When resolving financial issues on separation, whether assets or liabilities, we will not settle for anything less than the right result for you. Our family team has experience advising on a broad range of financial matters, from clear-cut property transfers and pension sharing to complex high-value settlements, including company shareholdings, trusts and international property for high net worth individuals. Our key aim is to secure the future for whatever your financial circumstances.
Both you and your spouse have an absolute duty to each other and to the court to fully disclose your financial position so that a proper financial arrangement can be made. The court takes an extremely dim view of failure to properly disclose or produce incomplete or misleading information. In those circumstances the court can draw an adverse inference, a final order can be re-opened and/or a costs order can be made against you. The duty to disclose information in relation to your circumstances is an ongoing one and you must inform us of any changes in your circumstances until matters are concluded.
Your financial disclosure should include:
1. Details of any property or land or buildings in which you have an interest along with a valuation and an up-to-date redemption figure for any outstanding mortgage/ secured charge
2. Last 12 months statements for any bank/building society accounts held in your sole name, joint names with any other person or in which you have any interest.
3. Details of any investments, savings or shares to include the name of the institution, reference and value.
4. Details of any endowment and life policies to include the institution with whom it is held, policy number, policy type, name holder, surrender value, expected date of maturity and if the policy is assigned or charged, to whom.
5. If you are employed, P60 for the last financial year, last three months wage slips and your last P11D if you have benefits in kind.
6. If you are self-employed or in a partnership a copy of your latest tax assessment or a letter from your accountant confirming your tax liability and copy management accounts for the period since your last accounts.
7. Details of any pension or additional voluntary contribution (AVC) to include the policy number, cash equivalent transfer value. Also any pension protection fund compensation.
8. Details of any other assets you may hold, to include their values not already specifically referred to above.
9. Details of any monies owed to you.
10. Details in relation to any debts or loans or credit cards for which you are liable, including the current balance owing and terms for repayment.
11. Details of any personal belongings/items of value individually worth more than £500 including cars, collections, pictures, jewellery, furniture.
12. Details of any child maintenance service (CMS) assessment including the date of the assessment, and the amount payable.
13. Details of any other source of income such as state benefits, pensions in payment or rental income.
14. A list of your expenditure/ regular outgoings.
15. Copies of business account for the last two financial years and an estimate of the current value of your interest in your business, supported, if available, by a letter from an accountant or a formal valuation.
You must not use the self-help approach with regard to your spouse's financial documents whether, for example, from a computer, Iphone, intercepted emails, locked or unlocked filing cabinets, opened or unopened documents lying around the house or elsewhere. It is not lawful to copy or use such material. Serious consequences could follow a breach such as an injunction, civil damages claim, criminal proceedings and possibly a change of solicitors.
What type of orders can the divorce court make?
The court can make a property adjustment order. This includes:
- a sale of property
- a transfer of property from one party to another
- a settlement of property for the use and benefit of one party until a specified event or future date
- a deferred charge to be realised on a specified event or future date
The court can make an order for interim maintenance pending the outcome of proceedings, a periodical payments order or a secured provision order.
A periodical payments order is a payment made out of income by you to your spouse or vice versa to provide for the other and is frequently called maintenance. It is payable by reference to a period, very often a monthly payment. A spousal maintenance order can last during your joint lives until one of you dies or the payee remarries or it can be limited in duration for a term of years.
A secured provision order ensures that you or your spouse makes personal payments to the other for maintenance. It will only be made if the payer has enough capital or assets to cover the payment should the payer be unable to pay.
A nominal maintenance order is a maintenance order of a nominal amount such as £1 per year. It can provide a safety net if you are the payee in case you need to ask for substantive financial help from your spouse in the future. A nominal maintenance order is sometimes granted in favour of a parent who is the main carer of a child to safeguard against any significant change in circumstances in the future, at which point the payee can ask the court to vary the nominal order upwards to an appropriate amount.
There is no set formula for calculating spousal maintenance. The appropriate amount varies significantly from case to case. When deciding whether spousal maintenance should be paid, how much and the length of time for which it should be paid, the court has regard to all your respective financial needs, resources and circumstances. We can provide you with specialist advice.
A clean break settlement means that you will have no financial ties or obligations to each other once the financial order is agreed or ruled upon by the court. In some cases, where you have a claim for spousal maintenance, you may receive a greater share of capital assets (if available) instead of pursuing your claim for spousal maintenance. The court has a duty to look to see whether a clean break is suitable in preference to ordering ongoing spousal maintenance.
A lump sum payment order is an order that requires you to pay a lump sum of money to your spouse. A lump sum can be paid in installments. Interest may accrue on a lump sum payment if not paid on time.
The courts have to take into account any pensions that you and your spouse have when agreeing on a financial settlement on divorce. You and your spouse will each need to tell the court the value of your pensions. Only the person who is a member of the pension scheme, or who has taken out the pension, can ask for a valuation. In divorce, pensions are valued using the cash equivalent value (CEV). This is the amount you'd get if you moved your pension elsewhere. You should be able to request this information free of charge once in a 12 month period. It can sometimes take up to 3 months for this information to be produced by your pension provider. If your pension is already in payment you will need to request cash equivalent benefits (CEB) for which there may be a charge.
There are three options available to deal with pensions on divorce:
- pension offsetting
- pension attachment/earmarking
- pension sharing
Pension offsetting means that you or your spouse get to keep your pension and in return, you or your spouse receive a greater share of other family assets such as the house or a lump sum.
