When a marriage breaks down, the question of how to divide assets can be just as difficult as the emotional fallout.
The stakes are often higher for families with inherited wealth, business interests, or complex financial arrangements.
The law that governs financial outcomes on divorce (the Matrimonial Causes Act 1973 (the Act)), gives judges broad powers to make decisions based on fairness, subject to the parties respective needs.
Fairness is subjective however, and what one judge sees as reasonable, another might not.
This flexibility can work, but it also means the law often feels inconsistent.
In December 2024, the Law Commission published a report confirming that the current approach creates too much uncertainty.
It noted that many separating couples do not know where they stand legally, which can increase the chance of conflict, even when both parties want to settle without going to court.
Out of all divorces in 2023, just 40 per cent involved formal financial applications to the court.
Of those, nearly three-quarters were uncontested.
This may seem encouraging, but the report found that the system’s unpredictability tends to prolong disputes and frustrate negotiation, especially where legal advice differs.
While the Commission outlined options for reform, no changes have been made yet. Any shift will depend on whether the Government chooses to intervene.
What the law currently allows
Courts can make a wide range of financial orders, including the transfer or sale of property, pension sharing, lump sums, and maintenance.
In many cases, this leads to a balanced settlement.
However, when significant or unusual assets are involved, things quickly become more complicated.
Some steps can be taken to give greater clarity and reduce exposure.
- Prenuptial and postnuptial agreements – When prepared properly, these agreements are often upheld. They should be entered into freely, with full financial disclosure and legal advice on both sides. If an agreement meets these conditions and is not clearly unfair, a court is likely to follow it.
- Keeping wealth ringfenced – Assets owned before the marriage, or received through inheritance, may be treated differently. But if they are merged with marital assets, for example, by using inherited money to buy the family home, they often lose that separate character.
- Pensions and business interests – Pensions are routinely included in the settlement, even if part of the fund was built up before marriage. Similarly, business assets can be taken into account, depending on their structure and the spouse’s involvement.
- Good records and advice early on – Wealth that is properly documented and clearly defined is easier to protect. Waiting until divorce proceedings begin can leave you with fewer options.
The courts are open to agreement. Mediation and negotiation are encouraged, and many couples reach a fair outcome without a final hearing.
Remember though, the law’s flexibility cuts both ways, and without clear planning, the financial picture can change quickly.
We act for individuals and families who want to plan ahead or need support when things become contentious.
If that is where you find yourself, please contact the Head of our Family & Relationship Team, Alison Green, on 0207 240 0521, or at alison.green@mackrell.com.
