Divorce and Finances
Reaching a Financial Settlement
When a relationship breaks down, there are usually assets that will need to be divided. As experienced specialists in this area, we are able to deal with financial disputes ranging from straight forward cases (for example, whereby the main asset is the former matrimonial home) to higher value more complex matters involving companies, trusts and investments held in this jurisdiction and abroad.
Our specialist team of family lawyers have a wealth of experience in dealing with complex cases such as those where a husband or wife is deliberately trying to conceal or dispose of assets and detailed investigations are required to trace those assets. We also have extensive experience in dealing with cases where injunctions are needed to freeze assets.
We routinely represent or oppose business owners, entrepreneurs and city, medical and teaching professionals. We often represent clients with large pensions and investment portfolios and who run small to large sized companies. We are experienced in dealing with spouses who try to hide assets or income in their company or elsewhere who are trying to suppress the value of their business/assets.
We work closely with a select group of barrister’s expert in financial remedy applications and we will select a barrister who we consider will work in harmony with you. We also work closely with pensions experts called pension actuaries as well as experts in financial and taxation issues, such as specialist accountants. If you own properties in addition to the family home, you or your company owns the business premises or there are shares to be divided you are likely to need expert advice from an accountant about the capital gains tax implications of any financial settlement. In more complex business cases the services of a forensic accountant may be required.
We will always attempt to keep costs regarding financial disputes to a minimum obtaining, where possible, a speedy conclusion and settlement through negotiations. When that is not possible, for example, if one party is making unrealistic demands or where one party is attempting to hide assets, we will ensure you receive high quality representation in Court proceedings.
What financial orders can the court make on divorce?
The Court has a range of powers available to make financial orders.
Maintenance pending suit – where one party pays to their spouse a sum of money on a regular basis until financial matters regarding the divorce have been finalised;
Periodical payments – where one party is ordered to pay (spousal) maintenance to the other on a regular defined basis;
Secured periodical payments – where periodical payments are secured upon a certain asset so that if the party paying maintenance defaults, the asset would be at risk;
Lump sums – where one party pays to their spouse a lump sum of money on or before a set date;
Property adjustment orders – where ownership of an asset is transferred from one spouse to another or where sale of a property is ordered or where a property is settled between spouses;
Child maintenance – where the court orders one party to pay the other a sum of money for the benefit of the children. Please note that the courts powers to make child maintenance orders are now limited. Child maintenance is now dealt with by the Child Maintenance Service.
Pensions – The court has the power to make pension sharing orders where a percentage of the pension is ordered to be transferred from the pension scheme of the spouse to the chosen pension scheme of the other spouse or a pension earmarking order where the court orders a proportion of the pension in payment to be paid to the other spouse. A pension sharing order can share a pension before retirement. An earmarking order can only share a pension following retirement. On retirement you can elect to up to 25% of your pension fund tax free and to take the rest as income until you die. Under an earmarking order the court can order a sharing of the lump sum as well as the income.
Clean break – where a spouse is prevented from making further financial claims against the other.
Unfortunately, there is no set formula to decide how financial matters should be decided. The courts will consider what is fair and take into account a number of factors laid down by legislation. The first consideration will be the welfare of the children and other factors the courts will take into account (called the “section 25 factors”) are as follows:
1. 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 courts, reasonable to expect a person to take steps to acquire.
2. The financial needs, obligations and responsibilities which each spouse has or is likely to have in the foreseeable future.
3. The standard of living enjoyed by the family before the breakdown of the marriage.
4. The ages of each spouse and the length of the marriage.
5. Any physical or mental disability of each spouse.
6. 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.
7. The conduct of each spouse, if that conduct is such that it would in the opinion of the courts be inequitable to disregard.
8. 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).
Both parties have an absolute duty to each other and to the courts to fully disclose their financial positions.
What is the procedure for a financial settlement?
Going to court is very much seen as the last resort and every effort will be made to settle your case away from Court. However, there are cases where parties cannot agree on a settlement and the assistance of the court is needed.
If the case goes all the way to a final hearing it will involve a three hearing process. Final hearings are rare at Townsend’s because we have a track record for settling disputes through negotiation and determination.
At Townsend’s, before we apply to court, we will encourage you to attempt to settle your case by voluntarily exchanging financial information and then trying to negotiate. If you are able to agree a settlement without going to court, we can incorporate your settlement into an agreement called a “consent order”. This will not only set out what has been agreed and the timing of the implementation of the agreement, it will also provide for a dismissal of your financial claims against each other called a “clean break” which means that once the order has been approved by the court, it will be legally binding and neither you or your ex-spouse can make a financial claim against each other in the future.
