An Ultimate Guide to the Division of Assets in Divorce

 Dividing assets during a divorce can be one of the most challenging aspects of separation. But it’s also one of the most important. In this Ultimate Guide, we will explain everything you need to know to make informed decisions and take the next step on your journey, including:

• What legislation governs the division of assets in divorce?
• Which legislation governs the division of assets for unmarried couples who separate?
• What is the process of asset division during divorce?
• Which assets are typically included in the division process?
• How are businesses dealt with during divorce?
• How are pensions dealt with during divorce?
• How can divorcing couples resolve disputes during asset division negotiations?
• How can assets be protected during divorce?
• You ask, we answer: our most frequently asked questions
• Blanchards Law’s final thoughts on the division of assets in divorce

What Legislation Governs the Division of Assets in Divorce?

The division of assets during divorce in England and Wales is governed by the Matrimonial Causes Act 1973 (MCA). This key piece of legislation provides the legal framework for financial settlements following the breakdown of a marriage. It sets out the factors the courts must consider when determining how assets should be divided, ensuring that the outcome is fair and equitable.

What Factors Influence How Assets are Divided?

The court’s primary task in financial proceedings is to establish the matrimonial assets—that is, the assets accumulated during the marriage that form the pot available for division. Once these are identified, the court will apply three fundamental principles:

1. Needs – The court prioritises meeting the financial needs of both parties, with a particular focus on the welfare of any children and the person who mainly looks after them.
2. Compensation – If one party has made financial sacrifices, such as giving up a career to care for children, they may be entitled to compensation.
3. Sharing – Marital assets are generally divided equally, unless there is a compelling reason to deviate from a 50/50 split.

While the Act provides guidelines, each case is assessed on its own merits, with judicial discretion playing a significant role in achieving a fair settlement.

What is a Needs-Based Approach?

In most divorces, particularly those involving children, needs are the central consideration. The court will assess what each party requires for housing, daily living expenses, and future stability. A key factor is ensuring that both parents can provide suitable accommodation for their children. For example, if the couple has two children, it is likely that both parents will need a home with at least two or three bedrooms. The court will evaluate whether the available assets can be divided in a way that allows both parties to meet these needs. 

Will I be Compensated for My Career Sacrifices?

The principle of compensation comes into play when one spouse has foregone career opportunities for the benefit of the family. A common scenario is where one party steps back from a high-earning career to care for children, while the other progresses professionally. In such cases, the financially disadvantaged spouse may be awarded additional assets or ongoing maintenance to reflect the disparity.

A landmark case in this area involved a wife who had been a successful professional but gave up her career to raise the couple’s four children. Meanwhile, her husband’s career flourished, and he accumulated significant wealth post-separation. Although post-divorce earnings are generally considered the individual’s own, the court recognised that the wife’s career trajectory had been permanently altered. As a result, she received both capital and a large maintenance order to compensate for her financial disadvantage.

What is the Sharing Principle and how Does it Influence Asset Division?

Under the sharing principle, a starting point for the division of matrimonial assets—typically including the family home, pensions, and savings—is an equal split, prior to the consideration of needs and compensation. 

However, the court may differentiate between assets acquired during the marriage and those brought into the relationship beforehand (or inherited). This process, known as ring-fencing, can mean that certain pre-marital or inherited assets are excluded from the division if they are surplus to both parties’ needs.

In this situation, the court will consider whether additional assets should be shared or retained by the original owner. However, in most cases, the guiding principle is that assets accumulated during the marriage should be shared between both spouses.

Are Maintenance and Financial Support Part of the Asset Division?

While maintenance payments are related to asset division, they are assessed separately. Spousal maintenance is usually based on need, rather than entitlement to a share of ongoing earnings (though compensation can sometimes play a part). The court evaluates each party’s earning capacity, financial shortfall, and ability to mitigate their own financial dependency over time.

In high-net-worth cases, maintenance may include a share of future bonuses for a limited period to help the financially weaker spouse transition to independence. However, courts are cautious about awarding indefinite maintenance, favouring clean break settlements where possible, to encourage financial independence post-divorce.

