Non-matrimonial property may be excluded from divorce settlements

13 September 2012

The Law Commission has begun its long-awaited consultation on a new statutory principle to guide the division of assets on divorce in England and Wales.

The exercise is part of a wider Law Commission project already running on matrimonial property in general. The new consultation focuses especially on two issues: non-matrimonial assets and spousal needs.

Current English law on these matters is vague, and the family courts’ decisions in individual cases are almost unpredictable. The most recent statute law is the 1973 Act, since when a series of big-money cases have changed the courts’ practices significantly. Notably, the sharing principle introduced in White v White in 2000 has no basis in statute, but has led to London being widely referred to as the divorce capital of the world. It is much sought after by spouses as the jurisdiction likely to offer them the most generous settlement.

The Commission wants to see a new statute stating the goals of a divorce settlement, taking into account each party’s needs as created by the relationship, including a possible need for one of them to be granted temporary support while working towards independence. The current system sometimes provides high levels of maintenance for a dependent spouse’s life, at least in big-money cases.

According to the Commission’s paper, financial settlements should not be left to a judge’s discretion as much as they are now. Instead, their amount and duration should be calculated by a statutory formula, as is already done in Canada.

Most significantly, the Commission believes non-matrimonial property acquired by one spouse as a gift or inheritance, or before the marriage, should not be thrown into the asset pool for the divorce settlement, unless it is necessary to meet the other spouse’s needs. At the moment, there are no clear rules about sharing of non-matrimonial property, though in general it is not shared.

Law Commissioner Elizabeth Cooke said the consultation would ‘look at the boundaries of the sharing principle’. Many technical matters will have to be resolved, she noted: for example where a premarital asset is later substituted by another one during the marriage, or sold and the proceeds used for other purposes.

The consultation is open until 11 December and the STEP UK Practice Committee is responding on behalf of the Society. Draft legislation is expected next year, incorporating new rules on related matters such as post- and prenuptial agreements.

Sources

Law Commission

Law Commission (consultation document, PDF)

Law Gazette

Independent

Telegraph

Guardian

Mail

Guardian (additional article)


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