The grounds for re-opening a financial settlement are limited and once the door to a claim is closed it remains shut. It’s really important that before you commit to a financial settlement you are completely comfortable with it because there is no turning back.
The only claims that can remain open are maintenance or lump sum orders payable by instalments. Increasingly these days the payment of spousal maintenance is time limited and not payable over the lifetime of a party unless the financial circumstances demand it. Child maintenance payments set out in a Court Order are only legally binding for a period of one year, following which the Child Maintenance Service reclaims jurisdiction.
There is no set formula that applies to financial settlements. As explained above, there are factors that a Court takes into account. These factors are worded in a way to allow judicial discretion in their interpretation the purpose of which is to achieve a fair outcome in each case that comes before a Court. Every case is unique with its own special set of financial circumstances. It can be dangerous to expect the same outcome as a friend or family member who has been through a divorce process. It rarely works that way.
It’s important not to fix your expectations on settlement because this can lead to disappointment. In most cases there has to be some give and take in negotiating a financial settlement. Our experience has taught us that clients come to terms more readily with financial settlements that are agreed through negotiation rather than imposed by the courts.
What if you can’t reach a settlement?
If you can’t reach a financial settlement through solicitors you can make an application for a financial remedy order. Before making the application, you will need to attend a mediation information assessment meeting or “MIAM” for short. This is explained more fully further on.
Once your application has been issued, your case will be listed for what is called a First Directions Appointment (“FDA” for short) before which both parties will file with the court and exchange with each other a financial statement called a “form E”. This is a comprehensive document and if completed properly should limit further enquiry.
In advance of the first hearing parties are allowed to raise a questionnaire setting out the further information that they need from each other before they can properly negotiate a settlement. At the FDA, if there any questions in dispute the Judge will decide which questions will and will not be answered and direct when answers should be provided.
The FDA will also be used to decide on issues of valuation, joining third parties into the proceedings such as family members who have an interest in a matrimonial asset or property and taxation issues.
The next hearing is the Financial Dispute Resolution hearing (“FDR” for short). Sometimes the court will allow the FDA to be used as an FDR if the parties and the court consider that there is sufficient disclosure to proceed and the parties are agreed on the issues they need the court to help them with. In advance of the FDR, the questionnaires need to be answered and values of assets need to be agreed. Both parties will have provided the FDR Judge with a summary of their settlement position and the Judge will give an indication of how the court at trial would judge the case. This Judge is excused from hearing the case further because he or she knows the party’s settlement positions. The purpose of the indication from the Judge is to encourage the parties to settle at the FDR stage or soon after to avoid the enormous expense of a final hearing. Most cases will settle around the FDR stage provided the party’s expectations have been properly managed, they are not fixed on an outcome and they are prepared to compromise.
If a settlement cannot be reached the proceedings will be timetabled to a final hearing before which both parties will be directed to file statements. The decision of the Judge will be final and binding unless there are grounds to appeal a decision. Appeals are rare.
At every stage of the proceedings the court must be informed of the costs incurred to that stage. This is to encourage parties to reflect on what they are spending in legal fees, to take a step back and to think about whether it is financially worthwhile continuing to litigate.
Can I claim my costs back?
The general rule is that the Court will not make a costs order, that one party pay the costs of the other, unless that is justified by the way one of the parties has behaved within the proceedings. Costs Orders are extremely rare in family proceedings.
What is enforcement?
Enforcement is a means by which a party can take the other party back to court if they have not honoured a financial settlement or obeyed a final order and the court’s assistance is required, for example to make a party pay maintenance or transfer over their share of the family home or shares in a business. The court has power to sign documents on behalf of a party who is refusing to sign them, to force monthly payments to be deducted at source in the same way as PAYE tax, to send bailiffs or High Court Enforcement officers to seize assets or to impose sanctions such as a fine or committal to prison in extreme circumstances.
Obtain Expert Legal Advice
Dealing with finances will obviously have an impact upon a client’s future financial security. It is therefore essential that you obtain expert legal advice in this area. If you wish to speak to one of our specialist solicitors confidentially, please telephone us on 01992 892214 to make an appointment.
What is mediation?
Mediation is the process by which a separated couple can meet with a professionally trained mediator to try to reach agreement on their financial arrangements and also arrangements around their children. Meetings take place without the involvement of solicitors. The aim is to keep the law out of discussions and to encourage a separated couple to reach agreement by being open and honest with each other about what they want for themselves and their children at the end of their relationship. Mediation is about helping a separated couple come to their own agreement over financial, familial and practical matters. At the end of mediation, the mediator will prepare what is called a “memorandum of understanding” which can be taken to a solicitor for an agreement to be drawn up. At any time during the mediation process you can come and see a solicitor if it helps you to work through what you have been discussing in mediation.
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