Which Legislation Governs the Division of Assets for Unmarried Couples Who Separate?

Unlike married couples, who are covered by the MCA 1973, unmarried couples in England and Wales do not have the same legal protections when it comes to the division of assets upon separation. Instead, two key pieces of legislation apply:

1. The Trusts of Land and Appointment of Trustees Act 1996 (TOLATA) – Governs property ownership and beneficial interests for unmarried couples.
2. Schedule 1 of the Children Act 1989 – Provides financial relief for unmarried parents, primarily in relation to housing and child-related expenses.

Property Rights Under TOLATA

For unmarried couples, property division is determined by legal ownership rather than the principles of fairness applied in divorce. If a property is owned in joint names, it is usually presumed to be split 50/50, meaning one party can buy out the other’s share or the property can be sold, with the proceeds divided equally. If the property is solely in one party’s name, the other has no automatic entitlement to a share unless they can prove a beneficial interest. This is typically by demonstrating financial contributions towards the purchase or mortgage, or because one party promised a share to the other, which they may have relied upon in making decisions, or contributing funds, to their detriment .

Financial Provision for Unmarried Parents

While an unmarried partner cannot claim maintenance or a share of assets for themselves, Schedule 1 of the Children Act 1989 allows a parent (the primary caregiver, usually the mother) to seek financial support for their children. This can include:

• Housing provision – A wealthy parent may be required to purchase or fund a property for the child’s benefit. However, this arrangement is temporary; the property must be returned or sold when the child reaches 18 (or 21 if in full-time education).
• Carer’s allowance – While not formally labelled as maintenance, the court can order payments to support the child’s primary carer.
• Capital payments – Lump sums may be awarded to cover specific child-related expenses, such as furnishing a child’s room, buying a laptop, or purchasing a car for school transport. These sums are not repayable.

Limits and Considerations

Unlike divorce settlements, there is no clean break under Schedule 1 of the Children Act. Financial support can be revisited while the child is dependent, meaning claims can be made multiple times. However, any claims are contingent on the financial resources of the paying parent—if there is insufficient wealth, the court has limited ability to intervene.

What is the Process of Asset Division During Divorce?

The division of assets in divorce follows a structured legal process in England and Wales, ensuring a fair outcome for both parties. While some couples reach an agreement amicably, others may require court intervention to settle financial disputes. The process normally involves the following steps:

1. Financial Disclosure

Both parties must provide full and honest disclosure of their financial situation. This includes:

• Bank accounts, investments, and savings.
• Property ownership and valuations.
• Pensions and business interests.
• Debts and liabilities.

This is usually done using Form E, a detailed financial statement required in court proceedings but often used voluntarily in negotiations.

2. Negotiation and Dispute Resolution

Where possible, couples are encouraged to negotiate a settlement outside of court. Dispute resolution methods, like mediation or collaborative law, can help resolve financial disputes with the guidance of experienced third parties. If an agreement is reached, it can be formalised with a Consent Order which is legally binding, once it has been lodged with the court and approved by a judge.

3. Court Proceedings (If Necessary)

If an agreement cannot be reached, one party may apply for a Financial Order from the court. The process follows three main hearings:

• First Directions Appointment (FDA) – The court assesses the financial disclosure and may order further evidence.
• Financial Dispute Resolution (FDR) Hearing – A judge provides guidance on a likely outcome to encourage settlement.
• Final Hearing – If no settlement is reached, a judge makes a legally binding decision on asset division.

4. Implementing the Settlement

Once an order is in place, assets must be transferred, pensions split, and any maintenance payments arranged. In cases involving the family home or business assets, adjustments may be needed to ensure liquidity and fairness.

Which Assets are Typically Included in the Division Process?

When a couple divorce, the starting principle is that all assets are included in the division process. The court will assess the financial resources of both parties, considering everything that has been accrued during the marriage. However, certain assets may be excluded in specific circumstances, particularly if they are deemed surplus to needs.

