For the most part, very few financial cases reach court because solicitors work hard to negotiate settlements, whether that is with your ex’s legal representative or via alternative dispute resolution. Sometimes, reaching a settlement just cannot be achieved, and this is when parties often find themselves in court. The question that everyone wants answered is how does the court work out what I am entitled to, and will this be shared equally? Here, we discuss the relevant factors.
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It is important to say here that the needs of any children of the marriage are paramount, but beyond that, the starting point for working out a financial settlement is always 50:50, unless there is ‘good reason to the contrary.’ In order to determine a fair settlement between the parties, the judge will look for any reasons to depart from the principle of equality. This is where Section 25 of the Matrimonial Causes Act 1973 comes in. It contains a checklist setting out the things a judge must consider if they are to split matrimonial assets on an unequal basis. Depending on circumstances, some factors may be given more weight than others.
Income and earning capacity of both parties
The court must consider both parties income, any assets, their financial resources and future earning capacity. These things may vary depending on age and circumstances. Perhaps one party’s career has taken a back seat to accommodate caring for the children, and the other party has been working long hours to get a promotion. In this scenario, it is likely the second party will have greater earning capacity than their partner, which they have only been able to achieve because their partner gave up their own career. The court is duty bound to take this into consideration.
The children’s ages will also play a role in how the court views future earning capacity. Very young children may restrict the primary carer from increasing their earning capacity for a number of years, given they are now single. However, the court will expect the primary carer to get back into the jobs market as soon as they can.
Financial needs and responsibilities of the divorcing parties
Needs fall into two categories: housing and day-to-day income. These should be determined within the context of the resources available to the parties. The starting point is to evaluate the needs of each party in conjunction with the other factors discussed here. Particular attention will be paid to the needs of the children.
Standard of living enjoyed by the parties
This can be a controversial factor, particularly in cases involving wealthy couples. The courts have earned a reputation for interpreting the needs in this regard, generously.
The age of each party and length of marriage
The older the couple when they divorce, the more their future earning potential is impacted, and therefore considered differently than couples divorcing in their twenties or thirties. Settlements involving older couples are more likely to focus on pensions and investments.
In short marriages, the court will look at each party’s contribution to the overall matrimonial pot. The court also considers whether to make a ‘clean break order’, particularly if there are no children involved. A clean break order allows both parties to walk away from any future financial liability to each other.
If any party has a mental or physical disability
If either party has a disability, it may impact upon their financial needs and consequently their ability to earn income.
Contributions of the parties
This can be both financial and non-financial. The courts have a duty not to put at a financial disadvantage someone who has sacrificed their career for the family. The longer the marriage, the less relevant individual contributions will be.
Conduct of the parties
This is an area that always causes confusion amongst parties. The very fact that one party may have had multiple affairs or had a drug habit or gambling addiction is unlikely to hold any sway with a judge.
Losing a benefit because of divorce
This is generally taken into account in relation to pension benefits on retirement, which can be adversely affected by a divorce.
The most common mistakes spouses make when agreeing to a divorce settlement?
- Failing to take proper account of pensions – if your spouse has a pension, it is essential you find out the true value, and properly take it into account in the settlement.
- Attempting to hide assets – it is extremely tempting to downplay assets, but it is a bad idea because the lack of transparency or dishonesty can lead to a financial settlement being open to challenge.
- Failing to adequately calculate your needs – underestimating your needs can leave you struggling to survive, overestimating it can lead to the case taking longer to sort out than it otherwise would.
- Not getting your agreement put into an order – you can only be certain that the agreement you’ve reached with your ex is final and enforceable if you get a consent order approved by the court.
- Falling into the remarriage trap – no, this isn’t a track on the latest Robbie Williams swing album, but it is something to be aware of. The law says that if you have remarried, you cannot apply to the court for financial remedies in relation to your earlier marriage. To avoid falling into the trap, all you need to do is to apply to the court before remarrying. A word of warning, it is not sufficient to simply agree with your ex, you must make sure it is encompassed into a consent order before remarrying.
It can be difficult to predict exactly how a judge will divide a couple’s assets, and given the unpredictability of the outcome, a good family solicitor will always encourage couples to reach an amicable agreement without going to court. Such arrangements can help form a solid bedrock of communication giving you confidence to resolve any issues with your ex that arise in the future.
The information on this website is to be considered a guide and is therefore not legal advice. You use this information with the understanding that Wiselaw does not accept liability for any direct or indirect losses as a result of anyone relying on or acting upon the information on this website. Whilst we endeavour to provide accurate information, Wiselaw does not accept liability for any errors or omissions on this website.
