12th June, 2020
Draining the tank – is equal sharing of assets enough?
When divorcing, it is settled law that there should be no discrimination between ‘breadwinner’ and ‘homemaker’ in financial arrangements.
However, the debate about sharing post-divorce earnings rages on.
A recent court decision focusses on the extent to which the wife should be required to deplete her capital award so as to meet her income needs for the rest of her life, whereas the husband’s position was such that he would have surplus income and increase his assets during the same period.
Whilst equal sharing of capital is usually inevitable in cases where assets exceed current needs (absent a Pre Nuptial Agreement or non-matrimonial property) what will courts do where a non-working party, without any earning capacity, has an obvious gap between their lifetime income needs and the income they can generate from investing their capital?
The answer in recent cases looks fairly bleak for someone in that position and arguably this is at odds with the non-discrimination principle that lies at the heart of modern family law.
Historically, courts have remedied this either by the imposition of a spousal maintenance order or an additional capital award (over and above equal sharing of assets). In smaller value cases, this may still be the way that Judges find the fair solution. In CB v KB, however, the Judge expected that the wife may have to spend over 70% of her capital award to meet her and her 6 children’s income needs for the future. His comment “that is what money is for” might be perceived as harsh when contrasted with the husband’s earnings of £640,000 per annum which plainly exceeded his own needs. Whilst the wife’s capital may get close to exhaustion by the time that she dies, the husband would maintain and improve his, simply because of his established earning capacity all of which was built up within the marital partnership.
Whilst it may be fair for parties to divide capital equally where each has an earning capacity, there is obvious relationship-generated disadvantage where the party who has looked after the home and children has impaired or eliminated their own ability to be self-sufficient for the future.
If you need any help with your divorce, please contact our experienced Family team.
Partner and Head of Team
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