Financial Advice on Divorce/Separation

Our family financial solicitors in Sheffield understand that when a relationship breaks down there will be a great deal of worry and anxiety. We know that your main concerns are your home, offering stability for your children and ensuring that the transition into two households is as straightforward as possible.

When you separate dealing with financial matters can be overwhelming at times. We are here to help you negotiate your way through the legal process, listening to your needs and concerns and helping you reach an agreement that is as individual as you and your family.

The law considers a number of factors when deciding how to share out the assets (these include, capital, assets, pensions and property) so that it is fair to both parties including:

We have addressed in our FAQ's below the types of orders a court can make on separation, although not all will be applicable depending on your financial circumstances. 

Contact us to book your free initial appointment (30 minutes) via email by clicking here or call us on 0114 266 6660. 


FAQs

Your income needs may be more pressing if your spouse or civil partner does not agree to support you once you separate and you do not have enough money to support your immediate outgoings. If this is the case, then we can apply to the court for an urgent application for financial support shortly after separation. This is known as an interim periodical payments order (maintenance pending suit) and is used by the court to provide an income for a spouse/partner who does not have enough income of their own to support themselves while the other spouse/partner has sufficient income but has refused to support them. If you are in this situation then you should seek legal advice as soon as possible. Although this application is seen by the court as an emergency measure, it can take several months for the application to succeed. Therefore, the sooner you make the application, the sooner you will receive the financial support you need.

If you need advice about child maintenance, the courts normally recommend parents use the Child Maintenance Service as a resource to recover child maintenance, unless you are considered significantly wealthy (earning over £150,0000.00 per annum), the maintenance is for step children or the paying party lives out of the jurisdiction. If you are a high earner or have sufficient wealth, then the court does have powers to make orders that top up the amount of child maintenance you pay for support of school or university fees.

The government website provides a very helpful breakdown and calculator, which assess your entitlement or obligation https://www.gov.uk/calculate-your-child-maintenance. As an over view, the parent with care of the child is entitled to claim from the other parent until the child finishes full time secondary education or reaches the age of 20 years.

The court can still include by consent a child maintenance order within a financial order if necessary. This is usually where the child support agreed is more generous that under the Child Support Act 1991. The inclusion of a child maintenance order may also be helpful to the receiving parent if they are looking to obtain a mortgage as this provides some security to mortgage lenders when assessing mortgage capacity. However, child maintenance is only binding on the parties for 12 months after the order is made, thereafter either party can apply to the Child Maintenance Service for reassessment.

One of the main concerns for separating couples is the need for a home for both parties. Unless you are very wealthy it is expected that there will be a reduction in both your standards of living.

The family home is often where most couples find difficulty in agreeing what is to happen. Should one of them remain living in the property, or should the property be sold? There are a number of factors the court and you should consider when looking at your housing needs:

  • The welfare of your children is the courts first consideration. Where your children are going to live is very important. This will depend on the arrangements you have agreed, unless the parenting of the children is going to be shared between the parents. The parent who the children lives with will usually take priority if there is insufficient money available to rehouse both parents.
  • It does not matter who owns the family home, because you are married/civil partners, you both have rights of occupation of the property and the court has the power to transfer the property to the other if it considers appropriate. We would always recommend that if your home is owned in the sole name of your spouse/civil partner, a Home Rights restriction be registered at the Land registry to ensure that your rights to the home are protected until resolution of your finances.
  • The court also takes other factors into consideration when deciding what will happen to the home and the housing needs on divorce/dissolution. The court looks at whether the home is suitable for the needs of the party who wants to remain in the property. If the house is too big for their needs, then should the house be sold and the proceeds of sale used to rehouse the parties in more modest accommodation suitable to their needs.
  • If the property has sufficient equity available to rehouse both parties, either by way of mortgage or outright cash purchase, then the court is more likely to order a sale of the property.
  • The court does not consider it appropriate to place the needs of one party over the other unless it has to because of the housing needs of the children.

