Divorce 70/30 asset split – is it fair?
Dividing up assets on a divorce or separation can be complicated, stressful, and if you don’t both agree, very expensive.
You may have heard from a friend or read on the internet that a 70/30 split is a likely outcome for the party who was not working – or even the party who was working to reflect the work they did over the marriage.
Others may say that a 60/40 split is fair or that everything should be shared equally on a 50/50 basis.
Which one is correct? Is a 70/30 split the norm in divorce? And what should be the outcome for your situation? The short answer is, it all depends on your situation and future needs. And we will explain why below.
In our blog, “What am I entitled to if I divorce my husband?” we look at the Section 25 factors and how a court will use these to decide what is a fair financial agreement. In a long marriage or long relationship leading straight onto marriage, then the starting point for the division of finances is a 50/50 split.
But a 50/50 split may not be fair for your situation. And that can be difficult for some people to understand when going through a divorce, with all the added stress and emotional difficulties that can be involved at this time.
It is quite possible that a fair outcome may be a 70/30 split of all assets. Or that a 60/40 split is more equitable for your situation than an equal split. Or a fair outcome could be something completely different – we have seen a couple agree a 95/5 split as that was what was required for their specific situation (they had a disabled child who required 24-hour care by his mum).
So what is a fair division of assets for your situation?
Our recommendation is not to even start to look at the overall percentage split until you have both looked at your needs. As we have mentioned many times in our blog, family law – which is the law divorce falls under – is focused primarily on future needs. And it is these needs that will then dictate the overall asset split. Start with what you both need. Don’t start with the assets split and then try and work out why that is fair.
Let’s use an example:
Angie and Arnold are getting divorced. Angie has been to her solicitor, who has advised her to request a 70/30 asset split in mediation.
Arnold has also had legal advice and been told that the courts would agree a 50/50 asset split for his situation. Both have paid heavily for their legal advice and neither wishes to budge on their situation. They go to family mediation to resolve their financial dispute.
Angie earns £30,000 per year. She is 39 years old. Her mortgage capacity is £120,000.
Arnold earns £58,000 per year. He is 42 years old. His mortgage capacity is £232,000.
They have 2 teenage children. The children will spend time equally with both parents.
They have been married for 12 years and together for a total of 15 years. It is considered a long marriage.
As teenagers, the children cannot be expected to share a bedroom. And as the children spend equal time with each parent, they both need a 3-bedroom property. A reasonable 3-bedroom property in their area, with stamp duty and other costs is £375,000.
They have no savings. And each owns a car valued at approximately £8,000 each. Both have pensions, which have been valued at £60,000 and £80,000 to Angie and Arnold respectively. Neither have savings or other assets.
Currently, they live in a 5-bedroom house, which is valued at £600,000. Equity after mortgage and costs will be about £400,000. They have agreed the house needs to be sold.
Angie needs £375,000 to buy a house to meet her needs. If she takes a mortgage out for £120,000 (the most she can borrow) and shares the equity from the house sale equally, she would have £320,000. She is £55,000 short to meet her needs from a 50/50 split.
Arnold also needs £375,000 to buy a house. A 50/50 split of the equity from the house sale and maximizing his mortgage capacity would give him £432,000. He would have more than was required to meet his needs.
Instead, they agree that Angie should have more from the house sale – £255,000. With her full mortgage capacity, she can then purchase a 3-bedroom property to meet her future needs.
Arnold gets £145,000 from the house sale. Without maximising his mortgage capacity he can also meet his future living needs.
They agree to both keep their pensions.
Let’s see how this looks from a division of assets percentage:
|Car: £8,000||Car: £8,000|
|House Equity: £255,000||House Equity: £145,000|
|Pension: £60,000||Pension: 80,000|
|A) TOTAL £323,000||B) TOTAL £233,000|
TOTAL POT (A) + (B) = (C) £556,000
Division of assets (A) divided by (C) = 58%
Division of assets (B) divided by (C) = 42%
In this relatively basic example, the overall split is 58% to Angie and 42% to Arnold. That is a fair division of assets as it is the only way they can both afford to meet their reasonable needs moving forwards. It also allows them to get a clean break consent order.
Starting a discussion around both your needs moving forwards, working out how to meet them from the asset pot you have, and including your mortgage capacity, is a far better way to work out the division of assets than negotiating over the % split as a nominal figure in itself. This way, both parties can see that even though the split of assets may not be equal – there was a clear and obvious reason for a departure from a 50/50 split. In the example above, mortgage capacity was the primary factor that allowed both their needs to be met.
Q: Isn’t it unfair that Arnold has a far higher mortgage to pay off each month?
Arnold may consider so. But it is the only way they can both afford a 3-bedroom property to meet their needs.
Q: Is Arnold being punished for having a higher income?
It would not be considered punishment. His higher income allows him to get a higher mortgage so they can purchase 2 properties instead of the one. This means his children can have their own bedroom each when they stay at either parent’s house. They agreed this is really important for the children’s well-being and future relationships with either parent.
Q: What if Arnold loses his job and cannot afford the mortgage any longer?
The court will only look at the current situation and the facts they have now or are known to be happening now. They could not foresee every possibility in the future.
Q: Is it fair that when the children grow up and leave home, Angie will have a 3-bedroom house with a low mortgage?
This division allows the couple to achieve a clean break financially now, whilst meeting their immediate needs. There are mesher orders and some other similar options, which can provide future payment to a spouse when a property is subsequently sold, but these don’t allow for a clean break and can have negative tax implications.
Reasonable need will dictate the percentage split for your situation. Be wary of just agreeing on a percentage split, without the reasons behind that split. Many couples do agree to a 50/50 split if the assets meet both their reasonable needs. However, if you diverge from such a split in a long marriage, the court will want to know why and may decline your consent order if the reasons are not made clear. Because of this, a standard 70/30 asset split or a 60/40 asset split on divorce is a myth. It is wholly dependent on what you can both agree, based on meeting your needs.
We wish you all the best in agreeing your finances without going to court. If you are struggling to agree, take a look at our blog 11 ways to reach an agreement on divorce or separation. Family mediation is one of these methods and with a 90% success rate, therefore Mediate UK may just save you a lot of time, money and stress at this time.
Take our interactive questionnaire to see if you need a MIAM for your situation – you can even book online if you do.
Feel free to contact our business support team on 0330 999 0959 if you have any further questions.