It is important to ascertain which assets are matrimonial and which assets are non-matrimonial.

Matrimonial assets typically include the assets built up during the marriage and the family home. Non-matrimonial assets generally include assets external to the marriage, such as inheritances and wealth generated before the marriage. Non-matrimonial assets can become matrimonial, for example if mingled with matrimonial assets and/or used for purposes connected with the marriage.

The starting point on divorce will be that matrimonial assets are shared equally, whilst non-matrimonial assets are not, though they can be divided by the court where the other party’s financial needs (usually housing) cannot otherwise be met.

Therefore, whether an asset is categorised as matrimonial or non-matrimonial (or a mixture) is significant in cases where the parties’ assets exceed their financial needs. The question of how assets generated after the parties’ separation, but before the finalisation of their financial settlement, should be categorised can be a complex one.

Relevant factors from case law

The court has looked at different types of post-separation assets in various cases. There are no hard and fast rules, and much will depend on the circumstances of the case. However, the following factors are likely to be relevant:

• Has there been undue delay between the parties’ separation and the financial negotiations or proceedings? Where there has been a significant gap between the end of the parties’ relationship and the commencement of financial negotiations, it is more likely that any increase in value in a party’s assets will be considered non-matrimonial.
• Is the increase in value a product of one party’s endeavours following separation, or does it reflect passive economic growth of assets they held at the time of the separation (e.g. the increase in value of a house over time)? Passive growth is generally considered to be a matrimonial asset.
• Does the post-separation accrual result from a truly new venture commenced after separation, or does it arise from a continuation of pre-separation activity? The former is more likely to be considered non-matrimonial.
• Can the increase be characterised as resulting from one party being able to utilise or trade with matrimonial assets during the period since separation? This is often seen as trading with the other party’s unascertained share of the matrimonial assets, meaning any increase is likely to be considered matrimonial.
• Does the increase reflect remuneration received after separation but relating to a period prior to separation (e.g. a bonus awarded in respect of a previous year, or deferred compensation vesting after several years)? If so, it is likely to be considered matrimonial. It has been suggested that only bonuses relating periods more than a year after separation should be considered non-matrimonial, though other judges have taken a more flexible approach.
• Did the party claiming that post-separation assets are non-matrimonial make reasonable financial provision for their spouse during the period since separation? If not, their claim that post-separation assets should not be shared is likely to be weaker.

An asset may be a hybrid of matrimonial and non-matrimonial property, such that it is shared unequally between the parties.

The scope for disputes about the status of assets generated after separation increases with the length of time which has passed since the separation took place. This can be a reason to progress resolution of financial arrangements sooner rather than later, and will be of particular concern to a party likely to generate significant assets in the period following separation.

If you have any questions about the issues raised here, or other aspects of family law, please contact Eri Horrocks on eri.horrocks@hunterslaw.com or 07901 742 175.