    When couples separate there is often a lot of confusion about who should maintain the monthly mortgage payments? Who pays the mortgage is very subjective to your individual circumstances.

    If you cannot afford to maintain the mortgage on your own, then you should seek help from the other party. If they do not agree then in the short term you could make an application to the court for interim maintenance to help you maintain the mortgage, until a final decision is made.

    Although the mortgage maybe in joint names, this does not mean that the person who is not living in the home should be expected to meet half of the mortgage. Depending on your respective incomes, if you both have similar housing costs and you can afford the mortgage payments, then you would be expected to maintain your own housing costs and utility bills, unless one party has a significantly greater income than the other.

    If you want to stay living in the family home, then the first practical step is to look at whether you could afford to remain living in the home. If you think you can, then is important obtain independent financial advice https://www.moneyadviceservice.org.uk/en/articles/choosing-a-financial-adviser and find out whether you have the mortgage capacity to take on the mortgage. You may also depending on your circumstances be able to raise additional money against the property to purchase your partner’s interest, releasing enough money to enable them to rehouse, known as a lump sum order.

    You can own your home in two ways, Joint Tenants or Tenants in Common. If you are unsure how you own your home we can search the property title and provide you with the appropriate advice. The majority of jointly owned properties are owned as Joint Tenants. What this means is that if either you or your partner were to die, the property would automatically transfer to the other joint owner. The property would not be included as part of your death estate and so would not be included in your Will.

    When you separate, you may no longer want to leave your share of your home to your spouse/civil partner. This could be for a number of reasons, usually to protect inheritance for children or family.

    If you do decide to sever the joint tenancy on the family home, then you must also make a Will. Otherwise if you were to die before the decree absolute or final order is made, the home would transfer to your spouse/partner by the law of intestacy.

    If your family home is not in your name and is in the sole name of your partner or spouse then we can help protect your interest in the property by registering a Home Rights restriction at the Land Registry. A Home Rights restriction protects your interest in the family home by placing a Notice on the properties register, which means that if your partner or spouse tries to sell the property or re-mortgage the property without your knowledge or consent, they will be unable to complete the transaction. This restriction stays in place until either the decree absolute is pronounced or the final order. It is therefore important that you obtain advice from your legal advisor if you are considering applying for your decree absolute or final order, without first obtaining a financial order from the court.

    Within any financial settlement, the court can order that one party pays the other a cash lump sum. This lump sum can be in consideration of assets retained by one party, such as a house, investments or pension. The lump sum can be a one off payment or can be by instalments, meaning the total lump sum does not have to paid all in one go and can be spread over a particular term.

    Family debt can be very difficult to resolve at the end of a marriage/civil partnership. The court has limited powers when dealing with creditors as they are not usually be involved in the court proceedings and so are seen as third parties.

    Although the court has limited powers, you and your former partner can make decisions about debts as to how they are to be repaid. However, the final decision about recovering the debt lies with the creditor. If a debt is in your joint names and one of you agrees to maintain the debt post separation, this can be included into a court order. However, if the payer fails to pay the liability, this will impact on your credit rating because you are financially connected until the liability is settled, the lender could also still try and recover the liability personally from you for the debt.

    It is common place for family members to loan one another money. However, when couples separate, the loan usually ends up being paid back by the spouse or civil partner of the family member. The court does not give priority to family creditors and sees them as soft loans. However, the court can if it sees fit redistribute a proportion of the assets to one party over another with the intention of rebalancing the debt position.

    Usually individuals going through a divorce or dissolution try to share the liability payments between them. Otherwise, the court could order one party pay the other a periodical payments order to meet the ongoing repayments or give an undertakings to meet the outgoings. However, undertakings are only binding if a party chooses not to meet their financial obligations, if there is a significant change in the income of the payer then they cannot be forced to maintain the debt.

    Family debt can be a serious worry and if you need detailed advice we recommend that you seek specialist help from government funded advisors such as https://www.nationaldebtline.org/ or charities such as http://www.stepchange.org who will be able to provide you with some practical advice about dealing with creditors.

