How to sort out property and financial matters between a husband and wife on divorce or separation.
The husband or wife may have claims against each other for all or any of the following forms of financial order:-
- Maintenance (in legal terms known as “periodical payments”)
- Capital (known as “lump sums”)
- The transfer of assets – usually houses or land but also including other assets, eg, shares, life policies (known as “transfer of property” or “property adjustment” orders)
- Pensions (which are dealt with by way of pension attachment or pension sharing orders)
Claims may also be made on behalf of children of the family.
Children’s maintenance can be dealt with by the Court if it is agreed; if not, only the Child Maintenance Service (previously the Child Support Agency) has jurisdiction to deal with the issue save in certain special cases.
Usually financial and property issues are resolved by agreement. Sometimes, the husband and the wife reach an agreement between themselves. Alternatively, an agreement may be reached through mediation, collaborative law or negotiations via solicitors. It is usually necessary for financial information to be exchanged or requested before discussions or negotiations can take place.
Once an agreement is reached about the financial matters, in divorce cases, a Court Order is necessary so that the agreement becomes final and legally binding. It can be enforced by legal action at a later date. An Order is also required when the potential future financial claims by one spouse against the other are to be terminated or dismissed.
If the agreement is finalised by means of a Court Order, this is known as a “Consent Order” and it is rare for any court attendance to be required.
In cases where the husband and wife separate and do not divorce at that time, a Separation Agreement or Deed may be completed to record the terms agreed. The Courts will usually follow the provisions of the Agreement or Deed in a subsequent divorce.
It is an important principle that both husband and wife must provide full and frank financial information or disclosure. Without this, any agreement or order may be invalid.
The information which must be provided includes:-
- Earnings, eg, P60s, salary payment slips, business accounts.
- Other income, eg, dividends, interest, trust income, child benefit, tax credits, other state benefits
- The capital value of investments, eg, stocks, shares, unit trusts, investment trusts, endowments and other life policies.
- Bank and building society accounts and cash sums
- PEPs and ISAs
- Valuable possessions
- Houses and land
- Business assets
- Property outside the UK
It is usual for any information to be verified by the supply of documents, for example, statements, passbooks and valuations, as appropriate.
How the financial claims are assessed
When family lawyers and the Courts are considering the appropriate terms or orders to be made in relation to a particular case, they will be seeking to achieve a fair outcome by reference to the law as set out in the Matrimonial Causes Act 1973 and Court decisions based on that law. All the circumstances of the case must be taken into account with the first consideration being the welfare of any minor children.
The Act states that in exercising its powers the Court is to have regard to the following matters:-
- The income, earning capacity, property and other financial resources of each spouse, to include any such resources which may come into existence in the foreseeable future.
- The financial needs, obligations and responsibilities of each party.
- 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 party.
- The contributions each party made or is likely to make to the welfare of the family in the foreseeable future, including any contributions by looking after the home or caring for the family.
- The conduct of each of the parties if it would be inequitable to disregard it.
- The value of any benefit which would be lost by the termination or annulment of the marriage, eg, a pension
None of the above matters has precedence over the other. It will be a matter for consideration in each case as to which factors should be given most weight. In the majority of cases, this may well come down to an assessment of the financial resources and needs of each party in both income and capital terms.
Each case is therefore considered on an individual basis. If the Court ultimately has to make a decision, it has a wide discretion.
An equal division of the capital assets and pensions is now regarded as the starting point in long marriages but in many cases, this division may need to be adjusted.
The Court also directs that, if possible, arrangements or orders should be made so that a clean break takes effect, ie, there are no ongoing payments for maintenance by one spouse to the other either with immediate effect or at a date to be agreed in the future.
There is no guidance or ruling to the effect that income should be divided equally. The division of income will usually take place by reference to the parties’ income needs and resources.
If the husband and wife cannot agree upon the terms of a financial and property settlement and/or one or both parties will not provide full financial details, it may be necessary to issue a formal application to the Court for a ‘financial remedy order.’
Directions are given to timetable the application through to a first hearing (the First Appointment) approximately twelve weeks after the applications are issued, with the filing of a full sworn financial statement (Form E) by each spouse taking place five weeks in advance of that hearing and further documents being required by the Court two weeks prior to the hearing.
At the First Appointment, the Court will assess the issues and give the appropriate directions to progress the case. The appointment may be used for the purposes of settlement (“Financial Dispute Resolution”) if both parties agree and all the necessary information is available. If not, then directions are given for the provision of any further evidence and information. The application is then adjourned to a further hearing when Financial Dispute Resolution will take place.
At the Financial Dispute Resolution appointment the Judge will try to assist the spouses by expressing a view on any contentious points and suggesting possible terms of settlement. If the spouses then want to discuss or agree terms of settlement, final orders can be made. If this is not possible, further directions are given to progress the case to a final hearing on a later date.
A final hearing will usually last one or two days, when the Judge will have read all the relevant papers and will hear evidence from each party and/or their witnesses. Submissions will be made by any barristers or solicitors who are representing the parties although they may represent themselves. The Judge will then make a decision as to the orders which will be made. The right of appeal from such decisions is limited.
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