Fiona Wadey, of The Family Law Company, discusses the financial ins and out of divorce…

Who should pay for what in the immediate aftermath of a break up?
It can take time to work out the long-term solution, and therefore sometimes an agreement needs to be reached regarding the payment of outgoings in the interim. What is fair will depend on the circumstances. Sometimes it is a case of arrangements continuing as they were prior to separation, but this is not always possible; for example one party has moved out and has outgoings in respect of their new property such that they cannot afford to make the same contribution to the matrimonial outgoings as they did previously. Essentially it is important to ensure that the mortgage and bills get paid. A sensible approach might be to work out what income both parties have and how much the mortgage and utility bills are, and then for each party to pay a proportionate amount towards those outgoings when taking into account their other expenses.  

What is financial disclosure and what information am I and my partner expected to share?
Financial disclosure is the process of exchanging with the other party full details of your personal financial circumstances including your assets, liabilities, income and outgoings. There is not an exhaustive list of the information and documentation that you will need to provide, but disclosure includes property valuations and recent mortgage statements, last 12 months’ bank statements for all accounts whether in sole or joint names, details of your income including last three months’ payslips and P60, as well as evidence of benefits or other income, business accounts for the last two years, details of any stocks and shares held, surrender values for any endowment policies, evidence of any liabilities, and a cash equivalent transfer valuation of all pension funds.

You also need to disclose information regarding your future resources. This may include for example any anticipated inheritances or assets you may be likely to receive.

It is important for there to be full and frank disclosure of both your financial circumstances before any settlement is negotiated. This duty of full and frank disclosure is ongoing throughout the case until a final order is made.

How can a solicitor help to decide what is a fair settlement?
In order for a solicitor to advise you on what would be fair, and to provide advice in relation to settlement proposals, both parties need to have given full and frank disclosure. Without having a full picture of both parties’ financial circumstances a solicitor will not be able to provide you with advice. It is therefore extremely important.

Once the financial disclosure is available, it can then be considered in light of all the facts of the case and in particular the various factors laid down by legislation which the court and solicitors when advising their clients must have regard to. The statutory factors, known as Section 25 factors, include each person’s income, property and earning capacity, each person’s needs, the standard of living enjoyed during the marriage, each person’s age and the length of the marriage, any physical or mental disability, contributions made previously or likely to be made in the future, the conduct of each of the parties in limited circumstances, and the value of any benefit that one party will lose the chance of acquiring due to the divorce, such as pensions. There is no set formula to dictate any sort of percentage settlement, and the overriding principle is that of fairness.

Who decides what level of maintenance estranged partners must pay?
Child maintenance is governed by the Child Maintenance Service, but there is no such formula for calculating the amount that one party should pay to the other each month, namely spousal maintenance. The amount is dependent on two factors; one party’s ability to pay, and the reasonable needs of the other party. It is a case of considering both parties’ income from all sources, together with their respective outgoings. If there is a shortfall between the income and reasonable income needs of the lower earner, then the higher earner might be ordered to fill the gap if they are able to do so.

As with the other elements of the financial settlement, hopefully it will be possible for an agreement to be reached between the parties but if this is not possible then on application to the court a judge will decide.

How are pensions divided on divorce?
Pensions are part of the marital assets, regardless of which party they belong to, and they can often represent the biggest asset. It is therefore essential that they are given due consideration, and sometimes it is necessary to instruct an actuary to advise how the pensions should be divided; it is a complex area. There are essentially three options for dealing with pensions:

  1. Pension sharing orders – some or all of a pension is transferred from one party to the other, giving the latter pension provision in their own right.
  2. Pension attachment orders – certain payments are directed to the other party, instead of being paid to the pension member, when the pension comes into payment.
  3. Offsetting – the value of pension assets is set against the value of other assets; no pension order is therefore made.

Who keeps the house?
This will very much depend on a number of factors, including the availability of other assets like pensions and income. There is no set division of assets on a divorce, and it will all depend on the circumstances of the case and Section 25 factors. The court can order a sale of a property or a transfer to one person; it may be that one of the parties can retain the house, or alternatively it might be the best option for the house to be sold in which case the division of the sale proceeds will need to be considered. Hopefully an agreement can be reached between the parties as to what is best, but failing this the court can decide.

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