What Happens to Savings & Investments in Divorce?

Hannah Goldstein

Divorce often raises important questions about the division of assets, particularly savings and investments. Understanding what happens to these financial resources is essential for both parties involved. This article examines the principles governing the distribution of savings and investments in divorce, clarifying common misconceptions and outlining potential outcomes.

Is my spouse entitled to my savings and investments if we divorce?

During the divorce process, both parties should exchange full and frank financial disclosure. This includes bank accounts, ISAs, stocks and shares, pension funds, real estate investments, commodities and any other form of investment, whether they are managed in the UK or overseas.

Whether you’re a husband wondering about your wife’s claim on your savings or a wife concerned about your husband’s entitlement to your investments, the principles of financial division in divorce remain the same for both spouses. The default rule is that savings and investments built up during a marriage are subject to a fair distribution between both parties. There are always exceptions, however—and “fair distribution” may not mean a 50-50 split.

Are savings and investments included in a divorce settlement?

Savings and investments that have been built up within the marriage are classified as matrimonial assets, even those held in one name only. Matrimonial assets are considered as part of the financial settlement in your divorce.

Non-matrimonial assets are less likely to be shared in divorce, though they may still be considered if there is not enough matrimonial money to meet each person’s needs. Non-matrimonial assets are those accrued outside the marriage, either:

• Before the relationship began, or
• After you separated, or
• Because the asset was very clearly only ever intended to benefit the individual owner.

Unlike the division of the family home in a divorce, it may not be immediately obvious whether savings and investments are matrimonial or non-matrimonial. What if you had money in a savings account before you married, but continued saving throughout your marriage? What if one spouse owns an investment property but uses the rental income to pay the mortgage on the couple’s main home? What if investments are illiquid and cannot be divided?

These are issues that will be considered when determining how savings and investments will be divided in a divorce settlement. In general, the longer you have been married, the more likely that savings and investments will be considered as matrimonialised and subject to division.

• Read our blog on Standish vs Standish – assets you consider to be non-matrimonial may not be treated as such for the purposes of a fair financial split.

How savings may be divided in a divorce

Bank accounts can be relatively simple to divide—one person will transfer the agreed amount to the other. However, it’s important to check with the bank first, as some accounts impose early access fees that could mean you lose interest if you withdraw a large sum.

By definition, Individual Savings Accounts cannot be jointly owned or moved to your ex-partner. To share money from an ISA, you will need to take the cash out, which means you will lose the tax benefits. It’s important that you understand the tax implications upfront and we usually advise that Tax advice is obtained, depending on you the assets in question.

Simply having an account or ISA in your own name does not exclude it from the matrimonial assets, and savings will likely form part of your financial settlement. You may be able to argue that savings are non-matrimonial if you can prove that the source of the money was from outside the marriage, such as an inheritance or gift, but even that may be invaded to meet needs.

How shares may be divided during a divorce

As with pensions, you have three main options for dividing shares in a divorce settlement:

• Share transfer – one party transfers ownership of their shares to the other.
• Offsetting – one party keeps their shares and gives their ex-partner cash or other assets instead.
• Sale and share division – the shares are sold, and the proceeds divided between both parties.

Dividing shares can get tricky when a family business is involved. Even if one spouse isn’t directly working in the business, they may still have a right to a portion of it in a divorce. The court aims to avoid disrupting the business, but in some cases, selling it or breaking it up may be the only fair way to split assets.

Offsetting is often the best way to handle these negotiations, especially if you haven’t set up a prenuptial or postnuptial agreement to protect the business beforehand.

What about pensions?

How your pension is divided in a divorce will depend on your specific situation and the type of pension you hold. The main options are:

• Pension Sharing – your pension provider will transfer a percentage of your pension’s value to your ex-partner, or vice versa.
• Pension Offsetting – you keep your pension and trade other assets of equivalent value, such as giving your ex-partner a greater share of your combined savings.
• Pension Attachment Order – a percentage of your pension and/or your pension lump sum will be paid directly to your ex-partner when you start drawing your pension benefits.

You will need to consult a pensions actuary to calculate the value of your pension and an experienced divorce lawyer to ensure that your long-term needs are met.

How Osbornes can help you divide investments and savings in a divorce

When it comes to savings and investments, arguments about whether assets should be classified as matrimonial or non-matrimonial will have the most significant impact on how they are divided. This is especially true in high-net-worth divorces where the origin of the wealth may justify a departure from equality, where investments are held in a complex web of trust structures, or where the fate of a family business is at stake.

As specialist divorce and financial remedies solicitors, we can help unravel these issues with practical solutions for distributing assets that may be difficult or impossible to sell.

We use mediation, collaborative law or private Financial Dispute Resolution to avoid the need for contentious court proceedings in most cases. We also work closely with your financial advisers to make sure that the value of the matrimonial pot is not eroded through unnecessary tax penalties.

Also, our dedicated solicitors can help you in uncovering hidden assets in your divorce for a fairer outcome.

To speak with one of our solicitors, contact us by:

• Filling in our online enquiry form; or
• Calling us on 020 7485 8811