Jacquie Birkett, a divorce solicitor and former chartered accountant, who is head of Family Law at Lancashire based law firm, Barber & Co Solicitors, has spoken out about why getting a financial settlement at the same time as divorce is so important, and here below, answers several questions on the matter.
Couples who opt for a divorce without coming to a financial agreement may come to regret it in the future. Even long after a divorce, an ex-spouse may make a claim in relation to financial issues arising from the breakdown of their marriage.
What part does a financial settlement play in a divorce?
It is absolutely vital for the parties to negotiate and arrive at a financial settlement on the breakdown of their marriage. Such a settlement means that both parties can move on into the future certain of their financial position and the options they now have. Any settlement reached should be set down in a final order made by the Court within the divorce proceedings.
Why is arranging a financial settlement so important?
Arranging a financial settlement provides certainty for both parties. This can help them make important decisions as they move forward into a new life and ensure that they do not need to worry about, for example, providing stability and security for their children.
What problems can arise if you do not arrange a financial settlement?
If an agreement is not reached as to how financial issues are to be dealt with on the breakdown of a marriage, then this can make it extremely difficult for both parties to move on. In principle either party can make a claim against the other in relation to those financial issues at any time in the future unless the party who wishes to make the claim has since remarried. If a claim is made then the assets of each party will be valued at that time and not at their value when the marriage broke down thus including lottery wins, inheritances, the fruits of business success and the increase in value of property in the intervening period.
Does not having a financial settlement affect how the marital home is divided up?
If there is no financial settlement, then it is likely that one of the parties remains in the former matrimonial home often with the children of the family. In these circumstances, it is very unlikely that the spouse who has left the home will have any lump sum with which to pay a deposit on a new property for themselves. This may cause problems when the children come to stay or may prevent them staying at all if it has not been possible to source suitable alternative accommodation.
For the spouse who remains in the property there may also be problems in the future. If they stay there until the children reach 18 then the equity in the property will usually be split equally at this time. If the property has increased in value and the spouse who has remained cannot afford to buy the other out, then the property will need to be sold. If a financial settlement was reached at the time of the divorce it may have been possible to argue that equality should be departed from and for the property to have been transferred into that spouse’s sole name.
What consideration is given to spousal maintenance in a financial settlement?
This is a complex area and very much depends on the particular circumstances of each individual case. Recent decided cases have concentrated much more on the needs of the spouse who is to be paid spousal maintenance and the need to set that spouse on the road to independence rather than earlier cases when much more generous decisions were made. It is vital to get expert legal advice in this area to ensure a fair outcome.
If I own a business, is my spouse legally entitled to half of it or any future earnings?
This is another complex area and very much depends on the type of business you own and how you own it. The Court is unlikely to deprive a spouse of his or her means of earning a living. It will not kill the “golden goose” but nonetheless the business will be considered along with all the other relevant circumstances of an individual case.
Are financial assets always split 50/50?
No. The starting point is that matrimonial assets should be split on a 50/50 basis however this may be departed from after considering the children’s needs, the length of the marriage, the ages, health and income earning capacity of the parties, the standard of living enjoyed during the marriage, needs and any other relevant circumstances. As always everything depends on the facts of the individual case and there is no set formula which can be applied.
What happens if I re-marry and do not have a financial settlement from my previous marriage?
Re-marriage will have an effect on your needs and obligations as well as your resources and this will be taken into account when reaching any financial settlement.
You should also note that in certain circumstances it is not possible to make a financial claim once you have re-married so it is important to take legal advice before you do.