Guide To Money & Property When Separating

Guide To Money & Property When Separating

Guide To Money & Property When Separating

We aim to give clear and positive advice to assist you in reaching a fair and cost effective solution to the financial issues arising upon separation.

We have specialists in resolving complicated and high net worth cases. Whatever your financial circumstances, a member of our family law team will be able to assist.

Dividing assets

This section will deal with the liquid assets of the relationship and the theory behind their division.

Following the House of Lords decision in White v White, HL (2000) 2 FLR 981 and subsequent cases the court has decided that the main objective to be achieved when apportioning capital assets between parties should be one of fairness.

Although the Judges did not decide that the starting position should be one of equal division, but in practice it is recommended this should be considered and departed from only if there is good reason.

The court has reinforced the need to apply the criteria set out at S25(2) of the Matrimonial Causes Act 1973 (as amended). It is on this basis that we will assist you in the consideration of and negotiations necessary to fairly divide the marital assets.

Both parties will be required to disclose all their assets.

Valuations of those assets and details of all liabilities (e.g. mortgages) will be obtained.

Once we have full information we will then advise on the most appropriate division of assets.

We may refer you to outside experts for advice on the following issues:-

  1. Life and endowment policies - we may need advice from Independent Financial Advisors or our in-house investment services team on the merit of keeping, transferring or cashing in policies or the cost of replacing the same.
  2. Business and shares - we may need tax and valuation advice from accountants regarding any business interests (i.e directorships and/or shareholdings) of either party or the assistance of our corporate team regarding the long term implications of any decisions made.
  3. Pensions - Please see the separate section on this special issue.

Most cases do result in an agreed settlement rather than a court imposed order, although it may be necessary in certain cases to commence court proceedings in order to obtain sufficient information to enable a negotiated settlement to be achieved.

Maintenance on marriage breakdown

In marital or civil partnership proceedings there may be circumstances which entitle one party to claim an income top-up from the other.

We will advise you on the merit of whether a claim can be made or opposed and whether such a claim should be for a short or long term.

Generally the types of maintenance are:

  1. Ongoing maintenance - this is paid to a party until either party dies, or the receiving party remarries or enters a civil partnership, or a court order changing the arrangements.
  2. Term maintenance - this is paid to a party for a limited period, eg. 2 years, or until either party dies, the receiving party remarries or enters a civil partnership or a court order. In certain circumstances the term period can be extended.
  3. Capitalised maintenance - this is where a party would be entitled to maintenance and there are sufficient realisable assets to provide the party with a capital fund to invest and from which to draw an income for the future.

The maintenance can either be substantive eg. £100 per week, or nominal eg. £1 per annum - the latter being used to keep a party's claim alive.

In all cases it must be considered whether or not all claims should be extinguished - this would result in an arrangement known as a "clean break".

Nowadays many parties both work full time and income claims may not be appropriate.

Sometimes it may be appropriate to provide one party with more of the available capital in place of maintenance to achieve a clean break or provide capitalised maintenance which would achieve the same result.

If a clean break is achieved then neither party will be entitled to raise any future claims against the others income.

Maintenance can be varied up or down depending on each parties financial circumstances.

Property

Most families will have a privately owned home. By its very nature, a relationship breakdown will result in the need to decide what should happen to the property. The needs of the children are the first consideration and maintaining a suitable home for the children of utmost importance.

There are 2 main options available and we will be able to advise on the most appropriate option for your circumstances taking all factors into consideration.

  1. For the property to be sold and the net proceeds divided between parties (not necessarily on a 50/50 basis).
  2. For the property to be transferred to one party (usually with the other being released from the mortgage) on the following basis:-
    • Outright i.e. with no payment to the departing party.
    • Lump sum i.e with a cash payment or capital adjustment awarded to the departing party.
    • Retained interest i.e with the departing party keeping a percentage interest or fixed amount of equity in the property which will be received in the future upon the sale of the property. The sale could be triggered by an event such as the youngest child attaining the age of 17 or finishing full time education.

In many cases resolving the housing needs of the parties can be the key to an overall settlement.

We will be able to assist with the resolution of the division of the contents of the property but this can be a costly exercise and clients are usually advised to prepare an inventory of contents and try to divide them by agreement.

We will also advise on the severing of joint tenancies and the merits of executing a will.

Our Conveyancing department and our Wills & Trusts department are available to assist with all property and inheritance issues.

Child support

All parents have a legal obligation to financially support their child, usually until either the 19th birthday or until completion of full time undergraduate education.

The parent with whom the child resides provides this financial support by keeping a roof over the child's head and running the household.

The normal type of financial support from the non-residential parent is commonly known as maintenance.

