It can often be a major source of disagreement as to precisely what assets should be accounted for when agreeing a financial settlement as part of a divorce, especially those gained after separation but before the divorce has been finalised.
Property acquired after separation but before divorce
Whilst one party may view post-separation assets as forming part of the matrimonial pot, the other may see these assets as being earned solely due to their hard work following separation and that they should therefore be ring-fenced from any sharing as non-matrimonial property.
As with many issues in financial proceedings, the treatment of these assets very much depends on the circumstances of the case. However, the Court has given us some guidance on this issue, which it is important to consider.
Example Cases of Post-Separation Divorce Assets
One of the leading cases in this area, is Rossi v Rossi [2006] EWHC 1482. In this case, Mr Mostyn QC set out several principles in regard to the treatment of post-separation assets.
It was established that an asset that has been acquired post the parties’ separation, may be treated as non-matrimonial property (i.e. ringfenced), if it can be said that the asset was created or acquired by that party by virtue of their own “personal industry” and not by merely using an asset that had been created or acquired during the marriage.
In the latter case of JL v SL (No.2) [2014] EWHC 360, where he was now Mostyn J, Mostyn J went onto to clarify that if there was post-separation accrual that related to a totally new venture that was unrelated to the matrimonial partnership, then this could be regarded as entirely non-matrimonial property and not shared.
Active v Passive Growth
Distinguishing between the growth of an asset which is as a result of the personal industry of one of the parties, (in this context roughly referring to active growth) and the increase in value of an asset, which is not attributable to the particular actions of the owner (passive growth), is key.
In Rossi, Mostyn QC held that passive economic growth on matrimonial property, which arises after the couple’s separation, will generally qualify as matrimonial property.
In JL v SL, Mostyn J expanded on this, stating that for assets that were existing at the date of separation, any passive growth achieved after separation would be likely to shared equally, while any active growth after separation may be shared unequally (i.e. to benefit the party responsible for the active growth), but this is not guaranteed.
Passive growth is more likely to be seen on the value of assets, such as shares, pensions, property or savings.
Remuneration received post–separation e.g. a bonus
In Rossi, Mostyn J, suggested that a bonus should only be characterised as non-matrimonial where it related to a period commencing at least 12 months after separation and this was reiterated in the more recent case EvL [2021] EWFC 60. Some argue that this goes against the Court of Appeal decision in Waggot v Waggot [2018] EWCA Civ 727 that future earnings are not subject to the sharing principle but their focus in this was on future earnings rather than income earned between separation and the date of trial.
Inheritance after separation but before divorce
The distinction between whether an asset is matrimonial or not as we have seen is not always black and white. Assets which you owned before the marriage can turn from being non-matrimonial to matrimonial over time. This happens if they are pooled with other joint funds or transferred into joint names (the word used by the courts is “mingling”). An example of mingling might be that inherited funds are used to pay off the mortgage of the family matrimonial home. In the same way, inheritance received post separation, for it to be potentially be ring-fenced by the courts for the owning party to keep, would need to be kept separate.
However, this principal can be overridden where the other party establishes that there is a need either for themselves or for any children in the family, that cannot be met from the other assets from the marriage. In this scenario the court may invade the non-matrimonial assets eg the post separation inheritance. The case of C v C [2018] EWHC 3186 (Fam) emphasises the overarching idea that although post-separation accruals can in theory be ring-fenced as non-matrimonial property, in practicality they may still be shared if one party’s reasonable needs or compensation require it.
No Distinction and Needs
Other cases involving divorce assets post-separation have gone further to remove a strict delineation between matrimonial and non-matrimonial property, including CR v CR [2007] EWHC 3334, which encouraged a broad view of viewing assets as part of a financial continuum with fewer strict distinctions between what could be attributed to one party or the other.
As the above guidance shows, each case is different and the treatment of post-separation assets will depend on the particular circumstances of the parties’ relative needs, time that the asset or venture came into being and the efforts gone to by the parties to grow the asset.
If you would like to discuss the division of your finances after separating or as part of a divorce, please get in touch with our team.