In this article, we will look at the issue of personal savings and how they are likely to be treated in the event you divorce. Generally speaking, all savings, including other types of investments such as ISAs, must be disclosed to enable financial negotiations to take place and be effective. But is your spouse entitled to half your savings, and if not, can they be shared out in another percentage? Read on for more information.
In this article, we will look at the issue of personal savings and how they are likely to be treated in the event you divorce. Generally speaking, all savings, including other types of investments such as ISAs, must be disclosed to enable financial negotiations to take place and be effective. But is your spouse entitled to half your savings, and if not, can they be shared out in another percentage? Read on for more information.
If you have need help with your divorce and you feel you need legal advice, contact specialist family solicitor Mark Heptinstall of Slater Heelis Solicitors. He is recognised as a ‘Leading Individual’ in The Legal 500 and ranked in Chambers UK, and is described as having “the amazing ability to bring calm into troubled waters”.
Are personal savings split in a divorce?
You might assume that an account held in your sole name that you have paid into on your own is kept separate during divorce proceedings, but this is not the case. Depending on the length of the marriage, personal savings may have been accrued during this time, which then designates them as a matrimonial asset. This is the case even where the account is in one name only. Therefore, personal savings are considered as part of the financial settlement if you divorce.
Most times, the bottom line is, your personal savings will not be ring-fenced and it is likely you will have to share them with your spouse. But this doesn’t necessarily mean an equal division of the pot.
Is my spouse entitled to half my savings on divorce?
As already stated in this article, all savings must be disclosed before entering financial negotiations with your ex. This is referred to as the duty of full and frank disclosure, and helps legal representatives or the court to work out how the matrimonial pot should be distributed fairly. How savings will be split during the financial settlement is different for each divorce, although the starting point in each case is 50:50.
Fairness is key to dividing assets, including personal savings, but this doesn’t necessarily mean it is split down the middle. Although the general principle is that personal assets within the matrimonial pot should be divided equally upon divorce, the following factors under s25 of the Matrimonial Causes Act 1973 are taken into account in all cases:
- Income and other financial resources
- Earning capacity of both parties, both now and in the future
- Children, their ages, and who they will live with
- Standard of living enjoyed by the parties
- The contributions made by each party
- Property
- Parties needs and ages
- Duration of the marriage
- The conduct of the party that would be inequitable to ignore. This generally refers to “exceptional” conduct, whether good or bad.
Can personal savings be exempt from a financial statement?
There is only one exemption that a spouse can rely upon, and this is if you can prove the savings were built up before the marriage. If the court agrees, it will classify the funds as a non-matrimonial asset and therefore not capable of division. Here are some scenarios:
- Personal savings were accrued previously and brought into the marriage
- The savings were received during the marriage from an outside source, for example, from an inheritance or monetary gift from a relative
- The savings have been built up following the separation
Although the above examples mean your savings are capable of being exempt from division in a financial settlement, it doesn’t necessarily mean they will be disregarded. If you cannot reach an agreement and the matter reaches court, the judge has the power to include the savings if they feel it would be inequitable to disregard them.
The waters can also become muddied if you used some of your pre-marriage savings to buy a jointly owned property. If the marriage was short, then there may be a persuasive argument to depart from the usual equal sharing of the matrimonial assets. However, it is much more difficult to justify if the marriage was of longer duration.
How are savings accounts shared?
The mechanics of dividing a savings account differs depending on the type of account and whose name appears on it. Dividing personal savings accounts is relatively straightforward and typically involves one party transferring an agreed sum of money to the other. That said, some savings accounts have withdrawal clauses, so it is important to contact the bank before entering a transaction.
Cash ISAs are only ever held in one party’s name, which means you are unable to transfer the money to the other party. The account holder will need to withdraw the agreed amount from the ISA and then transfer the money personally. With a lifetime ISA, you can withdraw the money you need, but you will have to pay a fee to do so.
Some National Savings and Investments (NS&I) savings accounts allow instant access, but there may be a charge if you want to cash in a fixed-term bond early.
It may be possible to keep your savings intact if you are prepared to “offset” them against another matrimonial asset. For example, your spouse could be awarded a larger share of the matrimonial home or another asset in order to facilitate retention of your savings.
Will my child’s savings be split as part of the divorce?
If you have opened a child’s savings account or Junior ISA, then this money will be in their name and belong to them. However, the savings held in your child’s name could be included as a matrimonial asset if one parent moves money from their own account into their child’s account in order to try to exclude money from the financial settlement.
Can I spend my savings before I divorce?
If you are considering ways in which you could spend some of your savings or dispose of them in some other way to prevent your ex getting hold of them, then you should think again. The court has powers to safeguard the other party’s financial interests, and in cases where someone has unfairly dissipated assets, the court may be able to reverse the wrongful transactions or protect them in some other way.
Add-back allows a court to notionally include any “missing funds” in the matrimonial pot to be shared. This can be done even when the assets are no longer available. If there is a tangible asset, such as the purchase of a new car, with a monetary value, it can be considered in place of the cash asset.
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