Finance on Divorce and Separation

Overview

We understand that the breakdown of a relationship, marriage or civil partnership can be stressful and emotional for both parties and we try to make the whole process as easy as possible for each client. We treat each client as an individual. We understand the importance of listening to a client to understand their needs. Our approach is to try and solve all matters amicably, with the least possible acrimony and if possible by agreement, unless it is absolutely necessary to go to Court. We therefore explain the various options available for dispute resolution, be it in relation to financial or children issues, and will consider our client’s wishes and feelings before putting forward a strategy setting out the way forward to achieve the best possible result for them, and any children.

Whether you are married, in a civil partnership or in a long term relationship there can often be financial issues which need to be resolved to secure your financial stability and that of any children in the future. Some individuals are able to reach an agreement between themselves which they just wish to be formalised. Others are able to reach an agreement with assistance from solicitors or by attending mediation. Unfortunately there are some circumstances when individuals are unable to reach an agreement on how to divide their assets or decide on what financial support they should give each other in the future. In these circumstances it may be necessary to issue court proceedings in order for a Court to decide on what it believes is an equitable financial settlement.

Whether you want to have a discussion about the legal ramifications of a financial settlement, have assistance in discussions about finances or in relation to Court proceedings, we are able to help you. We are also able to offer mediation if you and your spouse or partner are interested in attending mediation.

How to settle disputes

Save for certain exceptions, it is now compulsory for couples who intend to apply to Court for orders relating to children to attend a MIAM, or Mediation Intake Assessment Meeting, to consider mediation before making an application to Court. This is to encourage couples to resolve matters through mediation without going to Court. For many couples this is a more amicable, less contentious, and more cost effective way of resolving disputes. If you wish to discuss mediation further please contact our Mediation Team.

There are further details of some of the different options available to help settle financial disputes below:

Discussion

It is not always necessary to attend Court, mediation or arbitration to resolve financial matters. When parties have remained amicable following the breakdown of their relationship they are sometimes able to reach an agreement regarding many issues directly between them. We are able to assist you with those discussions to reach a full and final settlement, be it either in advising you on the options available to you or in discussing matters with your spouse or partner’s solicitors.

Voluntary Disclosure

Prior to the issue of court proceedings both parties can agree to provide full disclosure of their income, assets and outgoings. This is to ensure that you both have a complete breakdown of each other’s financial circumstances before entering into any future settlement. It is a requirement that for there to be a valid agreement or order following a divorce or dissolution that both parties make full and frank disclosure of their respective income and capital assets.

Once full financial disclosure has been provided we can advise our client on proposals for settlement. Any agreement reached can then be incorporated into a court order which will be binding upon the parties.

Mediation

If appropriate a referral can be made for both parties to see an independent mediator who will assist the parties in trying to find a solution to the issues which are in dispute. Solicitors are not present during mediation but we will provide advice as and when needed. Whether you wish to instruct us to deal with all financial issues arising from your separation or solely wish to receive advice on discussions you have had at mediation, we are happy to help. The amount of sessions of mediation will vary according to each individual case. The mediator can assess if the parties qualify for Legal Aid. If they do not then a fee may be payable. If an agreement is reached in mediation then the total costs may be cheaper than the legal process involved if court proceedings were issued. Any agreement reached in mediation can be incorporated into a court order.

Collaborative Process

Both parties will meet with their lawyers to try and settle their case in a series of meetings. The aim of the process is for it to be open and transparent. If an agreement is not reached during the collaborative process then both parties will have to instruct new lawyers to start their case again. Other experts such as financial advisers can be involved in the collaborative meetings.

Arbitration

Arbitration is an alternative to the court process in that the parties are able to elect an arbitrator who will make the final decision regarding the outcome of the issues in dispute. At the outset the parties will have to agree to be bound by the arbitrator’s decision, which once made, will be incorporated into a court order. Solicitors are generally fully involved in the process and will attend the arbitration and represent their clients there.

Consent Order

If you have reached a financial settlement in relation to a divorce or dissolution of a civil partnership then that agreement can be formalised in a document which is called a consent order. This is a legal document that sets out the terms of your settlement.

We can prepare a consent order for you or advise you on a consent order that has been proposed to you. We will do this as part of our instructions if we are instructed in relation to financial matters generally, but if you would like us solely to prepare a consent order and your application to Court then please do contact us and we can discuss that with you.

Litigation

If an agreement is not reached through the parties attending a form of mediation or by attempting voluntary disclosure then either party can invoke the court’s jurisdiction. This involves issuing an application for financial relief, formerly known as ancillary relief.

The procedure can be complicated but the benefit of issuing proceedings is that the court will provide a timetable setting out directions which both parties must comply with, in relation to the disclosure of evidence. Currently there is a fee of £240 to issue the application for financial relief. Generally there will be three hearings prior to a final order being made. The initial hearing is a procedural step after which directions will be made for the parties to file further evidence if required. At the second hearing, also referred to as the FDR (Financial Dispute Resolution Hearing), the District Judge can give an indication of the likely outcome of the case. Many cases settle after an indication has been provided by the District Judge but if they do not then the case will proceed to trial.

Factors taken into account

The law surrounding financial settlements in a divorce or dissolution of a civil partnership can be complex and there are many factors to be taken into account whether you are a high net worth individual or on a low income with limited capital assets. We are able to help guide you through the process not only in providing you with legal advice in relation to your individual circumstances, but also helping negotiate a settlement which suits you, preparing the necessary documents and ensuring that full financial disclosure is provided by your spouse and that details of all assets have been provided and that no information is being concealed.

