Allen Bailey, of Scotts Wright Solicitors, discusses the financial ins and outs of divorce…
Who should pay for what in the immediate aftermath of a break up?
This question is all about needs. It includes making sure that each of the spouses has a home and income for daily living costs both in the short term and often in the longer term. If there are children, it is important to think about where they will live.
In an ideal world, a couple who have separated or are going to separate should be able to agree between themselves who should pay for what but sadly this is not always possible, and they may need professional help in order to resolve these issues.
Mediation may be appropriate in some (but not all cases). A mediator can act as a neutral third party to facilitate and manage your discussions. Mediation can help you reach agreement about the arrangements for your children and your home, money and finance.
You may have debts with your ex-partner or you may owe money in your own name. Money is likely to be tight while you sort out your finances after you separate and its important to prioritise those which you can pay such as your mortgage or rent, council tax, gas and electric.
If you cannot reach an agreement as to the level of support for your children, you can ask the Child Maintenance Service (formerly CSA) to calculate the appropriate level of maintenance that your ex-partner should pay to you for their support. You may also wish to consider making an application to the Court for spousal maintenance (periodical payments)
What is financial disclosure and what information am I and my partner expected to share?
The first step in any negotiations is for each spouse to provide on a voluntary basis full information (known a disclosure) concerning their income and assets. This can be done either informally by each party disclosing to the other copies of their income, savings and investments and property and pensions. Supporting documentation will also need to be provided including bank statements, wage slips, property/pension valuations etc.
It is necessary for each spouse to provide full information about all their assets even though they may want to make out a special argument about why a particular asset should not be taken into account or should be retained. The courts treat failure to give a “full and frank disclosure” of all assets, liabilities and income very seriously and if it is found that one spouse has deliberately failed to disclose an asset or tried to conceal it, they may be subject to penalties such as being ordered to pay the other party’s legal costs. If the court have already made an order before the failure to disclose is discovered, the case could be re-opened.
The reason for financial disclosure is to enable both legal advisors and judges (if the case goes to Court) to see how much there is in “the matrimonial pot” to share out in order to meet the needs of the parties and any children.
How can a solicitor help to decide what is a fair settlement?
A solicitor will be able to focus on your personal needs and provide appropriate advice in a sensitive and discreet manner. They will take the time to understand the issues that are of concern to you. Many solicitors who specialise in family law belong to a professional body called Resolution and follow a Code of Practice that promotes a non-confrontational approach to family problems. Members of Resolution encourage solutions that consider the needs of the whole family and particular the best interests of children. If you decide to use a solicitor you should check that they are a member of Resolution.
Who decides what level of maintenance estranged partners must pay?
There are two types of financial support that can be paid by one spouse to the other namely spousal maintenance (known as periodical payments) and child maintenance.
Parents are encouraged to agree between themselves on the amount of money to be paid by one to the other to maintain their children. It is often a good idea to use the formula applied by the Child Maintenance Service (formerly Child Support Agency) as a starting point for discussing child maintenance. You can find out how much child maintenance you should be paying or receiving for your child by going to the official online child support calculator www.gov.uk/calculate-your-child-maintenance.
If you are not able to agree on the amount of child maintenance that should be paid, either parent can apply to the CMS for it to carry out an assessment and, if necessary, to collect the payment. It is important to note however that if the CMS will charge the payer an extra 20% on top of the maintenance payable and the person receiving the maintenance will be charged 4% of the maintenance payable.
It is not possible to apply to the court for child maintenance unless you are applying for a consent order or unless the paying parent lives abroad or there are very large sums of money involved.
Maintenance may be payable if one spouse will not have enough income to meet his or her needs, in which case the other spouse may be ordered to make periodical payments. This would be in addition to any child maintenance.
There is no set formula for calculating the payment of maintenance to a spouse. The starting point is to consider each party’s needs. How much it is fair to require the higher earning spouse to pay to the other spouse depends on a number of factors such as how much income each spouse has from all sources including full time and part time employment, tax credits and other benefits: what each spouse requires to cover their income needs including payments for accommodation whether they be rent or mortgage as well as day to day living expenses and how much the spouse who would be paying the maintenance can afford to pay bearing in mind their own needs and their other financial obligations including child maintenance payments
If the parties cannot reach an agreement between themselves as to the level of periodical payments a court may have to decide the issue.
How are pensions divided on divorce?
Pensions can often be a major asset within a marriage, possibly as valuable as the equity in your home.
There are different types of pensions that can be divided. They can be work related or personal. The basic state pension cannot be divided but it is possible to share the additional state pension.
The most common way of dividing a pension is by way of a pension sharing order whereby a spouse receives a specific percentage of any one or more of their ex-spouse’s pensions. This is known as a pension credit and is either transferred into a pension they may already have thereby “topping it up” or, If the receiving spouse does not have a pension of their own they will need to set one up and will need professional advice to do so. This is known as an external transfer. Sometimes an external transfer is not available under the rules of the pension scheme and the spouse has to receive the pension credit by way of an internal transfer whereby they join their ex-partner’s scheme.
Pensions can also be offset. This involves the spouse with the larger pension keeping it intact in return for which the other spouse receives a larger share of the other matrimonial assets (usually the family home) by way of compensation.
Pensions are rather unique assets and it can be quite daunting having to consider them. What exactly can be divided also depends on where you live in the UK and whether you are divorcing or dissolving your civil partnership. A solicitor will be able to give you expert advice as to how to get the best for you and your family.
Who keeps the house?
If you have children, they will probably want to be able to stay in their own home, keep their own bedrooms and be surrounded by their familiar things. The Court puts the interests of any minor child over and above all else, when considering what the financial arrangements should be on divorce. Keeping the family home has the benefit of reducing change at what is likely to be an unsettling time for children especially where a move may require a change of school and disrupt local friendships and activities.
In many situations the need for a home to be retained for the children will result in one parent keeping the family home whilst the other parent has to find new accommodation.
The name in which the family home is owned is generally of no significance on divorce. The court has powers to transfer assets between spouses in order to meet their needs which will include a house..
If there are no children, one of you may wish to stay in the home in which case he/she will need to make arrangements to buy out the share of the other and (if applicable) ask the mortgage company to release them from the mortgage.
To find out more about Scotts Wright Solicitors, visit scottswright.com