Finances

Divorce and Family Law

When a marriage breaks down there has to be a distribution of income and assets. This can be more complex where children are involved.

This guide is to give you an overview of what can be involved, what is required from you and how and why decisions are made.

The decisions you have to make are based upon the following processes:-

  • Information gathering
  • Advice we give based on the information
  • Investigating settlement or the issue of proceedings

The Powers Of The Court

It is important that you understand the options available to you before you decide on how to deal with the financial arrangements between you and your former husband/wife.

Spouses and former spouses have rights to make financial claims against each other by applying to the Court for orders for any or all of the following:

  • Maintenance (ie income payments)
  • Adjustment of property ownership (eg transfer of a house from joint ownership to the sole ownership of one spouse)
  • Lump sums (ie capital payments)
  • Pension sharing/attachment

These rights can only be brought to an end in two ways. The first and most usual way is by a Court Order. Where one or both spouses do not wish to proceed with financial claims then, provided the Court agrees that such an Order would be appropriate, an Order can be made dismissing their financial claims.

The second way is where someone obtains a divorce and then re-marries. In this situation, unless that person has already applied for the Orders for a lump sum or transfer of property which they are seeking either in the divorce Petition or by way of formal application on Form A before they re-marry, then they are caught in ‘the re-marriage trap’. The effect of this trap is that they have lost the right to make those financial claims against their former spouse.

Should the spouses decide not to obtain Court Orders dealing with financial provision and in the event that the re-marriage trap does not apply, then the claims which each of them have against the other are simply left open. This situation is unsatisfactory in that it creates a degree of uncertainty because it leaves the possibility of one spouse making a claim against the other at any time. On the other hand, where one spouse’s financial position is likely to improve substantially it may be in the other’s interest to delay a final financial settlement.

Where neither spouse wants to claim against the other it is usually better for an application to be made by consent for the respective claims of each spouse to be dismissed.

What The Court Take Into Consideration

With regard to financial arrangements between you and your spouse, the Court takes various matters into account when considering what Order should be made. The Court considers all the circumstances of the case, gives first consideration to the welfare of any children of the family under the age of 18 and, in particular, the Court has regard to the following matters, set out in S25 M.C.A 1973.

  • The income, earning capacity, property and other financial resources which each spouse has or is likely to have in the foreseeable future including, in the case of earning capacity, any increase in that capacity which it would be, in the opinion of the Court, reasonable to expect a person to take steps to acquire.
  • The financial needs, obligations and responsibilities which each spouse has or is likely to have in the foreseeable future.
  • The standard of living enjoyed by the family before the breakdown of the marriage.
  • The ages of each spouse and the duration of the marriage.
  • Any physical or mental disability of each spouse.
  • The contributions which each spouse has made or is likely to make in the foreseeable future to the welfare of the family, including any contribution by looking after the home or caring for the family.
  • The conduct of each spouse, if that conduct is such that it would in the opinion of the Court be inequitable to disregard.
  • The value to each spouse of any benefit which one spouse because of the divorce will lose the chance of acquiring (most usually pension provision).

The aim of the court is to achieve fairness. Often a key factor is the reasonable needs of yourself and your spouse.

In most cases, the Courts no longer have power to make orders for child maintenance except by agreement; an application to the Child Support Agency has to be made for child maintenance to be assessed.

Both you and your spouse have an absolute duty to each other and to the Court to disclose fully your financial position so that a proper financial arrangement can be made.

Information Gathering

Before any proper advice can be given we have to be sure that all relevant information about income and assets are available. The basis of the information required is in the Statement of Financial Information (Form E). The information and the documents that we require for that are:

  • Any written valuation of the matrimonial home which you have obtained in the last six months
  • Your most recent mortgage statement
  • Statement of all bank, building society and national savings account which are in credit which you hold or have an interest in including TESSA’s and ISA’s for the last 12 months
  • Any surrender value, quotation which were obtained for any life policies
  • If you are in business the last two years accounts and any other documents upon you based your valuation of your interest in that business
  • If you have a pension, the value of your pension rights. These are in a special form which we can supply
  • If you are an employee your last three payslips and your P60 for the most recently completed financial year
  • If you are self employed your accounts for the last two completed accounting years

7 things you should know about Finances after Divorce:

1. Dealing with the finances following a divorce is complex.  It is an art rather than a science.  Whilst you can agree anything a court has 5 powers and the criteria for exercising those powers are set out in section 25 of the Matrimonial Causes Act 1973.  

2. If a divorce is intractable and goes through all the stages that it can do, costs even for a modest divorce can be £20,000 or more but there are ways of financing this.  The days when a solicitor could afford to carry a divorce until the property was sold are unfortunately long gone.  Solicitors cannot afford to tie up work in progress to the extent that some divorces require and will require you to keep up to date with costs.  With the exception of some city firms, the hourly rates charged by family lawyers are reasonably modest.  It is simply the length of time involved preparing documents and going to court that is so expensive.    

3. Whilst most of the reported cases deal with ‘big money’ i.e. cases where there is more than sufficient money to house both parties – usually considered to be £4 million plus.  Most cases are ‘needs’ cases where there is either just enough or not quite enough to re-house both parties and to provide sufficient income for both to live on.   

4. You do not have to go through court proceedings.  The government are trying to promote mediation although apparently 92% of divorcing couples are unwilling to undertake this.  At KBL, our family solicitors are ‘collaborative’ lawyers who have undertaken training to try and resolve issues between parties without recourse to going to court.  Typically after both parties disclose all their financial and other details there will be a four-way meeting attended by both parties and their solicitors.  The aim is to facilitate the parties coming to an agreement although as solicitors we will give advice and will not let one party take advantage of the other.    

5. When your solicitor asks for information – typically so that they can complete a financial statement – provide the information in a timely and efficient fashion.  An awful lot of time and money is wasted in trying to chase up a party who is not providing the information requested, or in the format requested.    

6. Pensions – dealing with pensions is a minefield. Do not go to court and allow a Judge to make a decision if you can possibly avoid it.  Despite there being precedents and parameters in which orders are made, each Judge will have personal opinion of what the result should be.  There are also regional differences.  In London for instance it is usual for a court to make an order for spousal maintenance during joint lives i.e. until the death or remarriage (usually) the wife.  In the larger cities this is unlikely and there is more likely to be a ‘term’ of spousal maintenance probably until the children reaches a certain age.  In the regional courts it is almost unheard of to give joint life maintenance and in some courts even ‘term’ maintenance is unusual.

7. It is better to agree a result with which you can live rather than risk a Judge making an order with which you cannot live.  Appeals are expensive and usually unsuccessful.

You can share this article in the following networks: