On the breakdown of a marriage or civil partnership it is important for both parties to take time to consider the financial implications of separation. This is often an area of concern for both parties involved and it is advisable to seek independent advice from a Family Law practitioner.
Arguably the most effective way of dealing with the separation of finances is for both parties to enter in to a Separation Agreement. A Separation Agreement is effectively a written contract between both parties and it can make provisions for the family home, bank accounts, pensions, policies and any other assets or debts. Entered into voluntarily, it is more likely to be an amicable process. Through a period of negotiation, an agreement can be written up by a Solicitor, signed by both parties and thereafter registered in the Books of Council and Session. The Agreement then becomes binding and can be enforced in the same way as a Court Order if necessary.
Alternatively, if a Separation Agreement is not an option; the division of the parties’ assets will be decided upon by the Court. The law on financial provision on divorce is governed by the Family Law (Scotland) Act 1985 as amended by the Family Law (Scotland) Act 2006. Understandably, this can be a more contentious process for both parties involved as the final division of their financial assets is out of their hands.
Matrimonial Property
Irrelevant of the course of action decided upon, the matrimonial property of the parties must be identified. Both parties are required to carry out the following four steps before any decision can be made about the financial arrangements following the breakdown of their relationship:-
- Establish the date of separation on which the parties ceased to cohabit as husband and wife or as civil partners.
- Identify all assets owned either jointly or by the individual at the date of separation. It is important to note that property acquired after the date of separation will not constitute as matrimonial property.
- Consider the assets and identify any non-matrimonial property by reviewing the circumstances in which they were acquired. Assets owned by the individual prior to the marriage or assets gifted to the individual will not be considered as matrimonial property. However, such assets must remain in their original form; otherwise it may become matrimonial property. For instance, where gifted or inherited money is used to purchase a new property during the marriage, that property would be classified as matrimonial property.
- Finally, both parties must value the said assets at the date of separation. By providing an accurate value of all matrimonial property, the process of dividing the assets and finalising the financial separation will be more straightforward.
The Division of Matrimonial Property
As previously mentioned, there are two options available to the parties when deciding upon the division of their matrimonial property. Both parties can either agree privately by entering into a Separation Agreement or they can leave it up to the Court to decide. If the parties choose to enter into a Separation Agreement, it is at their own discretion to decide upon the division of their matrimonial property. However, it is good practice to consider the law in this area, particularly the financial provision principles set out in the Family Law (Scotland) Act 1985 Act. Provided the final agreement is fair and reasonable, the Court do not require sight of the Agreement and thus divorce is likely to be granted relatively quickly.
The alternative is for the Court to decide on the division of the matrimonial property and in doing so; the Court will apply the principles set out in the Family Law (Scotland) Act 1985. The Principles on Financial Provision on divorce are set out below:-
‘The Principles’
- Section 9(1)(a) - The first and usually the most important principle is that the net value of the matrimonial property requires to be shared fairly. “Fair” means “equal” unless there is a compelling argument to justify a fair but unequal split.
- Section 9(1)(b) - The Court requires to take fair account of any economic advantage derived by either party from the contributions of the other, and any economic disadvantage suffered by either party in the interests of the other party.
- Section 9(1)(c) – The Court should take fair account of the economic burden of caring for children under the age of 16.
- Section 9(1)(d) - If one party has been dependent to a substantial degree upon the financial support of the other, then there should be provision to enable that party to adjust over a period of not more than three years.
- Section 9(1)(e) - The Court should seek to relieve serious financial hardship that may be suffered as a result of divorce.
‘The Clean Break’
It is important to note that Scots Law underpins the ‘Clean Break’ premise in relation to financial provision on divorce or dissolution. This clean break is usually accounted for in the capital assets, however, if required, there are a number of orders that can be made by the Court under the 1985 to facilitate a clean break. In terms of Section 8 of the 1985 Act, the Court has the ability to order a payment of a lump sum, the transfer of property, a periodical allowance or a pension sharing order. Such orders are at the discretion of the court but are commonly used in the division of matrimonial property.
Conclusion
The Scottish Law on Financial Provision on divorce or dissolution is coherent and to a significant extent, it provides a predictive outcome. This could potentially work in the interest of either party as what they effectively wish to know is ‘what the judge will decide?’ However, it should be noted that there is less scope for judicial flexibility as a result of the 1985 Act. Both parties should take time to consider their options and review the pros and cons of private settlement versus the decision of the Court. Financial provision on divorce or dissolution can be a contentious issue between the two parties involved and it is therefore advisable for each party to seek the advice of a Family Law practitioner.
For more information or advice on Financial Provision on Divorce or Dissolution in Scotland please contact us on 0141 221 1919.