Offsetting assets in divorce

Offset assets divorce

Often one party is the main breadwinner in a marriage, and if the marriage breaks down the assets will need to be divided.

This division of assets should include the pensions of both parties.  However, when there are children involved, one party may earn substantially more than the other. This is because one person, normally the wife, either gives up work or works fewer hours to look after children, and therefore has a lower income, and a lower pension.

As part of a divorce, the judge tries to ensure all assets are divided fairly, and any children to the marriage are sufficiently catered for.  This does not penalise the lower earner, as they have contributed equally to the marriage, if not financially but in plenty of other ways.

There is rarely a 50-50 split of each asset, but a percentage split of total assets. One party can keep the majority if not all of one particular asset but less of another asset.  As long as the total assets are divided fairly. This can often require an explanation beforehand to ensure the judge is going to approve your order.

Pensions

Pensions are no different from other assets but, often one party has paid into a pension long before they were married.  When a pension is valued, a Cash Equivalent Transfer Value (CETV) will need to be calculated by the pension company.   This is the value used when totalling all assets in a divorce. But it does not mean the value which will be shared with the other.

If one party has a larger pension pot than the other party, it could be offset against other assets that are to be divided, like the house.

Eg. A couple with a house valued at £400,000 with a mortgage of £250,000 have an asset worth £150,000. If the husband has a pension with a CETV of £100,000. The wife has a pension valued at £18,000 then the assets might be divided as follows if the parties agree the wife shall remain in the house for a few years until the children are a little older. This will, of course, depend on the mortgage lender too and whether the parties are still holding the property jointly or there is to be a transfer of equity.

House value: £150,000
Husband Pension value: £100,000
Wife Pension Value: £18,000
Savings: £12,000
Total: £280,000

After the divorce, the wife will retain the house but will need to pay the husband £28,000

Wife:
House: £150,000
Wife Pension: £18,000
Payment to husband: £28,000
Total: £168,000 – £28,000 = £140,000

Husband:
Pension: £100,000
Savings: £12,000
Total: £100,000 + £12,000 + £28,000 = £140,000

Division of assets

If both husband and wife are divorcing amicably, then a consent order would set out how the assets are to be divided.  You have both agreed on how assets will be divided.

If you want the court to decide how assets should be divided, then a financial order will be required.  A Form E will need to be completed by each party that would include 12 months bank statements, property valuations, pension valuations, business valuations etc.  The court will then decide on how assets will be divided including child and spousal maintenance.

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Offsetting assets in divorce was last modified: March 18th, 2019 by John Fuller

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