A pension attachment or pension earmarking means that the pension still belongs to you or your spouse as the scheme member but the scheme is required to make some form of payment to you or your spouse. If a pension attachment or earmarking order is made in your favour, it means you receive an agreed percentage of your spouse's occupational or personal pension when it is paid, which could be a lump sum or a regular pension payment. These orders are not popular because if your spouse dies, you will not receive any more money after their death because the money is payable to your spouse only. Also, if the order is for regular payments, these would stop if you remarry.
Pension sharing is where the pension assets are split immediately on divorce. It means that you can decide what to do with your share independently of your spouse. The amount is expressed as a percentage of the transfer value of the pension that is to be split. Each transfer value is worked out the day before the pension sharing order comes into effect which can be up to 4 months after the pension sharing order has been made.
Since 6 April 2011, regulations enable pension compensation to be shared or attached when a person seeks a divorce. This means that if the court makes a pension compensation sharing order in your favour you will receive a share of your spouse's pension protection fund (PPF).
If you or your spouse own a business outright or you have a significant shareholding in a business, then the business will normally be valued for the purposes of the financial settlement. If possible, the courts leave the business owner with the business and compensate the spouse with a larger share of other assets and/or maintenance. The courts can be flexible. It might be possible to share the income or divide the shares. The courts prefer not to leave one spouse with all the secure/cash assets and the other with the riskier business assets but in practice, they often do just that.
We work closely with our business and employment lawyers to give you the best advice in relation to protecting your business from divorce.
Trust interests, including interests under a discretionary trust, comprise capital assets in a divorce settlement. You will need to state your estimate of the value of the interest and when it is likely to become realisable. If you say it will never be realisable, or has no value, you must give reasons. We work closely with our trust and probate lawyers to give you best advice in relation to protecting your trust on divorce.
Inherited property/gifts or loans
It is not unusual for you or your spouse to inherit monies or property or receive gifts or loans from family before or during the marriage or following separation. You have an obligation to disclose fully all the details and value of these resources. It is important that you seek our specialist advice as to whether this will form part of the marital assets available for division on separation and divorce or whether this money can be protected.
“Bank of mum and dad” is becoming a popular way of getting young married couples off to a good financial start in marriage but beware! There might well be unforeseen financial consequences arising from this should the marriage not work out. Loans can be protected by the payer having a charge over property. Gifts cannot. Contact us for specialist advice before payments are made.
Court's approach to finances
With regard to financial arrangements between you and your spouse, the court takes various matters into account when considering what order should be made. The court considers all the circumstances of your case, giving first consideration to the welfare of any child of the family under the age of 18 and, in particular, the court has regard to the following matters:
1. Your respective income, earning capacity, property and other financial resources which each of you has or is likely to have in the foreseeable future including, in the case of earning capacity, any increase in that capacity which it would be, in the opinion of the court, reasonable to expect a person to take steps to acquire
2. Your respective financial needs, obligations and responsibilities now and in the foreseeable future.
3. The standard of living enjoyed by the family before the breakdown of the marriage.
4. Your respective ages and the duration of the marriage.
5. Any respective physical or mental disability.
6. The contributions which each of you have made or is likely to make in the foreseeable future to the welfare of the family, including any contribution by looking after the home or caring for the family.
7. Your respective conduct, if that conduct is such that it would, in the opinion of the court, be inequitable to disregard.
8. The value to each of you of any benefit which one of you, because of the divorce, will lose the chance of acquiring (most usually pension provision).
The overriding factor in most cases is the reasonable needs of yourself and your spouse. The court expects you both to have carefully considered your position and arrive at a sensible and realistic view regarding the range of outcomes to the application.
In some cases, it might also be relevant to look at contributions, conduct and compensation. Your case is unique. Each case turns on its own facts.
There is also a duty to be reasonable and to try and settle the case wherever possible. There can be financial penalties for failing to do so, such as costs.
In most cases, the courts no longer have the power to make orders for child maintenance. An application to the Child Maintenance Service (CMS) has to be made for child maintenance to be assessed if not agreed. Please refer to https://www.gov.uk/calculate-your-child-maintenance
The court can make a child maintenance order in exceptional circumstances which includes: maintenance for a step-child, additional support/expenses for a child under disability, expenses for education/training or maintenance for a child or carer who is outside the UK
Disposal of assets
If your spouse has disposed of assets with a view to frustrating your claims for a financial settlement or they are about to do so, then it is important that you contact us immediately and that you know that the court has wide powers to deal with such situations.
The court can restrain someone from carrying out a transaction or from transferring assets out of the country. In addition, the court can cancel certain transactions which have already been carried out where they were completed with the intention of defeating a claim for a financial settlement arising from a marriage.
The court can exercise these powers whilst a financial application such as your own is proceeding or indeed after a financial provision order has been made.
However, the court cannot order a transaction to be set aside/cancelled if someone bought the asset from your spouse in good faith without knowledge that the motive behind the sale was to reduce your spouse's assets to frustrate your claim.
If you make such an application to cancel a transaction made by your spouse, if the transaction took place less than three years before your application, the court will presume that the transaction was completed to frustrate your financial claim unless there is convincing evidence to the contrary.
In addition to these powers, the court also has powers to prevent someone trying to defeat financial claims without the requirement that they have to prove an intention to frustrate their spouses or former spouses claim.
If you do consider that your spouse has acted in this way or that there is a risk that they will do so, please let us know immediately because we shall need to prepare documentation to present to the court to persuade the judge to exercise the appropriate powers.