    If you started a business during the course of your relationship, or your business increased in value or you are a shareholder, sole trader or partner in a business, then the court would usually consider that the business is an asset of the relationship. Depending on the size of the business, the court would either consider the business is an income stream, meaning it provides you as an individual with an income but has little value as a going concern, or the court could look at the business and consider it has value as a going concern and therefore could be sold and what value would be attributed to your interest in the business. You will appreciate that this is a very specialist area, there are many different types of business, which are valued on a variety of factors not limited to net profit. If necessary we would instruct a specialist forensic accountant to review the accounts of the business to determine its value.

    We understand that family and business are important, we also know that when the two are involved in financial proceedings that retaining a family business or family farm within financial proceedings can be complicated and distressing. We are here to support you through this legal process and look at creative ways to meet your requirements.

    When a relationship breaks down often parties focus on their immediate needs and overlook the importance of pensions. This is especially true if the parties are decades away from retirement. However, depending on the contributions made into a pension during the relationship, this can sometimes be the largest marital asset. The law considers that pension provision accumulated during the course of a relationship should be shared equally.

    The court can deal with pensions in three ways:

    • Pension sharing:  meaning a percentage of one party’s pension is transferred to the other to equalise their pension provision.
    • Pension Attachment: meaning that the person with the pension provision provides a percentage of their pension income to the other, but this is now rarely used, because if the payer passes away, the pension stops being paid to the payee.
    • Offsetting:  meaning that instead of receiving a share of the pension, or an income from the pension the receiver obtains a cash sum usually straightaway, to compensate them for not taking a share of the other’s pension in the future. The amount you receive would not be the same amount in cash terms as you would have transferred into your pension. This is because the receiver is taking the cash amount before retirement. The amount of lump sum the receiver obtains depends on the type of pension fund.

    The court generally considers that all pensions contributed to during the relationship should be taken into account. Therefore, it is important when obtaining your pension information, that you request not only your current pension information but also, any frozen pensions and also your additional state pension. Pension providers can take several months to provide you with a valuation of your pension known as a Cash Equivalent Transfer Value (CETV). We therefore recommend that you obtain the CTEV of your pensions as soon as possible, so as not to delay reaching a financial settlement with your former spouse.

    We also recommend, unless you intend to remarry or have a short life expectancy, you should not apply for the decree absolute or final order if your partner or spouse has pension provision, until you have reached financial settlement of your case. If you were to apply for the decree absolute or final order without first having reached a final settlement, then you would lose all interest in the other spouse’s or civil partner’s  death in service benefit, which in some cases can be a considerable amount of money.

    Any couple wanting to enter into open discussion and negotiations will need to provide to their solicitors what is known as full and frank disclosure of their financial positions. This enables both parties and their legal advisors to have a full understanding of their respective assets, liabilities, income and outgoings, to enable their legal advisors to assess what the likely outcome would be for their client if the case was to be determined by the court. It is then the legal advisors job to explain the position to their client and try and negotiate the best settlement they can with the information and knowledge they have of the law and their client individual circumstances and requirements.

    The process of negotiation would normally take place via correspondence or if appropriate a round table meeting between legal advisors and their clients or via the collaborative law process to try to see if an amicable settlement can be achieved.

    At Wake Smith, our team are committed to giving you sensible proactive advice about how to resolve your financial settlement. Our aim is to try and reach an agreement with your former spouse or civil partner as simply and sensibly as possible. We are conscious that protracted negotiations and court proceeding can lead to unnecessary legal costs which could be avoided leaving more money for you and your family.

    We are here to listen to your concerns, what matters to you and what you hope to achieve. We will then consider your position carefully and through negotiation reach a settlement with you in mind.

    Sometimes you are unable to reach an amicable settlement though negotiation through solicitors. Before you can make an application to the court, all parties must attempt mediation. Mediation is a voluntary process, whereby you and your former partner meet with a trained mediator to try and work through your financial positions, with a view to reaching financial settlement.

