Background
We acted for a husband who was divorced from his wife ten years previously. The parties had been married for 27 years and there was one adult son. Both parties were 63 years old.
At the time of the divorce, the wife was living in the matrimonial home which had a value of £2.5 million without a mortgage. There were various other jointly owned properties – all rented and which produced a significant income.
Throughout the marriage, the husband had a property business through which he traded commercial and residential property and he carried on with this business, developing it further and making significant profits.
It was the husband’s understanding that he had reached a financial agreement with the wife so that she would receive the former matrimonial home and the rental properties, and he would be left with his business interests and the capital that it had generated. This arrangement would give the wife a permanent home, or she could sell it, downsize and realise some capital and she would have significant income from the rentals for as long as she required.
The husband had not thought about ensuring that this “agreement” was finalised when the parties divorced, believing that there was no rush to do so and indeed, he went on to form a new relationship, remarry and was living a whole new life.
Process
Ten years after the divorce, the wife consulted Solicitors stating that she should have half of all the marital assets and not just the former matrimonial home and the rental properties.
Since the divorce, the husband had worked hard and he had continued to make a substantial profit from his business dealings of buying, developing and selling properties. With the profits he made, he was able to purchase a home for himself and his partner. He believed that all the capital he generated since divorce was his as it had been acquired through his own efforts and it would be unfair for the wife to receive a share.
Result
Unfortunately, the husband was mistaken. He had made money, but the Court decided that this was by trading matrimonial assets that had not been distributed post-separation/divorce.
The Court considered that the husband’s business post-separation was the same one that he had throughout the marriage, and the wife should have a share of any increase in value of the business or capital made from it.
She was eventually awarded the former matrimonial home and the rental properties, but was also awarded a lump sum payment of £2.25 million so that her eventual capital was on a par with the husband’s matrimonial capital. The husband managed to persuade the Court that some of his assets were non matrimonial and should not be shared and he was successful with this. But, the Court was clear that the Business continues to be matrimonial until the wife receives her share.
The above is a cautionary tale that each party’s financial claims remain open following divorce or separation unless a financial agreement has been reached and written into a Court Order. If matrimonial assets continue to increase in value, both parties are potentially entitled to at least half of the assets at the time of negotiating a settlement or at the time the matter appears before the Court. This is despite the separation or divorce occurring years before.
The reality is that the husband should have settled financial matters at the time of the divorce, preventing any further claims being made and enabling him to be the sole beneficiary of the business capital and income in the future.
Reaching a financial settlement agreement is a crucial stage of the divorce process. At Newtons, our highly experienced team can provide you with comprehensive financial settlement advice on a range of areas, including property, maintenance, savings and dividing pensions. Please contact us today.
Importance of Resolving Financial Matters Following Divorce
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