A recent divorce case has made headlines because it has awarded the wife ‘compensation’ because she gave up a successful career in law in order to be the primary carer of the children of the marriage.
The judge ruled that the parties should split the marital assets worth £10 million equally, but that the wife should also receive an additional £400,000 as compensation.
There are three ways to approach the division of marital assets: needs, sharing and compensation.
In the majority of cases, the marital ‘pot’ is divided in a way that the parties’ needs (such as housing) are met. This might mean a deviation from an equal split, in order to achieve an equal and fair outcome.
Where there are surplus assets to meet needs, it is possible for the division to be based on an equal sharing of the assets of the marriage.
Compensation is used to address relationship-generated disadvantage, such as giving up a career to become the primary carer of children. However, compensation awards tend to be ‘rolled up’ within an assessment of a party’s needs, and dealt with on that basis rather than as a separate amount of compensation.
The court in the recent case made it clear that compensation will rarely be awarded. Parents that have chosen to give up careers to bring up their children may not consider, at the time, that the curtailing of their career is a sacrifice for which they should be compensated.
However, their view may change upon relationship breakdown if one party has a reduced earning capacity as a result of decisions that were made during the marriage, particularly if their spouse continues to enjoy a lucrative and successful career.