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Financial settlements after divorce - what do I need?

Chris Fairhurst

09.10.2019

The newspapers and other media are often full of stories about the latest so-called big money or celebrity divorce, where commentators refer breathlessly to the extent of the matrimonial assets often running into the millions or exceptionally billions of pounds, possibly expressing surprise how a stay-at-home parent might have been ‘entitled’ or awarded a significant, if not equal, share of the available resources. 

Although newsworthy and capable of filling a page or two of publication, such situations are the exception rather than the norm and these big money cases still represent a fraction of the financial settlements arising from the hundred thousand or so divorces that the Family Court deals with each year.  The question often asked is why such settlements happen when an individual doesn’t ‘need’ that amount to live on.  In big money cases at least, that is because the court will lean towards a result which achieves equality between the separating couple, regardless of who generated the capital or who might have stayed at home, earned less, or looked after the children. 

The issue of ‘needs’ is one that had previously limited claims following divorce but the law changed some years ago and developed rapidly to a point where it is much more difficult to argue that matrimonial assets should not be shared more or less equally.  A court may on occasion deviate from equality but only in a limited number of circumstances, and generally speaking the longer a marriage has lasted the harder it is to argue against a more equal division.

That said, in the vast majority of cases the available assets for division between a parting couple is much more limited and there may only be hundreds if not tens of thousands of pounds to divide.  In such circumstances, the courts priority is trying to meet the day to day ‘needs’ of each of the parties as best it can from more limited resources.  It is widely known that when a couple separate and divorce, financial claims can be made against each other’s capital assets, property, pension and income.  The court has wide-ranging powers to make financial remedy orders (or awards) including the payment of lump sums, lump sums of cash, the transfer of property, sharing of pensions or payment of maintenance for a child, former spouse or both. 

When attempting to determine the appropriate financial settlement, the court will be obliged to consider the section 25 criteria,  set out in the Matrimonial Causes Act 1973.  These criteria will take into account, but are not limited to: the length of marriage; the parties' ages and health needs; the standard of living of the family during the course of the marriage; the income, earning, property and financial resources available now and in the foreseeable future; each parties' financial needs, obligations and responsibilities; contributions made by either party to the family, as well as the value of benefits that might be lost on divorce, for example death and service benefits in a pension.

Although each of these criteria tend to be considered alongside each other, in cases where there might be a more limited pot of money, meeting ‘needs’ is the most important consideration.

Most individuals primary 'needs' will be to provide a home for themselves and any dependent children, as well as having enough money to be able to live on.  As such, if there is insufficient money to buy two houses following divorce, the court might prioritise the needs of the financially weaker party, possibly on the basis that the other might be able to make up any shortfall with a greater mortgage capacity.  In such situations the court might determine that the available capital is split unequally but having regard to achieving fairness, may offset an increased lump sum payment to one by reducing a potential interest in another asset, such as a pension.

The court recognises that not all assets are of the same nature.  Comparing a future interest in a pension, which neither party may be able to access for a number of years, to cash in a bank or equity in a property, would be like comparing apples with oranges.  As such the court might not seek to divide any or all of the assets equally and instead try and achieve a balance so that in general terms equality is achieved between the parties.

In the most extreme cases this might mean that one party’s needs are prioritised over another, perhaps because the are deemed the financially weaker party and less able to meet their needs or their dependents' needs by themselves.

In contrasting ‘big money’ and more ordinary circumstances, needs would not limit an argument in seeking a share in a pot of money which would comfortably meet individual needs, but would enable a party where there is probably not sufficient to go around to get a greater share than the other. 

Clearly, it is important to obtain expert legal advice at an early stage to ensure that any proposed financial settlement is actually sufficient to meet what you actually need.  If you don’t, there is a risk that although dealing with short term needs, the longer term is ignored, and you find yourself in financial difficulties, without the ability to return matters to court.

 

If you are affected by any of the issues raised in this article, please get in touch today.  We're here to help you.

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