The Court of Appeal recently ruled on the divison of matrimonial assets during a unique divorce settlement, highlighting that not all divorcing couples can split their assets on an equal basis. Lucinda Brown of Hewitsons discusses the issues.
Departure from equal sharing principle on divorce – impact for inheritance claims?
The Court of Appeal recently found in favour of Mrs Sharp, who was appealing against an award of 50% of the matrimonial assets to her ex-husband on their divorce (JS v ES  EWCA Civ 408). The decision marks a departure from the commonly accepted position that the matrimonial assets of a divorcing couple should normally be shared between them on an equal basis (known as the equal sharing principle).
The distinguishing factors in this case were that Mr and Mrs Sharp had a relatively short co-habitation and marriage (two years cohabitation and four years marriage), they were both in full-time employment for the majority of the marriage, had no children and largely kept their finances separate. The Court of Appeal held that these factors meant that a departure from the equal sharing principle was justified and reduced the High Court award of £2.7 million to £2 million.
The decision will have a bearing on future claims on death by spouses or civil partners against their spouse or civil partner’s estate pursuant to the Inheritance (Provision for Family and Dependants) Act 1975. Where a spouse or civil partner brings a claim for reasonable financial provision, one of the factors that will be taken into account when determining the claim will be the provision that the claimant might reasonably have expected to receive on divorce or dissolution of the marriage or civil partnership. Whilst this factor is one of many that will be taken into account (such as the size of the estate and the financial needs of the claimant and other beneficiaries, both now and in the future) and must be applied equally with those other factors, the divorce “cross-check” factor is regularly applied as the benchmark against which spousal claims under the 1975 Act are set.
Following the decision in Sharp, it seems that when dealing with 1975 Act claims on death by a spouse or civil partner, where there has been a “short” marriage and other relevant factors such as the couple having kept their finances separate, the equal sharing principle will not be applied to the couple’s respective assets in the analysis of the fictional divorce “cross-check” factor. The notional divorce comparison that arises for consideration in a 1975 Act claim can only ever be fictitious, of course, as in claims under the 1975 Act on death, there is only one party to be provided for, whereas on divorce there are two. Nevertheless the Sharp case is likely to feature in the analysis of spousal claims under the 1975 Act. The case serves to highlight both the importance of pre-nuptial agreements in achieving certainty on divorce and the importance of taking steps to mitigate potential Inheritance Act claims by considering carefully the dispositions in your Will.
For more information please contact Lucinda Brown in our Contentious Trusts & Probate team on 01223 532721 or click here to email Lucinda.
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