Dealing with finances in divorce – what should be considered?

One of the main concerns for those taking advice from a family solicitor is often the costs of the divorce. In practice, the divorce itself does not normally cost very much. You do not normally need to instruct a solicitor to deal with the divorce itself, because the application can be made and progressed yourself online, in which case the only cost incurred would be the court filing fee which is currently £593.00. It is often advisable though to wait to apply for the final divorce order until financial matters have been resolved as otherwise there is a risk that certain benefits might be lost, such as spousal rights under a pension.

Where the costs tend to be higher is when dealing with a financial settlement alongside the divorce. Most people people say they simply want a fair financial settlement, however fairness is subjective and people are often surprised that things they think are highly relevant may not be considered so by a judge. By way of example, it is irrelevant whose decision it is to end the marriage or if someone has committed adultery, unless they are planning to cohabit with a new partner (in which case the cohabitee’s financial position may be relevant when it comes to considering needs).

Section 25 factors

There is no one right answer or fixed formula to calculate what is a fair and reasonable settlement. In any divorce settlement where there are children, the first consideration of the court is the welfare of any minor child of the family (that is a child who has not yet reached the age of 18).

After this, the judge has a checklist of factors (known as the section 25 factors as they are set out at Section 25 of the Matrimonial Causes Act 1973) which they must take into account including:

1. The current (and future) income, earning capacity, property and other financial resources of each of the parties
2. The financial needs, obligations and responsibilities of the parties now or in the foreseeable future
3. The standard of living enjoyed by the family before the breakdown of the marriage
4. The age of each party to the marriage and the duration of the marriage
5. Any physical or mental disability of either of the parties to the marriage
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 by looking after the home or caring for the family
7. The conduct of the each of the parties, if the court feels it would be inequitable to disregard it.

Clearly there can be conflicts amongst some of the points on the checklist. For example, the fact that one person has contributed all the assets to a marriage does not prevent the other party claiming against them, particularly if they are required to meet the needs of the parties and/or the children.

In a lot of cases, it will simply not be possible for both parties to continue to have the same standard of living they enjoyed during the marriage. Cut backs are likely to be required and indeed expected by the court.

There can also be arguments about somebody’s income capacity, that is what someone can reasonably be expected to earn going forward, particularly if they have an ongoing caring responsibility for the children.

When meeting with clients in an initial appointment, we will try to give them an indication as far as we are able to at an early stage as to the factors the court will consider and what is likely to constitute a fair settlement. This is helpful where people would subsequently like to have direct discussions with their spouse or attend mediation with a view to negotiating a financial settlement. However, it is often the case that financial disclosure is required so as to be able to give a more informed indication of the appropriate outcome based upon the financial circumstances of both parties.

When it comes to dealing with financial matters on divorce, it is helpful to see a solicitor early on in the process to talk through the benefits of resolving your case out of court, including options such as direct discussions, mediation, collaboration and arbitration. Before agreeing any settlement, whether directly with your spouse or at mediation, you should take legal advice from a solicitor to be able to properly consider whether or not it is in your interests to resolve matters on the proposed terms.

If you have any questions, please get in touch.