    Mediation is not reconciliation and can sometimes be confused with counselling or reconciliation services. Mediation aims to facilitate communication between you and your former partner about how you are to restructure and organise your separation. Mediation is not for everyone, the Mediator may depending on circumstances consider mediation is inappropriate if you have been a victim of physical, emotional or financial abuse during your relationship or that you are finding the separation extremely difficult.

    The majority of financial settlements are reached by agreement known as a Consent Order and the majority of cases do not end up in court. However, if you and your spouse or civil partner cannot reach an agreement, then there may come the time when there is no alternative but to make an application to the court to determine a financial settlement. There can be any number of reasons why settlement cannot be negotiated. There could be complex legal issues which can only be determined by the court, or your spouse or civil partner may be refusing to engaging in the process or failing to provide financial paperwork to enable negotiations.

    Once court proceedings are issued, (previously known as ancillary relief proceedings) the court sets a timetable of what needs to happen to ensure the court process moves smoothly. This ensures all relevant information is provided to the court, so that settlement can be negotiated between the parties with the assistance of the court, or if that is not achieved then determined by the court at a contested final hearing.

    Within three months of the court proceedings being issued, the case is listed for its first court hearing known as a First Directions Appointment (FDA).  The purpose of the First Directions appointment is to ensure that all the information needed can be obtained. This means sometimes the instruction of expert reports or valuations of assets such as property, antiques and pensions, along with allowing each party ask questions of the other person.

    The case then proceeds to the next hearing known as a Financial Dispute Resolution Appointment(FDR) at which the parties together with the assistance of the judge try to reach a financial settlement.  Many cases reach financial settlement prior to or at the FDR but, if not the case will go to a final contested hearing where a judge decides the outcome.

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    Before the first directions appointment, both parties need to have filed with the court and exchanged with the other a Financial Statement known as a Form E.

    In readiness for the court hearing, the legal advisors should also have taken their client’s instructions on the contents of the other parties’ financial statement and prepared a questionnaire of further information required of the other party.

    The court will also ask that both parties provide a Chronology, which sets out a history of the marriage and a statement of issues, which sets out each parties position and what issue need to be determined by the court, including where there is agreement and disagreement between the parties respective positions.

    The First Directions Appointment (FDA) usually lasts no longer than 30 minutes and allows the court to see what information is outstanding to enable the court to either encourage settlement by agreement or for the court to make a decision. If necessary the court will order expert valuation reports and timetable a date when the parties need to respond to the others questionnaire.

    The case will then be listed for a Financial Dispute Resolution Appointment (FDRA).  The purpose of a Financial Dispute Resolution Hearing is for the parties and legal advisors to attend court and be given direction by a Judge hearing the case, as to what the Judge considers the final outcome might be if a Judge was to determine the case at a contested final hearing.

    The Judge will explain the law to the parties and encourage the parties to consider what a final outcome might achieve. Along with stressing the legal costs likely to be expended if the case did not settle at that hearing and proceeded to a final contested hearing.

    The parties are then asked by the Judge to leave the court room and try to negotiate with their legal advisors a settlement outside the court room. This process can take several hours and if no agreement is reached then the case would be listed for a contested hearing, where a Judge decides the outcome. The Judge hearing the Financial Dispute Resolution Hearing is prohibited to hearing the final contested hearing as he/she has already heard the open positions of the parties by the legal advisors and so is unable to give an unbiased decision at a final hearing.

    What is a clean break order? How can I achieve a clean break? When parties separate the courts intention is to effect a clean break wherever possible. What this means is that if a clean break can be achieved, i.e. you and your spouse or civil partner are able to move forward into the future with no further financial responsibilities for one another (other than the children of the family) then that is the best outcome.

    A clean break is not always possible, there may be ongoing income needs for one party which means a clean break would not be reasonable. However, where a clean break is possible, this is achieved by entering into a final order (made by the court) or a consent order (made by agreement) which would include a clean break provision that you or your spouse or civil partner would not be able to claim against the other for income, capital, pension provision or upon the others death.