Included Assets

The default position is that all financial resources form part of the matrimonial pot. This typically includes:

• The Family Home – Regardless of legal ownership, the family home is almost always included, as both parties (and any children) require suitable housing post-divorce.
• Savings and Investments – Bank accounts, ISAs, shares, and investment portfolios are usually up for division.
• Pensions – Often one of the most valuable assets, pensions are considered part of the marital assets and can be subject to pension sharing orders.
• Business Interests and Bonuses – If one party owns a business or regularly receives bonuses, these are taken into account, particularly if bonuses were earned during the marriage. Even a bonus received post-separation can be included if it was effectively earned before the split.
• Debts – Any liabilities accrued during the marriage are usually shared, while pre-marital or post-separation debts may be treated differently depending on the circumstances.

Potentially Excluded Assets

While the starting point is that everything is included, some assets may be excluded if they exceed the financial needs of both parties. This is more common in high-net-worth divorces where both spouses can comfortably meet their needs. Assets that may be ring-fenced include:

• Pre-marital assets – Property, savings, or investments owned before the marriage may be excluded, unless they were mingled with marital finances.
• Post-separation assets – Wealth acquired after separation is generally not shared, unless there is a clear link to marital efforts.
• Inheritance – If one party receives an inheritance before or after separation, it may be ring-fenced, unless financial needs require its inclusion.

The Role of Needs in Asset Division

The key question in determining which assets are included or excluded is whether both parties can meet their financial needs. If there are sufficient resources for both to obtain suitable housing and maintain a reasonable standard of living, a 50/50 division is more likely. However, where there is financial disparity—such as a lower-earning spouse with limited mortgage capacity, the court may allocate a greater share of the assets to that party to ensure fairness.

How are Businesses Dealt with in Divorce?

When a business is involved in divorce proceedings, it is usually treated as a matrimonial asset, meaning its value may be considered in the financial settlement. However, dividing business assets is more complex than liquidating other marital assets, as courts aim to balance the principles they apply to the division of all matrimonial assets (fairness, compensation, and need) against financial practicality.

Valuing the Business

Determining the business’s value is the first step. If both spouses trust the business owner’s existing accountant, they may be asked to provide a valuation. However, if there are concerns about bias, a forensic accountant can be jointly appointed to provide an independent valuation.

The valuation process considers:

• The business’s assets and liabilities.
• The company’s profitability and future earning potential.
• The extent to which the business was built before, during, or after the marriage
• The liquidity of the business; i.e. can one spouse borrow against it to satisfy the other spouse’s claims.

Division of Business Assets

Unlike other marital assets, businesses are not usually divided equally between spouses. Courts recognise that forcing a sale could leave one party (usually the business owner) without an income, which would be counterproductive. Instead, solutions often include:

• Offsetting – The business owner may retain the company, while the other spouse receives a larger share of other assets (e.g., property or pensions) to balance the settlement.
• Income-Based Settlements – If a business provides a significant income, maintenance payments may be structured to ensure fairness without disrupting the company’s operations.
• Partial Buyout – In some cases, the business owner may buy out the spouse’s interest, often over time if liquidity is an issue.

Liquidity and Practical Considerations

A crucial factor in business-related settlements is liquidity—whether the business has enough cash flow to fund a settlement without jeopardising its operations. Courts carefully assess what can realistically be extracted from the business while ensuring its continued viability.

How are Pensions Dealt with in Divorce?

Like businesses, pensions are complex financial assets that will almost certainly be considered marital assets and require the attention of specialists. The exact process you go through will depend on a number of factors, including the type of pension you have. But in principle, it will always consist of two stages: a rigorous valuation, and a division of that value based on the same criteria elaborated previously (fairness, compensation, and needs). 

Methods of Pension Division

Courts may employ several approaches to distribute pension assets equitably:

1. Pension Sharing Orders: A specified percentage of one spouse’s pension is transferred into a pension scheme for the other spouse, granting individual control over their respective shares. This method facilitates a clean financial break.
2. Pension Offsetting: The value of a pension is offset against other marital assets. For instance, one spouse may retain the pension while the other receives assets of equivalent value, such as the family home. This approach requires careful valuation to ensure fairness.
3. Pension Attachment Orders (Earmarking): A portion of the pension benefits is designated to be paid to the ex-spouse upon the pension member’s retirement. However, this method lacks a clean break, as payments depend on future events and cease if the pension holder dies. For these reasons, earmarking is very rarely used today.

