Divorce financial claims for married couples & civil partners

There is no magic formula. The court must assess the assets and distribute to provide a fair outcome. The court has wide powers to redistribute assets by ordering sales or transfers of property, payments of lump sums of capital and transfers of other assets and to share pensions. Orders for maintenance can also be made.  A fair outcome will depend on numerous factors, in particular the needs of the parties and most importantly any children, as well as the parties’ resources and the length of the marriage. There is a presumption of an equal division of capital (and pensions) unless there is a very good reason to depart from equality. The law does distinguish between ‘Matrimonial Property’  and ‘Non Matrimonial Property’; the latter is not subject to the presumption of equal division but is still brought into account in the general consideration of fairness.

There are several ways you can reach an agreement regarding financial arrangements when separating or divorcing – directly with your partner, through solicitors, through collaborative practice, via mediation or by entering into arbitration. An application can be made to court if agreement cannot be reached or if the other party will not engage but generally court is considered as a lengthy and expensive process, best avoided if possible. With all methods it is imperative to have a clear picture of each other’s assets, income and pensions before considering what is a fair division.

If you are not divorcing but formally separating, or were never married, then the agreement can be set out in another type of legal document – a ‘Deed’ which formally records the financial arrangements that have been agreed.

You can agree this at any time, but it is sensible to try and resolve financial matters while divorce proceedings are ongoing as it is often preferable not to formally dissolve the marriage (with Decree Absolute/Final Divorce Order) until financial claims have been finalised and an order is in place. If financial matters are not resolved, both parties’ financial claims remain open and therefore claims can potentially be brought many years in the future! There can also be tax advantages in considering matters and implementing some redistribution early on.

The next step would be to have this formalised into a Consent Order. Solicitors should be instructed to ensure this is drawn up properly. Whilst there are online companies offering to do this at a low fixed fee these often end up causing more problems as they may not use the correct wording or interpret the parties’ intention correctly. Also seeing a solicitor means both parties can receive separate tailored advice on the settlement and whether it is advisable to enter into it. Once the order is drafted and the wording is agreed by both sides, the Consent Order together with a completed form – ‘Statement of information for a consent order ‘ can be sent to the court. The Statement of Information provides the Judge with the basic financial information they will need to review whether the order is fair. Once the Judge has approved the order a sealed copy will be available to the parties.

This term refers to property, assets and investments acquired by one or both of the parties during the marriage and to which the sharing principle applies. This sharing principle is established by case law and means equal sharing of the Matrimonial Property should be the presumption in every case unless there is a very good reason to depart from it. The Family Home even if acquired pre marriage is generally considered to be Matrimonial Property and often assets acquired pre marriage may become Matrimonial Property by virtue of the length of the marriage or the dealings between the parties. Non-Matrimonial Property may be pre acquired assets especially in the case of short marriages, possibly assets acquired by one party post separation or inheritances and gifts where they have been kept entirely separate by one party. Non-matrimonial assets may be excluded from a financial settlement unless the parties’ needs cannot be met by sharing the matrimonial assets.

This is a complex area and advice may be required to determine whether an asset should rightly be classed as ‘Matrimonial’ or ‘Non-Matrimonial’.

The division of the Family Home is frequently the key issue when reaching a financial settlement in divorce. The home can be sold and the proceeds divided, or it can be transferred to one of the parties, usually in return for a lump sum payment, or it can be retained for the occupation of one party, (usually to the exclusion of the other) until a suitable time in the future. The decision is made by addressing the sharing principle which provides a starting point of a 50:50 split and weighing this against the parties’ needs. The housing needs of the children will always take priority and it would be right to say that ‘needs trumps sharing’ where the Family home is concerned.

Whether it was bought before the marriage or whether it is owned by just one Partner to a marriage or jointly, the Family Home is still an asset to which the sharing principle applies, and the likely outcome is an equal split of the value unless this does not meet the needs of the parties in particular the children’s housing needs. The exception is in the case of a very short marriage where there is a much stronger argument for preserving assets acquired before the marriage including the Family Home.

It is very unlikely that paying more towards the outgoings of a property will entitle a party to a greater share of it on Divorce. Case law has determined that the role of a breadwinner in a marriage shall not be differentiated from the role of a homemaker and that the particular financial arrangements between the parties during a marriage should not determine who gets what at the end of it. There may be good solid reasons why there might be a departure from a 50:50 split but a contributions argument is not usually one of them.

It is quite common for a parent to assert an interest in their offspring’s home either because they are a legal owner (appear on the legal title at the Land Registry) or because they claim a ‘beneficial interest’, for example by having provided part of the purchase price.  There can be heated debates about whether these are true property interests or whether funds advanced by parents to help their offspring buy are simply soft loans or even gifts that were never intended to be repaid had the parties stayed together. It is possible for a parent to intervene in proceedings but there needs to be caution; these are not easy claims to establish especially where a party is not on the legal title and there can be serious cost implications. Legal advice is essential at an early stage.

The equity is the sum left after deducting the mortgage, and costs of sale (estate agents and solicitors) from the value of the property. Sometimes there are other costs to be deducted as well, such as an early redemption charge for the mortgage or Capital Gains Tax. When agreeing the value of a property for the purpose of negotiation in divorce it is usual to deduct the potential costs of sale even if the property is not to be sold and these are often set at 3% of the value of the property.

Inherited property is often treated as separate or non-matrimonial property and excluded from a settlement in Divorce. However, that is not automatic. The inherited property must have been kept entirely separate from shared assets. It must be disclosed in the proceedings and could be shared if the matrimonial assets don’t meet the parties’ needs especially if there are dependent children.  An inherited property that is received during a marriage and ‘mingled’ with other assets may however become a matrimonial asset.

If negotiation fails or if there is a good reason why the intervention of the court is required an application can be made. The court will fix a preliminary hearing date and order the parties to prepare for that by taking the initial steps to disclose their financial positions. Your solicitor will guide you through this process which has deadline dates prescribed by the Court. The fact that a court application has been made does not mean that negotiations cannot continue and proposals for settlement can be made at any stage.  At the first hearing the Judge will made orders to ensure there is a clear picture of the assets and issues and will fix a second hearing which is a Financial Dispute Resolution (FDR) hearing – designed to allow settlement negotiations to take place with input from a Judge. Many cases are settled at this stage and final hearings are relatively rare. Increasingly private Arbitration and private Financial Dispute Resolution Hearings are being used for a quicker and often more cost-effective approach to resolving disputes and the possibility of taking your case outside the court process should be carefully considered and discussed with a family lawyer.

Given the complexities of dealing with financial issues, and the seriousness of the consequences of making financial decisions for a party’s financial future, we would always recommend getting early specialist advice as that is key to a successful conclusion. Whilst some parties are confident enough to conduct direct negotiations once they have the relevant advice, others prefer to minimise the stress involved by having this handled for them. The drafting of a financial Consent Order to bring any settlement into effect requires very precise language and legal terminology and so should be dealt with by a specialist family solicitor.