    It is a common misunderstanding that by applying for the decree absolute or final order, you automatically entered into a clean break financial settlement and that you do not need to do anything else. This is untrue, until you have entered into a clean break order with your spouse or civil partner you are not financially separated from one another. Which means you have open financial claims against one another in the future for income, capital, pension sharing orders and potentially on death.

    There have been some recent cases highlighted in the media, where after decades of separation ex-wives and husbands have reappeared seeking a share of wealth accrued well after the decree absolute was pronounced. They have been able to claim financially because they have not entered into a clean break order. These cases apply equally to civil partners.  This has resulted in protracted litigation because they have attempted to seek a share of post separation assets, which they would not have been able to have if they had entered into a clean break order at the time of their divorce or dissolution. If you have been divorced or had your civil partnership dissolved but have not entered into a clean break order, you should consider taking advice as to whether you could be at risk of further claims in the future.

    Collaborative law is a process that helps you and your spouse or partner separate in the most constructive and amicable way possible, so very important when there is a child(ren) involved.  The process can be used to deal with financial settlement and the arrangements for a child(ren) and allows you to move on with dignity.

    Collaborative law can also be used for the equally sensitive process of agreeing the terms of a pre or post nuptial or cohabitation agreement, taking away the stress and worry about what may happen if the couple separate. 

    Click here to visit our collaborative law page for more information.

    This is dependent on your individual circumstances. Hopefully arrangements for the family home can be agreed but if not an application can be made to the court for interim spousal maintenance or maintenance pending suit. The outcome is dependent on the case specific facts.

    If you own a property jointly you are both entitled to enter (including forcing entry if necessary) and occupy it, unless that right of occupation is withdrawn by an occupation order made by a court (in circumstances where there is violence or risk of violence). Both of you have rights of occupation by being each other’s spouse/partner and those rights of occupation can also be suspended by the court in appropriate circumstances. Where no such order has been made you can either agree what is going to happen to the property, or seek an order of the court for transfer or sale if you cannot reach an agreement.

    No, your claims against the property will still exist until agreement between yourself and your spouse/partner is determined by a Court, however any claim which you may subsequently make to move back into the house or have the property transferred to you, may be affected.

    The payment of child maintenance is a statuary obligation. If you are the parent of a child, who does not live with you, child maintenance payments continue usually until a child reaches 16 (or 20 if they're in full-time education up to A-level or equivalent), even if you do not spend time with the child.

    If you are a parent who is paying child maintenance for a child who does not live with you, then you should continue to pay child maintenance for that child until they reach the age of 16 or 20 if they are in full time education up to A-level or equivalent. Child maintenance can also cease if for instance the child stops being eligible for child benefits, the parent being paid stops being the child’s main carer, the parent being paid doesn’t want it any more, either parent dies or the paying parent is eligible for the NIL Rate because they’re a student or a prisoner.

    If you are intending on transferring an asset such as a house to someone else to deprive your spouse/partner of a claim on the asset, then the court has the ability to overturn the transfer. This is also the case where an asset has been sold to someone at an undervalue, the court will use its discretion and take into consideration the disposal and may redress the loss by giving the other spouse/partner more of the family assets in compensation for the disposal. Although tempting to try and hide or dispose of assets before you consider separating, the court has the power to overturn such transfers and disposals several years before the divorce/dissolution proceedings themselves.

    Although it can be tempting to not give a full account of your financial assets when you get divorced/dissolve your civil partnership, usually because your spouse will have legal representation this will be picked up on. It is usual practice in divorce/dissolution proceedings for each party to give full and frank disclosure of their financial information/circumstances. The job of a solicitor is then for example to review all bank statements and look for discrepancies and transfers out of the accounts to ensure that all information has been provided. If you fail to provide a full account or fail to answer questions about your financial affairs, a court can order that you be held in contempt of court and you could, if severe be imprisoned.

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