What is the best way to deal with financial issues?
It is almost always best to negotiate an agreement regarding matrimonial assets on divorce. This avoids contested proceedings at Court and the associated extra stress, uncertainty and costs.
However, only the Court can dismiss claims between spouses arising from a marriage. Consequently, a Court Order is required to achieve finality. A negotiated settlement should be turned into an agreed form of Order (a “Consent Order”) for approval by the Court.
The law is the same whether you and your spouse are negotiating or a contested application is issued at Court, so the guidance as to the law in the following questions applies in both situations.
What is the best way to negotiate?
The best way to negotiate will depend on the needs and wishes of you and your spouse. There are several ways, including the following:
- Resolving issues between yourselves.
- Negotiating through solicitors, whether in correspondence or at a “round table” meeting.
- Mediation: meeting with a neutral mediator who will help you and your spouse in reaching agreement.
- Collaborative law: a series of “four way” meetings at which you, your spouse and your respective solicitors work together towards agreement.
Whichever you and your spouse choose, it is important for both of you to have legal advice throughout the process so that your negotiations are informed and sometimes difficult legal issues are dealt with in a way that will lead to the success of your agreement both in the short and long terms.
We can advise as to suitable ways to negotiate for your circumstances – not all of the above processes will be suitable for every divorcing couple.
Will the Court approve any agreement that my spouse and I reach?
If a settlement of financial matters is agreed it is usually endorsed by the Court unless the agreement seems not to put the interests of any children first or is unduly favourable towards the financially stronger party.
The court will sometimes ask for explanation if it thinks that the drafting of the proposed Consent Order or the intentions of the parties are unclear.
Are contested Court proceedings regarding finances ever necessary?
In a few cases issuing proceedings at Court becomes a regrettable necessity. We will advise you if this applies to your case, but this is a step to be avoided if at all possible.
Even if an application is issued, the Court will encourage negotiations and agreement. We will endeavour to apply this in our approach to your case.
Can I agree the division of property and other financial arrangements now, but get divorced later?
Yes, you can negotiate a separation agreement now and, as part of this, agree that you and your spouse will divorce at a later date – usually it is agreed that a divorce petition will be issued based on your separation for two years.
A separation agreement needs to be agreed after both spouses have fully and frankly disclosed their financial positions to each other, including all assets and income. It has to put into writing as a deed, be fair in all the circumstances of your case and have been entered into without any pressure being exerted by one spouse against another.
Both spouses should have independent legal advice while negotiating and certainly before signing the agreement – or at least have the opportunity to take such advice.
If any of the above factors are missing, the Court may not be willing to enforce the agreement.
My spouse may try to put his or her assets beyond my reach – what can I do?
If the property in which you and your spouse live (or lived) together is owned by your spouse alone, your Home Rights can be registered against it – this protects your interest by warning off any person that it might be sold or transferred to.
If there is real risk that your spouse will try to put any other property beyond the reach of the Court, for example by moving ownership overseas or transferring it to someone else, the Court can make Orders to prevent this. This is one of the rare situations in which it might be necessary to apply to the Court for orders before trying to negotiate a settlement.
Do I have to tell my spouse about all of my assets and income?
Yes. It is absolutely essential that both you and your spouse fully and frankly disclose your financial situations to each other and to the Court. Without this, the Court will not make an Order. This can be done on a voluntary basis without issuing proceedings and we can advise you on how to do so.
Which assets and income are available for division?
Usually, all assets including pensions, whether owned jointly or individually by the divorcing spouses, are regarded as matrimonial assets and are available for division as is all income received by the spouses – but that doesn’t mean that it is always appropriate for the settlement and Court Order to divide all the assets.
An exception may apply if either spouse owned a particular asset prior to marriage (or co-habitation), or if they inherited or were gifted it, especially if the marriage was of short duration. These may not be regarded as matrimonial assets but will usually still be taken into account when considering the overall resources available to their owner.
What orders can the Court make?
Orders can be made relating to any matrimonial asset or income, including:
- The transfer of assets from one spouse to the other.
- That one spouse pays the other a lump sum.
- That one spouse pays regular maintenance (“periodical payments”) to the other for his or her benefit, possibly by making a capital sum available to produce an income.
- The split of pension funds or payments between spouses.
- In certain circumstances (such as payment of school fees), for regular payments or capital provision for the benefit of children – but child support is more often dealt with by agreement or via the Child Support Agency (see below).
Collectively, these Orders are known as “financial orders”.
Do we have to split our assets or income down the middle?
Considering equal division of assets and income is only a starting point at best. In most cases there are circumstances demanding a different outcome. Equal division will not be appropriate if it will not give sufficient resources to meet the needs, especially the housing needs, of children.
What do we have to take into account when negotiating?
Negotiations should take place in light of the factors the Court must consider when making an order. The Courts have wide discretion when making Orders, so it is possible to be creative when negotiating and consider more than one possible option – there is rarely a “right” and obvious answer. The aim is to arrive at a fair outcome, but there are usually different views as to what is fair.
