Resolving financial issues arising from a marriage is often the most difficult part of dealing with a divorce. Initiating the divorce process is only the first step and whilst that is often an emotionally painful step, it is inevitable that discussions around the finances need to happen. Sadly, it can often be contentious and open a chasm of mistrust and misunderstandings.
There are often many myths surrounding how assets are divided; for example, a party that has sacrificed their career for their children may feel scared that they will walk away from the marriage with nothing. Conversely, the financial provider for the family may feel that they have to give up all of their assets to provide for the family. In reality, the solution is usually met in the middle.
The most amicable way of dealing with the finances is for the parties to exchange full and frank financial disclosure. Each party will be expected to disclose their finances covering the last year including their bank statements, payslips, mortgage statements, details of any debts, tax returns if they are self-employed and pension documents, to name but a few. The disclosure process is extremely effective especially when both parties fully cooperate and are honest with their finances. Problems start to arise when one party is not being entirely honest or hide their assets from the other party. This will only seek to raise tensions, hinder a settlement and raise legal costs.
Once the information is exchanged, negotiations can begin and if an agreement is reached, it can be incorporated into a consent order. This is a legally binding document and does not require Court attendance. If an agreement is not reached, it may be necessary to initiate court proceedings, which is a lengthy, costly and stressful process. Sometimes, however, one party is being unreasonable, or negotiations have reached an impasse and it is necessary to involve the Court.”
The starting point for any division of assets is a 50:50 split but this is adjusted according to each parties’ needs with first consideration given to any children of the family. Needs are two-fold and cover capital needs (i.e. a home) and income needs (i.e. a sufficient income to meet outgoings). It is governed by section 25 of the Matrimonial Causes Act 1973 and supported by case law and the factors are as follows:
(a) the income, earning capacity, property and other financial resources which 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 which it would in the opinion of the court be reasonable to expect a party to the marriage to take steps to acquire;
(b) the financial needs, obligations and responsibilities which each of the parties to the marriage has or is likely to have in the foreseeable future;
(c) the standard of living enjoyed by the family before the breakdown of the marriage;
(d) the age of each party to the marriage and the duration of the marriage;
(e) any physical or mental disability of either of the parties to the marriage;
(f) 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;
(g) 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;
Each of these factors carry weight and are used to determine a fair settlement for the parties. In cases where there are young children who are being predominately cared for by one parent who is on low income, there is a presumption that they would need a higher share of the matrimonial assets to accommodate themselves and the children. They might also require spousal maintenance for a fixed period until they are in a position to be financially independent.
The overriding issue is one of fairness and although the paying party might deem it “unfair”, difficult decisions do need to be made in best interests of the family and children. In the landmark decision of White v White , Lord Hoffman stated that:
“…there is one principle of universal application which can be stated with confidence. In seeking to achieve a fair outcome, there is no place for discrimination between husband and wife and their respective roles. Typically, a husband and wife share the activities of earning money, running their home and caring for their children. Traditionally, the husband earned the money, and the wife looked after the home and the children. This traditional division of labour is no longer the order of the day. Frequently both parents work. Sometimes it is the wife who is the money-earner, and the husband runs the home and cares for the children during the day. But whatever the division of labour chosen by the husband and wife, or forced upon them by circumstances, fairness requires that this should not prejudice or advantage either party when considering paragraph (f) [of section 25(2)], relating to the parties’ contributions … If, in their different spheres, each contributed equally to the family, then in principle it matters not which of them earned the money and built up the assets. There should be no bias in favour of the money-earner and against the home-maker and the child-carer.”
The principle behind the judgement was one of fairness and introduced the notion that women who give up their career in order to raise the children are treated in the same way as the husband who works to provide financially for the family. The Courts have a wide discretion, which reflects the fact there is no “one size fits all” approach in financial division. Every family’s financial situation is different, but the general rule of thumb is that needs must be met.
If you or a loved one is in need of legal advice in relation to finances and divorce or any family law matter take advantage of our complimentary, no obligations consultation where you can meet with one of our Family Law experts and find out what the next best course of action for you and your family is to secure your future. Be proactive and call us today on 0800 999 4437 or email firstname.lastname@example.org and one of our friendly team will be happy to assist you.