How are Matrimonial Finance Disputes Settled during Divorce?
Blog written by Sam Dickinson.
You have both decided to part separate ways, agreed, or disagreed upon child arrangements, and now there comes the argument about finances. You’ve probably got a lot of questions around where you stand legally, and there’s a lot you should probably consider. So, we bring you general guidance on how matrimonial finance disputes are settled during divorce and things you should expect.
It is widely considered the process of dividing assets during divorce is a hotly contested issue, mainly because the Court is obliged to use discretion in deciding who gets what. Discretion is granted under Section 25 of the Matrimonial Causes Act 1973 in making decisions over property, pensions, savings, and child maintenance. These decisions are also assisted with past cases, known as case law.
Are there other methods of settling matrimonial finance disputes?
Of course! And it’s quite simple too, you and your spouse come to an agreement yourselves, or if you need some help, you can go through what is called mediation.
Mediation is a cost-effective alternative in settling matrimonial finance disputes outside of the Court. The Courts will expect mediation to be considered before entering proceedings, otherwise may give reasons to decide less favourably on your claim.
If you can come to an agreement, this will then be documented into a Financial Remedy Order, also known as a Consent Order, and is sent to the Court to be approved as part of your divorce application.
If you cannot agree in mediation, then your solicitor will make negotiations with the other side. In our experience, negotiations have proven to be successful, but in the event that both parties cannot agree, then you will likely be presented with the option to proceed to Court.
How are assets divided?
This largely depends on whether there are any dependent children under the age of 18. The Court has a duty to decide all the circumstances but not before the consideration of the welfare and needs of any dependent children. This factor is considered on top of the following:
- a)The income, earning capacity, property, and other financial resources which each of the parties to the marriage has or is likely to have in the foreseeable future. - this usually refers to taking a 50/50 split of what assets have been gained during and after the marriage, should it have proceeded further.
- b)The financial needs, obligations, and responsibilities which each of the parties to the marriage has or is likely to have in the foreseeable future. - monthly outgoings and liabilities, such as mortgages, loans, bills etc. Who has a greater need, or is the needs of both equal? What is determined in (a) can then be divided based on needs.
- c)The standard of living enjoyed by the family before the breakdown of marriage. - usually, this will only apply to cases where the assets are substantial and exceed the reasonable needs of the parties.
- d)The age of each party to the marriage and the duration of the marriage. - the longevity of the marriage, for example, if the marriage is a short marriage, then sometimes (a) and (b) would not apply, and both parties would resume their lives with the assets owned before they got married.
- e)Any physical or mental disability of either parties to the marriage. - if either party has a physical or mental disability, then this will impact on income, and earning capacity, as well as their need for accommodation, expenses, and life expectancy.
- f)The contributions which each of these parties has made or is likely in the foreseeable future to make to the welfare of the family, including any contribution by looking after the home or caring for the family. - In traditional cases of breadwinner and homemaker, the Courts have on many occasions made it clear that the contribution of the custodial parent in raising the children is entirely equal to that of the breadwinner. This takes into consideration the life that the homemaker would have achieved if the family had not formed and has therefore become to his or her detriment.
- g)The conduct of each of the parties, if that conduct is such that it would in the opinion of the court be inequitable to disregard it. - exceptional bad behaviour such as extreme domestic abuse. Adultery, as many believe it to be so, is not considered as exceptional bad behaviour.
- h)In the case of proceedings for divorce or nullity of marriage, the value to either of the parties to the marriage of any benefit which, by reason of the dissolution or annulment of the marriage, that party will lose the chance of acquiring. - where pensions are involved and a party has died after divorce, they are not entitled to the deceased’s pension, unless there are other specific provisions made to the contrary.
How are these assets paid?
The Court has the power to make orders that separate finances following divorce, dissolution of a civil partnership, or judicial separation.
These are known as consent orders and these often depend on the circumstances of individuals and how assets were formed during the union, and may include one or more of the following:
- 1)Lump sum payment- This is where the Court has decided that one party is to pay the other a lump sum or continued payments to the value of the lump sum. This order can also be made instead to compensate another claim, for example, spousal maintenance.
- 2)Property Adjustment Order- This order sets out what should happen to the family home, i.e., who’s name it is in, who has the right to live there and until what time. There are various types of Property Adjustment Order, for example, a Mesher Order instructs a property can only be sold until a triggering event has occurred, such as the remarriage of the occupying party, unless both parties agree to sell.
- 3)Clean Break Order- This typically applies to situations where there are no financial assets to split, but you still want to cut all financial ties between you. Without a Clean Break Order, your financial obligations to each other will continue indefinitely, and despite your Decree Absolute being issued, the other party can still pursue your finances later on.
- 4)Maintenance Order - Also known as Spouse Maintenance, are often issued where one party is financially weaker than the other and considers for how long the liability applies. Entitlement to receive spousal maintenance depends on factors such as the length of the marriage, the wealth of each person, the needs of each person, and the role each person played during the marriage.
- 5)Pension Sharing Order - The Court may also decide that pensions should be split. If so, a Pension Sharing Order will outline how each pension pot should be split, relying on factors such as age, length of the marriage, and future career prospects.
If you’re making a financial remedy application to the Court, you should be aware that the above is very likely to apply to your circumstances in one way or another. The law that surrounds matrimonial finances is highly complex and requires an expert lawyer to help guide you through the process.
What happens at Court?
After submitting your financial remedy application, you will be asked to sit in two to three hearings, depending on how quickly a settlement can be reached. The Judge will aim to give as many chances as possible to reach a settlement before they make a decision themselves.
The first hearing, also known as the First Appointment, will involve the Judge exploring the evidence that he or she is presented with. This is only to establish the facts, and normally no one, at this stage is permitted to argue their case.
Following this, the second hearing is where the Judge will aim to settle the dispute with an indication as to a reasonable settlement. This is the financial dispute hearing, and if the matter is not settled at this stage, the case will then be listed for a third and final hearing. Throughout the procedure, negotiations will occur between both parties. Your advocate will of course defend your interests to the best your circumstances allow.
The provisions set under Section 25 of the Matrimonial Causes Act 1973 allow the Courts to use discretion when dealing with the varied circumstances involving matrimonial finances. Nevertheless, the outcome will always depend on the facts.
Please be aware that nothing in this article constitutes legal advice on which you should rely. This article is published for general information only and professional legal advice should always be sought before taking any action related to or relying on the content of this article. Our Terms apply to this article.
This blog was written by Sam Dickinson, Head of family law experts at the firm. Sam regularly advises clients on matters involving matrimonial finances and takes instructions to negotiate a settlement prior to court proceedings. Sonia is also an experienced advocate and regularly represents her clients in court. To find out more about our family law services, click here.
This blog was written by Sam Dickinson, Head of family law experts at the firm. Sam regularly advises clients on matters involving matrimonial finances and takes instructions to negotiate a settlement prior to court proceedings. Sonia is also an experienced advocate and regularly represents her clients in court. To find out more about our family law services, click here.
