The Finances of Splitting-up
The sorting out of financial matters during and after a divorce is referred to as ‘ancillary relief‘. This is separate from financial issues relating to children, which are dealt with by the Child Support Agency.
By being married, a person does not automatically acquire an interest in their spouse’s assets or vice versa.
Neither do we have a codified system for the division of assets and income on divorce as some jurisdictions do. The system in England and Wales is discretionary.
The law in England and Wales sets out certain criteria which must be taken into account when formulating a financial settlement in divorce. How those criteria are applied varies according to the circumstances of each case.
The court role is to balance the criteria in assessing the claims of each spouse.
Most of the law in this area is governed by the Matrimonial Causes Act 1973 (MCA), which sets out the factors that the courts must take into account in deciding what is fair.
Although this is a complex area of law, in summary the Act directs the courts to look at the following issues before deciding:
- the welfare of a child of the marriage;
- the income, earning capacity, property and resources of each party to the marriage;
- the financial needs, obligations and responsibilities of each person;
- the standard of living enjoyed by the family before the breakdown of the marriage;
- the age of each person and the duration of the marriage;
- any physical or mental disability;
- the contribution made by each person to the welfare of the family, including looking after the home and bringing up children;
- the conduct of each person, but usually only if it is so bad it would be unfair to ignore it; and
- any serious disadvantage to either person which would be caused by ending the marriage.
In cases where the family’s resources and assets do not satisfy both spouses needs, then the needs of the economically weaker spouse (often the parent with whom the children are going to live) is usually given priority in terms of the allocation of resources.
This is what is called a ‘needs ‘approach. However, in the case of long marriages where there is a surplus of assets, the courts have recently moved away from the ‘needs‘ approach towards an equal division based on contribution.
This approach was set out in a case called ‘White’ and has since been gradually developed further in more recent cases.
We will always seek to avoid the uncertainty, emotional stress and costs of a court hearing, for you.
In general, most people prefer to have solicitors just to advise them on an amicable settlement and a fair division and, to carry out the negotiations on their behalf, therefore avoiding confrontation and hassle.
Very few cases end up being argued over in front of a judge.
However it is often the case that court proceedings will be issued anyway, so as to pressure parties to reach a quick settlement and also to take advantage of the rigorous court procedure.
Even where couples agree on the allocation of finances on divorce it is still often necessary to obtain the courts approval for the agreement and embody the agreement in an official document, often called a ‘Consent Order‘.
What can the court do
The courts powers to make financial orders upon divorce are considerable and include, but are not limited to:
- A Periodical Payments Order (often called maintenance payments or alimony)
- A Secured Provision Order (similar to maintenance but secured against an asset such as the former matrimonial home)
- A Lump Sum Order (essentially a large cash payment)
- A Transfer of Property Order (where a property is transferred from one or both parties to a single party on divorce)
- A Pension Attachment Order or a Pension Sharing Order
The court has the power to make a combination of these Orders where necessary.
What happens if my case does go to court
Either party can start the process at any time after the divorce petition has been filed by filing a notice of application seeking ancillary relief.
You can do this at any stage before you re-marry, but the proper time to do this is during the divorce. When the court receives the notice, it will fix a First Directions Appointment (FDA) for 12 to 16 weeks after the issuing of an application.
Before the FDA, both parties will have to exchange their financial information, in the format of a sworn statement of means known as a ‘Form E‘.
At any stage either party can propose a settlement, but this has to be done cautiously and only after full financial disclosure has been made.
If an agreement can be reached at an early stage this will avoid the need for attendance at a court trial and the agreement can be protected by an order of the court, to which both spouses agree, known as a consent order.
If the matter does not progress at the FDA, the matter is listed for a further appointment known as a “Financial Dispute Resolution” hearing (FDR) and a judge takes an active part in helping the parties to resolve a settlement.
If an agreement is still not reached then the matter is listed for a final hearing and the trial judge will make a decision on how the financial circumstances of the case should be dealt with.
Clean Break Orders
The majority of divorce settlements comprise three main elements from the above list comprising periodical payments, capital orders (lump sum and/or transfer of property) and long term security such as pension attachment or pension sharing orders. In some cases, all three elements are bound together in a one off settlement.
This is commonly referred to as a ‘clean break‘. Clean break settlements are normally only appropriate where there a short, childless marriage involving a young couple or where the couple’s resources exceed their needs.
Where there are children or where the parties age is higher it is often that clean break orders are not appropriate, because it will naturally be more difficult for the parties to move on with their lives and as such one of the parties may be more dependant on the other.
Mediation services can also help couples reach agreement on key issues, although a solicitor will still be needed to advise on the implications of any agreement and convert it into an order recognised and enforceable by the courts.
The starting point must always be a full and honest disclosure of each person’s personal assets, to ensure that everything is included in the ‘matrimonial pot‘ to be shared.
Financial arrangements can be settled through a ‘clean break‘, which ends the financial obligations between the couple if this is appropriate.
Some form of maintenance payments may, however, be more suitable. These can be ongoing or for a fixed period of time. Even where there is a ‘clean break‘ agreement maintenance will still be payable for any dependent children.
Where a family’s main asset is the family home and there are children, the first consideration will always be to make sure that a suitable home is maintained for them. In some cases the family home can be sold and the proceeds divided between the couple; this is not always done in equal shares.
The property could also be transferred to one spouse with the other receiving a greater share of other assets. These days it is common for married couples to own several properties and not always even in the same country.
Another approach allows one person to stay in the house with the other keeping an interest in the property, receiving their share when it is sold or when the children grow up and finish their studies.
To ascertain your position in regard to ‘ancillary relief‘, we will need to obtain full details of all your assets, as well as those held or owned by your spouse.
This is an intricate process and requires full and frank honesty on both sides. Where your spouse is trying to avoid having to pay you your fair share or anything at all, more drastic legal measures may need to be taken. Each scenario must be looked at individually.
For more details about Clean Break Orders read on..
Legal Aid in regard to the financial aspects of divorce is effectively a loan. Legal Aid will pay for a lawyer to do certain types of work only and afterwards the assisted person will be expected to repay the loan.
We do not accept Legal Aid work, however we do provide our clients with a superbly experienced private solicitor, with extensive knowledge of this complex area of law, without the constraints of Legal Aid. This way we cut out the middle man and hand the reins to you, the client.