Pensions are a complex area—if you have further questions about how they’re handled during divorce proceedings, read our Ultimate Guide to Pensions in Divorce.

How Can Divorcing Couples Resolve Disputes During Asset Division Negotiations?

There are several options for resolving disputes over asset division. While some cases require court intervention, many can be settled through alternative dispute resolution (ADR) methods. These approaches help avoid lengthy legal battles, reduce costs, and encourage constructive discussions.

1. Negotiation Between Solicitors or Couples

The most common method is negotiation—either directly between the spouses or through their solicitors. At Blanchards Law, clients are encouraged to keep communication civil where possible and agree as much on their own as possible, involving lawyers for every discussion can quickly escalate costs. If both parties can discuss matters amicably, this often leads to a quicker and less contentious resolution.

2. Collaborative Law

Collaborative law is a structured negotiation process where both parties and their respective collaboratively trained lawyers meet to discuss and resolve financial matters. Key features include:

• No formal legal letters between solicitors; all communication is face to face.
• Pre-agreed meeting agendas to maintain focus and efficiency.
• Full financial disclosure in a transparent, non-adversarial setting.

This approach is particularly effective for couples willing to cooperate and compromise to reach an agreement without going to court. You can learn more about our collaborative law service here.

3. Mediation

Mediation involves an impartial third party, known as a mediator, who helps facilitate discussions between spouses. Unlike a judge or arbitrator, a mediator does not make decisions but guides both parties towards an agreement. Mediation is often quicker and cheaper than litigation and allows couples to retain more control over the outcome. You can learn more about our mediation service here.

4. Arbitration

Arbitration is a relatively new method in family law, offering a legally binding alternative to court. The key differences from traditional litigation are:

• The couple chooses their own arbitrator, who acts as a private judge.
• The timetable is controlled by the couple, avoiding long court delays.
• The arbitrator’s decision is legally binding and enforceable in court.

While arbitration involves legal fees, it is faster and more flexible than waiting for a court hearing.

5. Private Financial Dispute Resolution (Private FDRs)

A Private Financial Dispute Resolution (FDR) hearing is an alternative within the court process that allows couples to resolve disputes more efficiently. It mirrors the Financial Dispute Resolution hearing (FDR) in court, where a judge provides an indication of how the case would likely be decided at trial. However, in a Private FDR:

• The couple pays for a private judge to oversee the process.
• The hearing can be scheduled much sooner than a court FDR, reducing delays.
• The judge dedicates a full day to the case, providing in-depth guidance.

Although Private FDRs require upfront costs (paying for the judge and legal representation), they often save money in the long run by avoiding prolonged legal disputes. Blanchards Law strongly recommends Private FDRs for clients seeking a quicker and more structured resolution.

6. The Court Process

If all other methods fail, disputes are settled through court proceedings. The court process includes:

• A First Appointment, where financial disclosure is reviewed, and directions are given.
• An FDR hearing, where a judge provides a non-binding indication of a likely outcome.
• A Final Hearing, where a judge makes a binding decision if no agreement is reached.

The vast majority of cases settle at the FDR stage, as parties receive judicial guidance on the likely division of assets. However, for particularly contentious cases, a Final Hearing may be necessary.

Which Method is Best?

The most appropriate method depends on the couple’s circumstances, financial complexity, and willingness to negotiate. At Blanchards Law, Private FDRs and arbitration are increasingly favoured, as they provide faster, more controlled, and expert-led solutions. However, for couples who can engage amicably, negotiation and mediation remain effective options.

How Can Assets Be Protected During Divorce?

By the time a divorce has begun, there is very little you can do to protect your assets. However, if you are not married and looking to hedge your bets, or you are married but want to be prepared for the worst, then prenuptial and post-nuptial agreements can be valuable tools. While not legally binding under English law, courts consider these agreements when determining financial settlements—provided they are fair and properly executed.

