Defining Matrimonial and Non-Matrimonial Assets
Matrimonial assets encompass properties, finances, or other assets that were acquired during the course of a marriage. They are considered shared assets and are typically subject to equal division in divorce proceedings. On the other hand, non-matrimonial assets are those that aren't directly linked to the marriage's duration, making them less likely to be divided equally.
The Classification of Damages
In the context of personal injury cases, damages awarded to an injured spouse can pose a unique challenge in asset division. Notably, there is no clear definition of what is considered a matrimonial or non-matrimonial asset in this scenario. It's also important to understand that not all damages are automatically classed as non-matrimonial. Instead, only certain portions of the damages might be deemed non-matrimonial.
The Role of Damages in Asset Division
An example of this distinction can be observed in personal injury cases where damages are allocated for various purposes. For instance, a portion of the damages might be designated for the loss of earnings, which is more likely to be treated as a matrimonial asset and thus equally shared. In contrast, damages used to acquire or support a family home, particularly if they become intertwined with marital assets, can become challenging to classify as non-matrimonial.
Precedents and Legal Insights
To better understand this issue, it's essential to explore relevant legal precedents. One such case is Wagstaff v Wagstaff [1992] 1 WLR 320, which covered the treatment of substantial damages awarded to an injured spouse. In this case, the Court of Appeal emphasized that the capital sum awarded wasn't sacrosanct and couldn't be shielded from the other spouse's financial claims. Instead, each case should be evaluated based on its unique circumstances, considering factors outlined in Section 25 of the relevant law.
The Role of 'Needs' in Asset Division
One important factor to consider is the "needs" of the parties involved, especially the injured spouse's needs. This covers essential requirements such as housing. The court's primary objective is to make sure that these needs are met, and if using the compensation funds becomes necessary to meet these needs, the court may decide that a portion of the damages be transferred to the non-injured spouse.
Legal Case: Mansfield v Mansfield (2011)
A relevant case study that reflects this approach is Mansfield v Mansfield (2011). In this case, the Court of Appeal approved a "Mesher Order," which effectively placed a charge on the house the non-injured spouse intended to purchase using a portion of the compensation funds. Importantly, the funds were agreed to be returned to the injured spouse once they were no longer required, such as when the twins in the family reached the age of 18.
Is Everything in Divorce Split Equally?
There is a common misconception that everything is divided equally, regardless of its source, but that’s not the case.
The source of any asset will be taken into account and most personal injury or medical negligence compensation is classed as a non-matrimonial asset. This compensation is usually classed as external to the marriage because the money is a direct result of any injury to that person and is not jointly brought into the marriage.
Your Family Lawyer should speak to the Personal Injury Lawyer about how the compensation award is made up, as it may include payments for past losses and future losses so the Court will need to take all of that into account.
But if the needs of the uninjured spouse can’t be met without the personal injury compensation, it really doesn’t matter if the money is classed as non-matrimonial.
What Can I Do About My Compensation If I’m Getting Divorced?
The most important thing to do is to get legal advice from a specialist Divorce Solicitor who, once instructed to represent you, will do all they can to protect your compensation.
In the case from 2011 (Mansfield v Mansfield), the Court decided to award the wife £285,000 of joint funds of £600,000 (£500,000 of which was the husband’s personal injury compensation) as she was the primary carer for their two children. This case went to the Court of Appeal, who agreed with the original decision but added that a third should be paid back to the husband once the children reached 18.
The Court will always try to balance the needs of any dependent children and the source of the compensation.
There are some key ways you can protect your Personal Injury Compensation. They are:
Our Divorce Solicitors can help advise you on which one best suits your needs.
Personal Injury Trust
This means you put all of your compensation into a Trust and appoint Trustees to manage the funds for you. You would need permission to access the money. You may also benefit from getting regular payments, called Periodical Payments, rather than a lump sum. The division of assets during divorce proceedings can be influenced by these trusts. The impact of a trust on financial settlements depends on whether it is classed as a nuptial settlement, which signifies a connection to the marriage.
The court considers the primary purpose of the trust, its long-term objectives, and the circumstances surrounding its establishment. Additionally, the breakdown of the damages received through the trust plays a crucial role. For instance, funds allocated for the cost of care, which addresses the beneficiary's essential needs, may be less susceptible to court intervention compared to general damages. However, the court's ultimate compass is the needs of the parties involved, particularly when children are concerned. Therefore, the court will not hesitate to issue an order that compels the transfer of trust funds to satisfy the non-beneficiary spouse's financial requirements if deemed necessary.
If you’re still finalising your Personal Injury claim, speak to your Personal Injury and Divorce Lawyers so they can give you the best advice on how to structure your compensation before it’s paid.
Prenuptial or Postnuptial Agreement
The Court places much greater weight on prenup and postnuptial agreements since a case called Radmacher v Granatino went to the Court of Appeal in 2010. The Supreme Court's judgment emphasised the importance of prenuptial and postnuptial agreements. According to the ruling, spouses should generally be bound by these agreements, except when it can be proven that they were either unfairly established or would yield unjust consequences.
After the Radmacher decision, subsequent case law has indicated a shift in judicial attitudes towards prenuptial agreements. Provided that the conditions established in Radmacher are met, judges are increasingly inclined to uphold these agreements. The onus now lies on the party seeking to deviate from the agreement to demonstrate why it should not be enforced. In essence, the court will give credence to a prenuptial agreement that is considered fair and reasonable under the law and fulfils the needs of the parties, including any children of the family.
In cases where the agreement falls short of meeting these criteria, the court will not necessarily disregard it entirely. Instead, it will amend the agreement to rectify any issues. Beyond safeguarding financial interests, prenuptial agreements also serve as cost-effective tools for averting potential litigation.
If you received compensation before your marriage, you can put a prenup agreement into place, which should protect your compensation. You could also consider making a postnuptial agreement if you are already married.
If the agreement is freely entered into by both people, with a clear and full understanding of what it means with independent legal advice, then it should be taken into account. Any children of the marriage or civil partnership will need to be maintained though.
The key is to get specialist legal advice as early as possible. Serious injuries can impact your life in many different ways. Our team at Simpson Millar can help you with your Personal Injury claim and also help you with divorce advice.
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