Financial agreement advice

Last week, after just over 3.5 years of marriage my wife asked me for a divorce. We've started a discussion on a financial settlement and the advice she has been given is that a 50/50 split of all assets is the likely outcome. I have done some reading and have seen it suggested that if the marriage is "short" then a more realistic outcome is for each party to leave with the asset value they have contributed and a half share of anything they have accumulated together (matrimonial acquest).

Here is a summary of our finances - a bit confusing so please ask questions if needed!

House A: We own the house we live in. Value is £280K

House B: Before we were married we bought a different home together and co-habitated. Joint names, joint mortgage. We both put down equity for a deposit and had a large mortgage. Purchase price was £323K, mortgage was £220K. Today it is worth £350K. It is currently rented out with long term tenants who have approx 2 years left on their contract. It has a £250K interest only mortgage in joint names and approx £100K of equity (before sale costs and capital gains tax). The money from the remortgage was used to buy House A.

House C: After purchasing House B I agreed a financial settlement with my former partner (mother of my children, not married) and the house I lived in with her and my children was sold. I received approx £250K and used most of this to clear the mortgage on House B. Therefore my equity share in House was considerably greater, approx 65% of the total value.

House D: When my first relationship broke down I left House C and bought House D. After I moved in with my current wife (House I kept this as a buy-to-let. It is valued at approx. £200K with £100K outstanding on the mortgage. My wife has never lived in that house with me and has never contributed financially and I owned it before we were married (although we were dating).

Other considerations:

I have a £400K pension pot which was accumulated before we were married. I used to have a much better job (£100K per year) but I was made redundant in 2019.

I work in IT Support, earning £24K per year. She works in project management full time and earns £33K pa.

We have two cars - one worth approx. £20K and one £7K

Other assets of significance are artworks worth £8K, watches worth £9K, jewelry £7K, designer bags/clothes/shoes £5K and a lego collection £3K.

She wants to keep the house we currently live in and have a car.

My problem is that overall I have contributed so much more equity and now she expects half and has indicated that she may come after my pension and the house in my name. Ironically we did discuss what would happen if our relationship broke down and I even drew up an equity share for House B before paying off the mortageg and a pre-nup but she refused to sign them in the cold light of day and stupidly I trusted her!

We have no children together but I have 14 and 16 year olds that I support via child maintenance. The youngest still comes over and stays every couple of 2 weeks.

Any advice appreciated - is she entitled to half of everything, half of the equity in house B and C and our cars and possessions, or just what she contributed?

>>the advice she has been given is that a 50/50 split of all assets is the likely outcome.

You should always take, 'My solicitor has said' with a large pinch of salt. Usually statements like these are self serving and may or may not reflect the actual advice that has been given.

You say you have been married for 3.5 years but also that you cohabited prior to marriage. You do not say how long the period of cohabitation was. Potentially this is important because a prior period of cohabitation is added to the length of the marriage in order to determine the length of the relationship. In this case there would be a big difference between a six month period of prior cohabitation and one which lasted ten years.

Thanks for the reply. We co-habited from March 2017, got Married in Jan 2019. So approximately 2 extra years.

Comment about “pinch of salt” noted!

Well, this will be treated as a marriage of 5.5 years so whether it is 'short' is debatable. Probably not. Having said that, there are no dependent children of this marriage, your wife earns more than you do and a significant proportion of the assets were owned by you prior to the start of the relationship.

For what it is worth I don' think the chattels will be treated as cash. Your wife will keep the jewellery and designer bags etc. You will keep your watches, she hers and you will probably keep the lego collection (which I assume is yours). If they are capable of division the art works will be divided.

You have a good argument for keeping your pension and house D which were both acquired previously and have not been shared with your wife so you can reasonably say they are non-matrimonial assets. It is true that if your wife can show 'need' this would trump the fact that these assets are non matrimonial but on the face of it your wife's needs can be met without recourse to these assets.

Houses A and B are jointly owned they will probably end up being divided equally (even though you contributed most of the capital). The fact is that they almost certainly need to be divided in order to meet your wife's housing needs. There is no good reason why your wife should retain house A free of mortgage because (a) that would result in an unequal division in her favour assuming you ended up with house B, (b) she earns more and there are no dependent children to take into account and (c) it is hard to see why she should live in a mortgage free property whereas presumably you would need a mortgage if she kept house A. There is no good reason why A and B should not be sold, the equity be divided and you both go your separate ways.

Please note there is no certainty the above would be the outcome but it is within the range of reasonable outcomes and you have a good arguable case for it. It would seem to be preferable to argue that case than simply to accept what your wife wants.

There is one final point. If the marriage is over it would probably be wise to apply for divorce as soon as possible. The powers that be have decided that there is now to be a fixed six month delay between applying for a divorce and getting decree nisi. Therefore there will be plenty of time to sort out financial issues after issuing a divorce application. Also, within the context of divorce you can force a resolution of financial issues in a way you cannot do without such proceedings being under way. Nor do you have to leave it to your wife to decide when she wants to apply for a divorce. If you are sure the marriage is over you do not have to wait for her and you would probably be unwise to do so because the longer the marriage lasts the stronger her claims are likely to become and the less time you will have to repair any financial damage.

Thank you for the detailed reply. I forgot to mention that I am 50 and my wife is 39. Is this relevant given that my age (and my relatively low income) will restrict my ability to get a mortgage?

If my wife were unable to provide the equivalent to half of the equity value in cash for house A would that force a sale? There is a chance she might try and buy me out with money from her father.

In the case of house B, not our primary residence, am I correct in assuming that the equity paid after costs and capital gains tax is what counts? Selling house B would yield maybe £100K but then conveyancing costs and capital gains would reduce this by 20% ish.

My thinking is that my share of House A would be £140K (50%), so I wouldn't want any settlement to assume my equity from House B would be £100K, when in fact it would be much less (maybe £75k). I don't think the costs of selling and the tax are mine to bear alone, are they? So in that scenario where I cleared £75k from house B it is reasonable to expect £105k in cash to sign over house A, even if she has to remortgage to raise the money because her equity left in house A would be £180k, equal to my share. In a scenario where she is unwilling to sell on those terms, what happens?

Thanks for the tip on applying for a divorce, asap. I have emailed you!



Edited 1 time(s). Last edit at 09/01/2022 11:19PM by Turnip26.

The net value of any property is what is relevant so in the case of house B that means what you could expect to receive after any costs of sale and any CGT due.

If your wife cannot raise the cash to buy you out then the property would need to be sold, yes. There is no good reason to prioritise her needs over yours in this case.