The Ultimate Guide to Post-Separation Accrual - What happens to wealth accumulated after separation?

Family law cases involving post-separation accrual can often be complex and highly contentious.

Vardags has a wealth of experience in relation to cases involving post-separation accrual. Our distinguished family lawyers and in-house financial forensics team are well placed to protect your financial interests, while ultimately achieving the best possible outcome in your case.

WHAT IS POST-SEPARATION ACCURAL?

Post-separation accrual refers to the wealth that has been accumulated after separation and before a financial settlement.  It can often relate to the following types of assets:

• company shares;
• property portfolios;
• inheritances; and
• bonuses.

WHY IS POST-SEPARATION ACCRUAL IMPORTANT?

Financial remedy proceedings may last months, or even years depending on the complexity of the case and the conduct of the parties. During this period, you or your spouse may continue to accrue wealth; therefore, increasing the matrimonial assets available for division upon settlement.

The assets that are available for division are generally considered as at the date of settlement or the final hearing. This means that any wealth accrued following separation will be included in the matrimonial pot.

This is important because post-separation accrual can have a significant impact on the financial settlement where one party has made significant contributions towards the matrimonial pot and therefore seeks an adjustment in their favour.

I HAVE BUILT SIGNIFICANT WEALTH FOLLOWING SEPARATION: WILL MY SPOUSE BE ENTITLED TO A SHARE OF THIS?

This will depend on the category that the post-separation accrual falls into. There are broadly 3 categories:

1. New ventures

New ventures mean an entirely new venture, with no connection to the martial partnership or marital assets and funds. New ventures are considered non-matrimonial and therefore, are not available for division with your spouse.

In the case of Rossi v Rossi [2006] EWHC 1482, it was held that an asset acquired following separation may be considered a non-matrimonial asset if the asset was acquired by virtue of one’s own personal performance or industry.

However, if matrimonial funds are used to embark upon the new venture, then this will be considered a matrimonial asset, and your spouse may then be entitled to a share.

2. Passive growth

Passive growth means an increase in the value of pre-existing matrimonial assets which come about passively (for example, an increase in the stock market or  inflation). Passive growth on matrimonial assets is likely to be shared equally with your spouse. Passive growth can often relate to property, pensions, savings, cryptocurrency and investments.

3. Active growth

Active growth generally relates to the positive actions one party has taken to increase the value of the particular asset.

The court will approach this category on a case-by-case approach, with careful consideration in relation to whether such growth is due to the hard work and effort of one spouse, or whether there has been an element of luck (such as favourable market conditions).

MY BUSINESS HAS INCREASED SIGNIFICANTLY IN VALUE POST-SEPARATION: CAN MY SPOUSE CLAIM A SHARE OF THIS?

This will depend on whether the increase in value was due to passive or active growth. If the increase in value was as a direct result of your personal performance, then you may potentially seek an adjustment in your favour or seek that such increase in value be ringfenced.

The court will also consider other factors, such as wider market forces, any help received from stakeholders and consultants, and whether there has been an element of luck (such as favourable market conditions).

Careful analysis will be required regarding your business and your role in increasing the value. At Vardags, our unique financial forensics team are specially placed to do this.

WHAT IF I INHERIT WEALTH FOLLOWING SEPARATION?

The principle here is the same as if you had inherited wealth during the marriage: this is a non-matrimonial asset and will be ringfenced (except in exceptional circumstances).

If you have received an inheritance following separation, we recommend contacting us to speak with our experienced family law team in relation to protecting your assets.

I HAVE RECEIVED A BONUS POST-SEPARATION: IS MY SPOUSE ENTITLED TO A PART OF THIS?

This can often be a controversial area of family law. However, in the case of O’Dwyer  v O’Dwyer [2019] EWHC 1838 (Fam), Mr Justice Francis held that if a bonus was earned during the marriage but not paid out until after the marriage had ended, then there is every reason to treat the bonus as matrimonial property.

Generally, if the bonus is paid within 12 months of separation, then it is likely to be treated as matrimonial property. However, it depends on the circumstances of the bonus.

If you have any questions in relation to post-separation accrual, Vardags is well placed to provide tailored advice and representation, with our experienced family law team and in-house financial forensics team. We recommend contacting us as early as possible to ensure your financial interests are protected during and following your separation.