June 22, 2020

Divorce and finances: Four vital areas to consider

When considering separation, you will inevitably come across the term “financial claims” on divorce.

Competent legal advice can help you deal with these claims swiftly and often without involvement of the Court.

The first priority is establishing the value of the matrimonial “pot” – all the assets and debts you each hold – and agreeing their value before dividing them.

Valuations will potentially be lower now than a few months ago – your solicitor will advise whether to take action now or wait until the economy settles down.

Once you have a clear idea of your pot’s value, you can look at settlement options in these key areas:

Properties – these claims deal with properties such as your family home, second homes, or investment properties. These can be sold, and the equity divided between you, or they can be transferred to one of you. Sales and transfers can be deferred until property prices have settled, and borrowing options are more widely available. The first step is to consider what you will both need, and where you will both live; the starting point is equality of division although assets and pension can be divided unequally to meet need and achieve a fair settlement. Your solicitor will advise on factors to consider. It may be that you will need other expert advice eg in relation to tax issues.

Capital – money held in accounts, savings, insurance policies with a surrender value, other investments, and businesses. These assets can be converted and shared, used to clear debts, or transferred between you. As with property claims, the priority is what you both require to meet your needs. In some instances, assets may be ringfenced if acquired prior to the relationship, received by way of an inheritance – or if one of you has obtained them without using family resources. Expert advice may be required both to establish the true value of assets, which may have been affected by the pandemic, and to consider the appropriate way to share them. An experienced solicitor will be able to guide you through the process and flag up where there is a need for advice from other experts.

Pensions – a pension claim balances your respective provisions for retirement. Money can be transferred from one scheme to another to redistribute retirement income or capital funds between you. Alternatively, they can be used to “offset” a capital division – for instance if you need more money now to rehouse, you may choose to take less from a pension than your entitlement. Pensions are invested assets, and again we have seen reductions, some significant, in the value of some types of pensions over recent months. Expert advice will unpick the current value and establish anticipated future values and incomes that they may generate – and how they can be divided fairly.

Incomes – known as maintenance claims, they deal with monthly payments from one partner to another to help meet needs. Child Maintenance is usually dealt with by the Child Maintenance Service if you cannot reach agreement. In some circumstances, you may also be entitled to spousal maintenance which is usually time limited. Given the reduction to incomes that many families have suffered, spousal maintenance may be more relevant to you now than previously. However an order for maintenance can be varied in future if circumstances change. We have highlighted how these claims are entirely needs based, there is no automatic entitlement.

On understanding your entitlement, the first option is to discuss matters with your partner. You may not want to have a solicitor write to them, but it is sensible to consider having someone to advise you about any decisions you may reach and ensure you have considered all relevant factors and claims.

As explained in our previous blog, there are ways to find agreed financial settlements avoiding Court including Mediation and Collaborative Family Law. If none of these processes is right for you, you could consider a Private Financial Dispute Resolution (a private negotiation supported by a suitably qualified lawyer in the role of “Judge”) or Arbitration (a private process where a lawyer acting as “Judge” would make a binding decision about your case or some parts of it). In either case you would be advised and represented by a qualified solicitor or barrister. The potential advantage over a full Court application is that you choose your “Judge”, have more control over the timing of the process and the cost. Sadly, going to Court is necessary in some cases.

Each of the routes highlighted can be effectively undertaken remotely during the lockdown to progress your case.

Jones Myers extensive expertise can advise you both on the option which may suit you best.