Prenuptial Agreements

A prenuptial agreement (prenup) is a contract between two people made before marriage, setting out how assets should be divided if the marriage breaks down. Prenups can:

• Protect pre-marital assets, such as inherited wealth, businesses, or property.
• Define how future earnings and investments should be treated.
• Help prevent lengthy and costly disputes over asset division.

While prenups are not legally binding, courts may generally be more willing to uphold them if they meet certain criteria, including:

• Both parties fully understand the terms and sign voluntarily.
• The agreement is fair and does not leave one party in a significantly worse financial position.
• Each party receives independent legal advice before signing.
• The agreement is made well in advance of the wedding (last-minute prenups will carry less weight). The general rule is that the Agreement should be done and dusted 28 days before the wedding, but this is not an absolute requirement. Where the pre-nup is being considered very close to the wedding date, parties should look at a Post-Nup instead.

Post-Nuptial Agreements

A post-nuptial agreement (postnup) is similar to a prenup but is made after marriage. It can serve as:

• A way to clarify financial arrangements if circumstances change (e.g., inheritance, business growth).
• A means to strengthen financial security if a marriage is under strain but the couple wishes to remain together
• Where the couple considered a Pre-Nup but too late for it to be effective

Postnups, like prenups, are not automatically enforceable but can be given significant weight by courts if properly drafted.

While no agreement can fully prevent court intervention, a well-structured prenup or postnup greatly reduces uncertainty in divorce settlements, making them a worthwhile consideration for couples looking to protect their assets. If you’re considering this route, check out our Ultimate Guide to Prenuptial and Post-nuptial agreements.

FAQs: You Ask, We Answer

How long does the division of assets process take?

The length of time varies depending on the complexity of the assets and the level of cooperation between both parties. Straightforward cases where both sides agree can be resolved relatively quickly, but more contentious cases or those requiring specialist valuations (such as businesses or pensions) can take 12 to 18 months. In particularly difficult cases, the process can extend to two years or more, but this is rare.

How are overseas assets dealt with?

The English court has worldwide jurisdiction and can take overseas assets into account during divorce proceedings. However, assessing the value of foreign property or businesses often requires expert reports from professionals in that jurisdiction. If the asset is deemed a matrimonial asset, it can be included in the financial settlement, with the court considering how best to distribute it fairly.

What are the most common mistakes people make regarding division of assets in divorce?

A common mistake is transferring assets out of one’s name, before or at the start of proceedings in an attempt to protect them. Courts can set aside these transfers if they appear to be a deliberate attempt to deprive the other party of their entitlement. Another mistake is failing to obtain a legally binding court order after reaching a financial agreement—without a Consent Order, either party can make a future claim. People also sometimes sign unfair agreements without legal advice, which can leave them stuck with an unfavourable settlement.

Can trust assets be included in the process?

In general, trust assets are not automatically included unless they provide regular distributions relied upon by the family. If a trust has historically provided financial support, the court may treat it as an available resource. Trustees often claim they will no longer make payments after a divorce, but if there is a clear pattern of distributions, the court may take this into account when determining a fair settlement.

What if my partner won’t agree to a fair division of assets?

If negotiations stall, the first step is often mediation, as this is a compulsory step before applying to court. If mediation fails, an application can be made to court for a Financial Order, which allows the court to determine how assets should be divided. In extreme cases, emergency orders may be made if a party is deliberately avoiding disclosure or hiding assets.

Final Thoughts

When it comes to divorce and asset division, seeking professional advice at the earliest opportunity is crucial. Many people delay speaking to a solicitor out of fear about legal costs or uncertainty, but knowledge is power—understanding your rights and options early can prevent costly mistakes later on. It is a worthwhile investment to have a meeting with an experienced family lawyer at the outset to prevent much more costly – and potentially unalterable – mistakes later on.

Your first port of call should be an experienced family lawyer, like Blanchards Law. We can then source any additional specialist help (like forensic accountants or pension actuaries) you require from our trusted network. If you would like to explore whether we are the right fit for your case, please feel free to contact us at your earliest opportunity.