Whilst obtaining a divorce is often straightforward, agreeing what is going to happen to the family finances is usually more complicated. Although the divorce and finances are technically two separate sets of proceedings, they are usually looked at alongside one another.
By the nature of being married, spouses have financial claims against one another until they are formally dismissed by the Court. It is important for parties to understand their rights and entitlements in advance as it can help in managing expectations and often speed up the process. It is hoped that at this stage, former spouses can really begin to think about the future, putting any conflict behind them.
When looking at the finances, the first step is to ascertain what is in the family pot. This will include matrimonial assets. These are assets that were built up during the period of the marriage. These could include, but are not limited to, the family home, other properties, pensions, savings, investments, business assets and vehicles. Sometimes there are also non-matrimonial assets. These are financial assets which were acquired before or after the relationship, inheritances and gifts. There is scope for non-matrimonial assets to be treated differently, and potentially excluded, but it will depend on the individual circumstances of the case and often the party's needs.
There is no hard and fast rule for calculating the financial settlement. Each case is judged on its own merits. The Law focuses on achieving a fair outcome which can be very different from one family to the next, and whilst the starting point is 50/50, this doesn't necessarily mean half and half. There will often be a range of different ways in which the assets can be divided and the advantages and disadvantages of those will need to be explored. It is also important for you to consider what your preferred option would be and the practicalities of that.
The Court's first consideration is any minor children. The Court will want details about where and whom any children will be living so that this can be taken into account when looking at the type of housing required to meet their needs. The length of the marriage is also a key consideration. If the parties lived together prior to the marriage then this can be taken into account provided that it "flows seamlessly into marriage". Age is also a factor along with income and earning capacity. For example, if one party is better equipped to "regenerate" their finances or meet their needs from their income then there may be an argument to say that they should receive less. The Court will also consider contributions made by the parties to the marriage. There is often a misconception that this simply relates to financial contributions. It is wider than that. It takes into account contributions to the family as a whole. For example, caring for children is clearly a vital and equal contribution.
One asset that often causes confusion is pensions and how they should be dealt with on a divorce. A survey recently carried out by Shoosmiths found that a third of married couples do not know about pension sharing on divorce. This is a worrying statistic, particularly for women who separate after taking a career break to start a family, as this can have a huge impact when it comes to long term financial security. The research shows that on the whole, pensions are often overlooked with the focus being on physical assets.
When it comes to pensions on divorce there are different options but the most common are pension sharing and pension offsetting. Pension sharing is where one party's pension is split and a percentage transferred to the other spouse to "top up" their pot, usually either to equalise pension values or income upon retirement. Pension offsetting is the idea that cash is received now instead of a pension share. Pensions can be complex assets and it is important that you seek specialist advice. However, the take away point is that former spouses may be entitled to a proportion of their spouse's pension if they split up.
It is hoped that former spouses are able to come to an agreement about how the family finances are split, whether that is achieved by them discussing it directly, going to mediation or having negotiations through solicitors. However, if former spouses cannot agree then they can ask the Court to make a decision, although this should be viewed as the last resort.
The family finances can be tricky and it is important to take specialist advice. At Clapham & Collinge we have a dedicated team of experts who are able to provide you with all of the necessary information, support and legal advice on family law, divorce and the family finances.
If you have a legal query please contact our dedicated Client Relations Team on 01603 693500 or email us using the 'Make an enquiry' form. Appointments available at our Norwich, North Walsham and Sheringham offices.
*This article is provided for general information purposes only and does not constitute legal advice or other professional advice.