How Assets and Liabilities are Divided

The rules regarding assets and liabilities have been in existence since 1985. What is important to bear in mind is that this is only a framework. Every case is unique and has its own set of circumstances and, ultimately, anything and everything potentially could be argued.

What the Act does (Family Law (Scotland) Act 1985) is put in place a clean break principle whereby both parties to the marriage take a fair share of the matrimonial assets and liabilities and then get on with their respective lives post-divorce.

There are two stages to go through. The first stage is to gather information as to what there is by way of matrimonial assets and liabilities (i.e. who owns what, what is it worth, who owes what and how much?). Once this has been agreed (or as much as possible agreed) the second stage is to then decide how these are to be divided fairly and what is actually going to happen to each of these assets and liabilities.

What are Matrimonial Assets and Liabilities?

Matrimonial assets are all assets that have been acquired from the date of marriage up to the date of separation.

There are 2 exceptions to this, if a house was bought before the marriage with the intention of it being the family home then it would still be classed a marital asset. The other exception to this general rule is any gifts or inheritances from a third party to the husband or wife during the course of the marriage.

This is an area that can get quite complicated because very often what is gifted or inherited is money which is then used for a variety of purposes.  There is then a question of whether that money can be traced. You should be aware that in these cases assets can be treated in a different way and you should seek advice.

All assets and liabilities acquired during this period are classed as matrimonial, even if they are just in one person's name. Generally these assets and liabilities will be valued at the date of separation.

As you can imagine there may be some assets that have increased in value from the date of separation to the date of divorce. Generally speaking, if that asset is owned by one of the parties, then any increase in the value will be ignored and its value at the date of separation will apply. If it is jointly owned then that may be different

How Are Our Assets and Liabilities Fairly Divided?

The big question is What Does Fairly Mean? The starting off point in law is that marriages are a joint venture between two people and so the fairest way would be to divide it equally. It is important to bear in mind that the law does not say that the parties are entitled to an equal share of matrimonial assets and liabilities. It is true to say that nine times out of ten they may be divided equally but not always. You may have what is known as a special circumstance for non 50/50 split of either one particular asset or the whole pool of assets.

Why May Assets and Liabilities be Divided Unfairly?

The Act lists some examples of what could be special circumstances. For example it may be argued that by giving up a career to have children is a special circumstance. 

You can look at the source of funds used to acquire any of the matrimonial property where those funds or assets were not derived from either of your incomes during the course of the marriage. You could look at the nature of the matrimonial property and the extent to which it could be divided or used as security.

There could therefore be a number of special circumstances but whether any of them are strong enough to influence a departure from the normal 50/50 split of assets depends on the circumstances of your case and whether your spouse and the court agrees with you. Every case is unique.

What Happens to the Various Assets and Liabilities?

Once you have decided to divide everything you would then try and reach an agreement on who is to get what. Sometimes this involves the transfer of houses, giving up a share of your pensions or the payment of a capital sum. 

There is a lot of flexibility in the distribution of assets; pensions can be split (which can be particularly useful if one of the spouses has a large pension entitlement), property can be transferred (such as the matrimonial home from one spouse to the other). There is therefore a variety of different ways in which a solution might be worked out for the division of matrimonial assets and liabilities. It is possible for the court to make these orders as well in disputed cases.

It should be noted that, even once it has been decided who will get what assets after the separation, there is still a possibility that one spouse may seek maintenance after a divorce.

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