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Money, property, and finances

The law sets out basic factors that have to be taken into account in deciding how to deal with financial cases on divorce. First consideration has to be given to the welfare, while a minor, of any child of the family who is under 18.  After that, the law looks at:

  • the financial resources of the couple;
  • their financial needs;
  • their standard of living;
  • any disability;
  • their contributions to the welfare of the family (including any contribution by looking after the home or caring for the family);
  • conduct (but only if relevant to finances, e.g. heavy gambling leading to debts); and
  • the value of any benefit (for example, pension rights) which might be lost because of divorce.

When looking at any child of the family, the court has to consider:

  • the financial needs of the child;
  • the financial resources of the child;
  • any disability the child may have;
  • how the child is being educated or trained;
  • the financial circumstances of the parents, and any disability they might have

The court also has to apply the concepts of equality, fairness, marriage as a partnership, and personal autonomy, in deciding financial matters.  The division of assets has to take into account the different kinds of matrimonial and non-matrimonial property – it might be wrong to award all the more liquid assets to one party, leaving the other party with assets that cannot easily be converted into cash.

There can be a number of more complicated considerations, such as when one party has made a “special contribution” to the family finances, directly or indirectly; and assets brought into the marriage and after-acquired wealth (e.g. through inheritance).

Child Support

The courts have a potentially limited role in deciding child support and maintenance; and parents can agree on child maintenance and not use the Child Support Agency (CSA) for a child support calculation. In any case, the CSA cannot deal with “top up” maintenance for children or school fees, and that would have to be agreed separately. 

Finances - what Lucy and Joe can do

Lucy and Joe have two dependent children, have been married for a long time, and appear to have income and assets that cover more than their basic needs. Joe may have contributed more in pure money terms, but Lucy’s contribution in terms of looking after the children counts as well, so they will probably be seen as having made equal contributions to the family.  These would be important factors in deciding what would be a fair financial settlement.

If Lucy and Joe are unsure about divorce, they can consider a formal separation agreement, to help manage financial matters until they decide on the future of the marriage.  A separation agreement should be tailored to the circumstances of the case, and could be the basis for an eventual agreed court order dealing with financial matters on divorce. 

There are legal consequences to entering into a separation agreement, so specialist legal advice should always be taken. It would be possible, for instance, to use dispute resolution methods to agree on the terms of a separation agreement, then use specialist family solicitors to draft the agreement.

If Lucy and Joe decide to divorce, they must deal with finances.  The case of Wyatt v Vince, in the news in March 2015, shows how important it is to ensure that all financial matters are finalised when a couple divorces, with a court order. Otherwise there could be future financial claims after the divorce. This would be important for Joe and for Lucy, both of whose earnings might increase in the future.  The way to avoid such uncertainty is to settle all potential financial claims at the time of a divorce.

The first step in trying to resolve financial matters is full and frank disclosure. That means that Lucy and Joe would both have to provide details of their income, assets, and pension rights, as well as all their outgoings.  Without that, it is impossible to know that any agreement is fair and reasonable.

They may each feel confident that they know all about each other’s finances, in which case disclosure should be straightforward.  If not, or if they do not trust each other, this can be a protracted and expensive exercise.  If need be, the court can order disclosure, including from third parties (such as an employer, regarding income) – adding to costs, and possibly damaging the credibility of one or both of the parties.

For Lucy and Joe, there should be enough to provide for them and their children, if they make are able to agree early on and make the best use of their available income and assets to provide for the future.

They may decide, for instance, to sell the family home and the Tuscan property, and use the proceeds to re-house themselves separately (possibly in less expensive accommodation).  That would necessarily mean some upheaval for the children, but that could be eased by ensuring they can still attend the same schools (in which case, Lucy and Joe would need to ensure they could still pay the school fees, as well as plan for the children’s university education).

Lucy is earning much less than Joe. However, she may have unrealised earning capacity. She might be expected to increase her earnings, for instance by looking for full time, salaried employment, if not immediately then after a (short) period of adjustment. She cannot expect indefinitely to receive maintenance for herself from Joe, as the courts have made clear.

There might need to be some adjustment of the couple’s portfolios of savings and investments, to achieve a balance in terms of how much they each have, and the mix of liquid and less liquid assets.  

They may also need to look at their pension rights, also to ensure any disparities are eliminated.  That is a complex area of law. Lucy’s and Joe’s pension rights would have to be valued, and a careful analysis made of the best way of achieving a fair result.

The basic truth is that two households cannot live as cheaply as one. Both Lucy and Joe would have to be realistic about any settlement, and try to avoid costly court proceedings.

Dispute Resolution

Mediation might help them agree on financial matters.

Mediation can only work if it is fair and there is equal bargaining power.  For Joe and Lucy, there may be issues about their unequal earnings. Lucy might feel she has unequal bargaining power, as a result.  A MIAM can be used look at whether mediation could go ahead.

Subject to that, 3 – 4 sessions are usually required to reach agreement on finances (and up to 5 sessions if mediation is dealing with children and finances – “all issues” mediation).

Another form of dispute resolution, collaborative law, can help. Collaboratively trained lawyers work with clients, through one or more face to face meetings, to reach agreement, with legal advice given in private before and after meetings.  The clients and their collaborative lawyers sign an agreement that commits them to trying to resolve the issues without going to court, and prevents the lawyers from representing the clients in court if the collaborative process breaks down. That means everyone is committed to finding the best solutions by agreement, rather than through court proceedings (although if the process breaks down, it is still possible to go to court, but with different lawyers).

As with mediation, collaborative law is a way of reaching agreement without the court imposing a solution, so a degree of autonomy and control is retained.

Arbitration is yet another form of dispute resolution that might help, and avoid going to court. It can be speedy, and flexible, and it offers confidentiality, as well the option of choosing an arbitrator with specialist experience (for instance if a family has particularly complex or unusual finances). An arbitrator will gather all the relevant evidence and consider what each party wants to happen, then decide on an “award”, rather like a judge.  The couple have to agree to arbitrate, but once they decide that, both the process and the award are binding. That means less control of the process, but in the right circumstances this can be a good option.

More traditional negotiation through specialist family solicitors can also resolve disputes without contested court proceedings. Specialist family lawyers are trained to deal with family financial disputes in a calm and cost effective way, to achieve fair results that the whole family can live with.

 

How TV Edwards can help

We can help with expert advice and representation:

 

With regard to fees, we work to individuals’ budgets, and can offer competitive fixed fees, as well as hourly rates, depending on what works best for our clients. We also offer legal aid where it is still available, and when individuals qualify on their means, and the merits of their case.

 

Contact us on 020 3440 8000, or e-mail David Emmerson at david.emmerson@tvedwards.com to find out more.