First, consideration goes to the welfare until the age of 18 of any child of the family. Then, the following factors are taken into account:
- The income, earning capacity, property and other financial resources that each of the parties to the marriage has or is likely to have in the foreseeable future, including in the case of earning capacity any increase in that capacity that it would in the opinion of the Court be reasonable to expect a party to the marriage to take steps to acquire.
- The financial needs, obligations and responsibilities which each of the parties to the marriage 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 age of each party and the duration of the marriage.
- Any physical or mental disability of either of the parties to the marriage.
- The contributions which each of the parties has made or is likely in the foreseeable future to make to the welfare of the family, including any contribution by looking after the home or caring for the family.
- The conduct of each of the parties if that conduct is such that it would in the opinion of the Court be inequitable to disregard it.
- The value to each of the parties to the marriage of any benefit (for example a pension), a party will lose by reason of the dissolution or annulment of the marriage.
I think that my spouse is to blame for the breakdown of our marriage. Can this be taken into account?
The conduct of your spouse will only rarely and in the most extreme circumstances be a factor in deciding how to divide matrimonial finances.
Does the person who issued the divorce petition have any financial advantage?
There is no advantage in being the person who initiates divorce proceedings.
I stayed at home throughout the marriage to look after our children, while my spouse earned all or most of the money coming into the household. Is this taken into account?
Yes it is. The law says that non-financial contributions to a marriage count for as much as financial ones and should be treated equally.
I gave up my career to look after our children – can I be compensated for this?
It is possible to be compensated if you have given up a career to make a non-financial contribution to your family life, but it is only likely that this will be taken into account if there are sufficient resources left after meeting the needs of the children of your family and both spouses.
Am I entitled to maintenance from my spouse?
This depends on the circumstance of the case. If your children and you can be provided for from the capital available, maintenance may not be appropriate, but in many cases this is not possible and maintenance will have to be paid. Even then, continuing payment of maintenance may be the only way to fairly divide the financial resources available between spouses.
There has to be money available from which maintenance can be paid. There is no point in agreeing to or the Court Ordering the payment of maintenance if the resources are not there.
The law provides that spouses should take reasonable steps to maximise the resources available from their own earnings. If you are looking after children maintenance may only be appropriate until they are old enough for you to return to full time work. Maintenance might be paid to assist you to retrain for a new job.
Can I make claim against my spouse’s pension?
It is possible to obtain a Pension Sharing Order to split a pension fund into two. Other Orders are available to deal with pensions, but Pension Sharing is by far the most common.
The law relating to pensions and the calculation of their value so that an Order can be made is very complex, so detailed legal advice, possibly also involving a pensions consultant, is essential if any division of pensions is envisaged.
The law only allows pension scheme administrators to divide pension funds if there is a Court Order in place. Without an order you will be left relying on the goodwill of your spouse when his or her pension comes into payment, perhaps many years after your divorce or separation and in very different financial circumstances.
Is it possible for us to go our own ways without further financial obligations to each other?
A “clean break” Order can dismiss all claims between divorcing spouses, with no payment of maintenance for the benefit of either husband or wife. The Court is obliged to consider whether a clean break is appropriate.
If there are children under the age of 18 it is unlikely that a clean break will be ordered to take effect immediately. Instead, a deferred clean break can come into effect when the youngest child reaches 18. This will keep alive a claim for maintenance for the spouse caring for the children.
It is not possible to end a parent’s financial obligation towards their children aged under 18. Clean breaks can only take effect between husband and wife.
Can we agree the payment of child support? Do we have to go to the Child Support Agency (CSA)?
Most separating parents agree child support payment and the CSA does not have to become involved. Since the CSA was set up the Courts only have limited powers to make Orders for child support.
If an agreement is reached for payment of maintenance to support children it only bars the parent with whom the children are living from applying to the CSA for 12 months. There are various ways to avoid this problem and give both parents certainty as to how much child support will be paid, but it is important to be careful. Each case is unique and your arrangements for child support should suit your particular circumstances.
Some circumstances fall outside the jurisdiction of the CSA and a Court Order will be necessary:
- If a child is over 16, or over 19 and in full-time education.
- If a child or either of his or her parents is habitually resident outside the UK (even then, there are a few circumstances in which the CSA has jurisdiction).
- If payment of school fees or expenses associated with training or education is required.
- If a child has a disability and requires additional maintenance.
- If the maximum child support available under the CSA system has been reached.
- If an Order is needed for the person with care of the children to pay maintenance to their spouse for the benefit of the children.
If an Order is made when any of these circumstances apply there is no 12 months time limit on its enforceability.
The maximum child support available under the CSA system will not be reached unless the income after tax, national insurance and pension contributions of the parent who lives apart from the children exceeds £104,000 p.a.
You may find the Child Maintenance Options website (www.cmoptions.org) helpful.
If you would like to know more please contact Greg Randall at [email protected] or on 020 8670 6141.