Kris Seed and Emma Benyon-Tinkler, of Everys Solicitors, discuss the financial ins and out of divorce…
Who should pay for what in the immediate aftermath of a break up?
There are no rules as to who should pay for what in the immediate aftermath of a break up. Initially it is usually best to continue as you were whilst you are sorting out the new arrangements.
If one party has moved into new accommodation, then the joint income which was paying for one household and all bills, now needs to pay for two households and all bills. It will be a financial calculation in each case as to who can afford to pay for what. If one party is the higher earner, and they have moved out of the family home, they may well be expected to continue to make a substantial contribution to the running of the former family home.
Any extras such as gym membership should be made by the party that it will benefit.
In the longer term an agreement will be reached as to whether one party needs to pay spousal or child maintenance to the other.
What is financial disclosure and what information am and I my partner expected to share?
Financial disclosure is information about all capital, liabilities, income, expenditure and pension provision that a spouse may have.
Both spouses are required to provide this information to each other and to provide documentary evidence in support.
The purpose of disclosure is so that both parties are aware of the true financial picture of the marriage and both parties can then negotiate a fair settlement based on what is available for division between them.
The situation is slightly different if you are cohabiting. Then you need to discuss the assets and liabilities which are in your joint names.
How can a solicitor help to decide what is a fair settlement?
Once full financial disclosure has been exchanged itis not as straightforward as working out what there is and dividing it equally between you as you may have different needs and resources and lots of factors need to be weighed in the balance.
The welfare of any children you have will take priority and the following factors are also considered by the court and guide our advice on parameters for settlement:
- The length of the marriage: the longer the marriage the stronger the likelihood that the assets will be divided equally
- Your ages: needs will correspond with the stage in life of each of you
- The reasonable needs of each of you: this is loosely based on the standard of living you enjoyed during the marriage although it is important to remember that when the money is divided between two households it will not go as far
- The resources of each of you: this includes not only the assets, pension and income you have now but also your earning capacity (which may not be maximised currently) as well as mortgage capacity
- Contributions made by either of you: A significant contribution to the marital assets made by one of you (for example, property brought into the marriage or an inheritance/gift received at any time during the marriage) – this will be more likely to be ring-fenced if it has been kept completely separate or the marriage was short.
- Any health issues
- Any pre/post nuptial agreement you entered into
- Benefits which either of you could lose as a result of the divorce (such as widow(er)’s pension benefits)
Taking into account all the factors, a solicitor can then advise on what might be a fair settlement in your particular circumstances. It should be a settlement that meets the needs of all parties, particularly the needs of the children.
Again the situation is different if you were cohabiting. In that case, none of the above factors would matter. It would be a case of who owns what and whether each of the parties have an interest in the assets.
Who decides what level of maintenance estranged partners must pay?
There is a calculation which sets out what level of child maintenance should be paid which is based on income of the party paying. There is a helpful calculator on the Gov.uk website which does the calculation for you. This would apply whether you were married or cohabiting.
Spousal maintenance will depend on the needs and resources of the parties. If one party has been a stay at home parent, then it is likely that spousal maintenance will be paid by the other party. Spousal maintenance can be for a limited term, or it can be for an unlimited term. There is no set calculation, unlike for child maintenance.
How are pensions divided on divorce?
Pensions are just part of the matrimonial pot which are to be divided on a divorce. There are various ways in which pensions can be included in a settlement:
- Pension Offsetting – this is where one party elects to receive more capital rather than a share of the other’s party pension.
- Pension Sharing Order – this is where the pension pot is divided between the parties in the agreed shares. The party who is receiving the pension sharing order will elect their own pension to have their share paid into, and then each party has their own pension. This therefore results in their being two separate pension schemes which are not related to the other.
- Pension Attachment Order – this is not a very popular as it means that the party keeps their pension, and on their retirement, the pension company will pay an agreed percentage each month to the former spouse. The problem is that if the person with the pension should die, then the former spouse does not receive anything.
It should also be noted that if the value of the pension pots are “shared” equally it does not mean that each party will receive the same income. Income is calculated by a pension actuary, and generally the same pension pot will lead to a smaller income for a woman than it would for a man. If parties are trying to achieve an equal income in retirement, then an actuary will need to produce a calculation to state what percentage one party might need to receive.
Who keeps the house?
Who keeps the house is just one of the factors to be considered when determining what is a fair settlement in a divorce based on all the other factors that must be considered, as set out above. It cannot be considered in isolation without reference to the other assets, liabilities and pensions that the couple may have. The key issue to determine whether the house is kept by one party, or sold is usually the needs of the children. However keeping the house must also be financially affordable. It is often common that the sale of the house is postponed until the children have finished school or until the spouse remaining in the home remarries or cohabits. At that point the house would be sold and the equity divided.
If you are cohabiting, then it would depend on who owns the house. If the house is in one of the party’s sole name, then they will retain the house. If the house is in joint names, an agreement would need to be reached as to who will buy the other’s interest in the house or whether the house is sold and the proceeds split.
Find out more about Everys Solicitors at everys.co.uk