How Financial Orders are worked out
You will need clear and full information about each other’s finances. The information gathering we set out. You are obliged to be honest with your ex about your position. Each of you is entitled to ‘full and frank’ disclosure from the other. If you don’t provide this voluntarily, the court has powers to compel you to tell, which you can invoke. You will learn all about the infamous “Form E”.
All assets, however you acquired them, are matrimonial assets. That doesn’t necessarily mean that they will be split up between you, but they must be taken into account in reaching a final settlement.
WORKING OUT FUTURE NEEDS
Housing is probably the biggest consideration; once you have settled on what you want to do, most of the other decisions fit round this. It’s important to make sure that you work out the cost implications of any plans, both in terms of the capital you will have to spend and your future income needs. Don’t lose sight of what will happen when you and your ex reach retirement age. Pensions are an important factor in divorce settlements.
MATCHING RESOURCES AND EXPECTATIONS
Once you know what there is to share, and you have an idea of what you want for the future, you can start to think about how the assets might be divided up. You have to bear in mind the criteria used by the court. You are trying to match needs with resources and then achieve an overall fairness.
FAIRNESS AND COMPENSATION
Fairness also has to take account of what you as a couple might have expected out of the marriage if you had not split up.
Fairness does not necessarily mean equality. The starting point is ‘the yardstick of equality’. This does not mean that this is the right division in all cases.
The main factors that will militate against an equal split will be if:
- the lion share of the wealth has been created by one person
- one person brought a large share of the wealth into the marriage, by, say, an inheritance
- one person is financially dependent on the other and will suffer if he/she is not supported in the future. This factor can also prevent a clean break settlement
A typical example of this would be the wife who has, as a joint family decision, given up her career to look after the children and run the home. She has done this for many years and has as a result made no pension contributions of her own. She has also lost out in the job market and would have to retrain before she could go back to work. She had a reasonable expectation that in her old age she would be supported by her husband and his pension. Any settlement or court has to take this into account and make sure that she is provided for in the future. This means that there is an element of compensation for the lost expectations.
AIMING FOR A ‘CLEAN BREAK’
The court is, by law, biased in favour of achieving a ‘clean break’ order if possible. And most couples would generally prefer this sort of arrangement too. A clean break is an order where the couple are not left with any continuing future obligations to each other. This means that it cannot include maintenance payments.
When aiming for a clean break, you have to consider whether one of you has a maintenance claim against the other. If she or he has, the order should aim to ‘compensate’ for the loss of this claim by increasing her or his share of the capital. There are various established ways of working out what the appropriate capital sum should be. You have to bear in mind that there might not be enough capital to do this, however much you might want to.
Although a financial order is in most cases a ‘one off’, so you can’t come back to the court to change it or get a further amount later, there is scope for a later ‘buy out’ of a maintenance claim. Typically this happens when a husband has been ordered to pay his ex wife maintenance for the rest of her life. Later on, he accumulates enough capital to be able to offer a lump sum payment as a substitute for the maintenance. If this cannot be agreed between them, the court can order the payment, if it is satisfied that it is a reasonable amount to compensate the wife for the loss of her income.
Clean break order
This should include a provision to prevent each of you from having a claim on the estate of the other after death under the inheritance (Provision for Family and Dependants) Act 1975.
At Hylton-Potts we promote clean break orders vigorously and have great experience and skill in achieving them.
Consult the experts. For more information or a free legal opinion telephone 020-7381-8111 (24 hour service) or email law@rhplaw.co.uk.