The starting point now is an equal division of the capital assets. The aim is to achieve fairness. The court then applies factors set out under statute to determine whether it is right to depart from equality. The court will have regard to all the circumstances of the case with first consideration being given to the welfare of any child of the family who has not attained the age of 18. The factors are not set out in any particular order, though the court will want to try and ensure that the needs of both parties are met.

Section 25 of the Matrimonial Causes Act sets out the factors that the Court must take into account when considering a suitable financial settlement.These include:

  • the financial needs, obligations and responsibilities which each party of the marriage has, or are likely to have in the foreseeable future;
  • the parties’ financial resources;
  • standard of living during the marriage;
  • age;
  • any disability;
  • their respective contributions to the marriage; or
  • any conduct which it would be inequitable to disregard.

We can advise you on how these factors apply to your situation and the extent that they should impact upon your financial settlement.

Orders

There are a number of different orders which can be made and the type of order made will vary in each case because each party’s needs are different. We have outlined below the different orders that can be made if a relationship breaks down:-

  1. Property Adjustment Order
  2. Lump sum
  3. Periodical Payments
  4. Orders relating to the parties’ pension.

An order can be made transferring one party’s interest in property to the other in consideration of a lump sum payment. The timing for the payment of the lump sum will vary according to the circumstances of the case.

In appropriate cases an order can be made for one party to pay to the other maintenance until such time that the recipient’s financial circumstances are expected to improve. Sometimes an order for maintenance can be made on a lifetime basis.

To determine what order should be made, in addition to considering the factors set out under statute and the starting point which is equality, the court will look at a number of other issues which include whether any of the assets are non matrimonial assets, inherited or pre-marital assets. These assets can be treated differently to assets which are acquired during the marriage.

Generally inherited wealth will be shared only to the extent necessary to meet the claimant spouse’s needs. However that principle will vary depending on when and how the inherited assets were received and how they were used during the marriage.

Financial proceedings involve consideration of a number of issues including in some cases how the financial disclosure was obtained.

Pensions

A number of different orders can be made in respect of a party’s pension, which can be a valuable asset that a party has been building up for the whole of their working life. Most commonly a Pension Sharing Order or an Offsetting Order is made. A Pension Sharing Order will involve a percentage of one party’s pension being transferred to the other party. In the alternative an Offsetting Order could be made whereby a claim is not made on the pension but instead the recipient is given a greater share of the other assets.

Recent proposed changes

The Law Commission is currently looking at the concept of ‘needs’ and the meaning of matrimonial property in the context of a divorce in England and Wales. ‘Needs’ is the Court’s perception of what the parties would require to maintain the standard of living they had during the marriage. It has been proposed that the current law on needs is due for reform.

Unmarried couples

Our Private Law department can offer advice and assistance to unmarried couples. The law relating to the division of capital assets for unmarried couples is completely different to the type of orders that can be made upon the dissolution of a marriage or a civil partnership. There is a misconception about the ‘common law marriage’. The principal issues which can be addressed by unmarried couples are an individual’s interest in a property or financial provision for children.

Where two individuals either owned a property together, or if one individual made a relevant contribution to a property on the understanding that they would acquire an interest in it, then a party may be able to make an application under the Trustees of Land and Appointment of Trustees Act.

If you own a property as ‘joint tenants’ and are unmarried the law assumes that you intended to own the property in equal shares.

This can be altered by you both signing a deed declaring otherwise or, in very limited circumstances as a result of assurances provided to the extent that they create a trust. The Courts have made it clear that it should only be in an exceptional case that a trust is created over a joint tenancy in the absence of a deed.

When a couple reside together and one of the individuals owns that property in their sole name then it is very difficult for the other individual to establish an interest in that property. If that individual has made a significant contribution to that property on the assurance that they would acquire an equitable interest in it then a trust may have been created granting them a share in that property. The law relating to trusts is complex and involves civil procedure rules unlike most areas of family law. We have extensive expertise in dealing with such issues and can advise you on the interest you have in a property and what options are available to you, either as an individual trying to establish an interest or one trying to prove that they are the only individual with an equitable interest in that property.

If there are children of the family, and their primary carer has a lower income or fewer capital assets, then it may be possible to make an application under a law called Schedule 1 of the Children Act. Such an application is to ensure that there is support for the children for their minority. This may be in providing a lump sum or property to live in. Such an application may be made by a married or un-married individual, although they tend to be made by an unmarried parent as married parents often resolve finances by making a financial or ‘ancillary’ relief application. Full instructions will be received from the client before advising the client in relation to the likely outcome.

Pre and Post-Nuptial Agreements

Pre-nuptial agreements can be entered into before the parties marry. A pre-civil partnership agreement can be drawn up before a civil partnership. Some couples choose to enter into a post-nuptial agreement which is drawn up during the course of the marriage. The purpose of the agreement is to have a document drawn up where the parties agree how their financial wealth should be divided in the event of a relationship break down. The law governing pre-nuptial and pre-civil agreements has evolved considerably in recent years with a recent case of Radmacher v Granatino 2010, setting out a number of factors that the court will consider in the event that there was a dispute about the agreement. Pre-nuptial and pre-civil agreements can be highly influential in particular where there has not been a significant change in the parties’ circumstances and the agreement was entered into fairly with both parties providing full disclosure of their assets, property and income and receiving independent legal advice. It is recommended that pre-nuptial or pre-civil partnership agreements do not deal with financial provisions for children since they should not prejudice the financial provisions to be made for children on divorce. The Law Commission is currently considering the status of pre-nuptial agreements under English Law.

If you wish to discuss any of the issues mentioned above then please contact our Family Law Team who will be able to discuss matters further.