If the residential parent is in receipt of state benefits (excluding child benefit) there is no option but for the Child Support Agency ("CSA") to become involved. The CSA will send forms to the non-residential parent to complete so that a maintenance assessment can be calculated. Co-operation with the agency is encouraged in these circumstances.

If neither parent is in receipt of income support then choices are available which are:-

  • To try and reach an agreement, or;
  • Apply to the CSA.

Agreement

There is no exact science to the amount payable by an agreement. The figure is usually achieved by discussion, negotiation and by assessing the monies required to provide for the running of a home and for the welfare of a child or children, whilst considering the financial means of both parents.

An agreement can be evidenced in a formal maintenance agreement or within divorce or civil partnership proceedings as an agreement incorporated into a court order.

The maintenance level agreed is not written in stone and can be varied upwards or downwards depending on the financial circumstances of the parent and if they change over time.

Child support agency

If agreement cannot be achieved an application to the agency by either parent can be made. We can provide you with our best calculation of the potential outcome of any assessment and advise how best to proceed.

For more information please visit the DSS and CSA websites.

Pensions

This is a highly complex area of law and we will advise you on the most appropriate way in which your pension provision should be considered in the context of your relationship breakdown.

We will obtain the information from your pension provider which will be required for negotiations or by the courts.

The purpose of this section is to explain the options available within negotiations or to the courts in respect of pension provision. On 1st December 2000 The Welfare Reform and Pensions Act 1999 introduced pension sharing as an option. As the law is complex the information on this site will be relatively limited and we would strongly suggest that advice from lawyers is obtained before finalising any settlement which has a pension aspect.

There are three methods of dealing with pension provision but there is no absolute entitlement to a share or claim against the pension of a spouse or civil partner. S25(2) of the Matrimonial Causes Act 1973/Schedule 5 Civil Partnership Act 2004 still dictate how financial provision on separation should be finalised.

Offsetting

This is a method by which it is agreed that one party will receive a greater proportion of the realisable (i.e. cashable) capital assets (see section on dividing assets) and in return the other party will retain his/her pension in its entirety.

Earmarking

This is where one party can claim a percentage of the other party's pension entitlement upon the retirement of the party with a pension.

A claim can be made against:

  • The lump sum element
  • The annual income (annuity)
  • The death in service benefits

These arrangements have not been popular with lawyers or the Courts for a variety of reasons, not least that the claiming party would have no control over the fund or the retirement age of his/her partner. If the claiming party remarried or entered into a further civil partnership he/she would lose any entitlement to the earmarked annuity. The earmarked provision in nearly all cases would not survive the death of the pensioned party.

Sharing

This involves the sharing of one party's pension fund with the other. A percentage of a member's fund will be transferred (either within the existing scheme rules or to an alternative scheme) into his/her partner's pension fund. Unlike earmarking the benefits will then be under the control of the receiving party. They will survive the member party's death and not be affected by remarriage or entering into a further civil partnership.

There are drawbacks e.g. for the member party as their fund will be depleted at the time of the final settlement. However, the introduction of this option does provide greater flexibility for negotiated settlements.

It will be necessary to get specialist advice from either the scheme trustees or financial advisers as to whether it is in both parties interests for one party's pension fund to be shared.

We will be able to arrange this specialist advice, analyse this and thereafter, advise you on the way forward in your particular circumstances.

Section 25(2) of the Matrimonial Causes Act 1973/Schedule 5 Civil Partnership Act 2004

This sets out how the court exercises its powers when considering the level of a financial order. The court shall in particular have regard to the following matters:

  1. The income, earning capacity, property and other financial resources which each of the parties to the marriage or civil partnership 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 in the opinion of the court be reasonable to expect a party to the marriage or civil partnership to take steps to acquire;
  2. The financial needs, obligations and responsibilities which each of the parties to the marriage or civil partnership has or is likely to have in the foreseeable future;
  3. The standard of living enjoyed by the family before the breakdown of the marriage or civil partnership;
  4. The age of each party to the marriage and the duration of the marriage or civil partnership;
  5. Any physical or mental disability of either of the parties to the marriage or civil partnership;
  6. The contributions which each of the 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;
  7. The conduct of each of the parties, [whatever the nature of the conduct and whether it occurred during the marriage or civil partnership or after the separation of the parties or (as the case may be) dissolution or annulment of the marriage or civil partnership], if that conduct is such that it would in the opinion of the court be inequitable to disregard it;
  8. In the case of proceedings for divorce or nullity of marriage or civil partnership, the value to each of the parties to the marriage or civil partnership of any benefit (for example, a pension) which, by reason of the dissolution or annulment of the marriage or civil partnership, that party will lose the chance of acquiring.