Finances in Divorce
Family Law and Practice: Week 6 - Finances in Divorce
Learning Outcomes
Upon completion of this session, students will achieve a robust understanding of the law as it pertains to finances in divorce proceedings.
Aligns with Learning Outcome 1: Understanding financial consequences of marriage dissolution.
Aligns with Learning Outcome 2: Applying understanding through practical tools (e.g. Form E).
Session divided into three sections:
The Law / Orders Available
Procedure
Alternatives
Starting Point: Financial Orders
Definition: Financial orders are orders made by the court concerning financial settlements post-divorce, replacing the term originally known as "ancillary relief".
Reference to Legislation:
Governed by Part 9 of the FPR 2010, which discusses proceedings for financial remedy.
Definition of financial remedies: According to Part 2.3 FPR 2010, financial remedies are defined and the scope of court orders lies within the Matrimonial Causes Act 1973.
Available Orders
Three Main Categories of Court Orders:
Orders affecting the capital of the parties: Includes division of property or other assets.
Orders affecting the income of the parties: Concerns ongoing income support or maintenance payment arrangements.
Orders affecting the pensions of the parties: Adjustments and orders relating to pension rights and entitlements.
Timing for Orders:
Financial orders can only be made after the petitioner reaches the Decree Nisi stage in separation proceedings, unless for interim orders or those affecting children.
Question: Is there a time limit for making a financial order claim?
Time Limits for Applying
Strictly Speaking: No formal time limit barring a petitioner from making a financial order claim; however, stale claims are typically not entertained by the court.
Reference Case: Vince v Wyatt [2015] UKSC 14: wife’s claim was allowed even 18 years post-Decree Absolute, signifying that claims may still hold merit after extended periods.
Marriage Implication: A petitioner is barred from making a claim if they remarry, per Section 28 (3) of the MCA 1973.
Factors Considered by the Court
According to Section 25 (2) MCA 1973, the court considers:
a) Income, earning capacity, property, and financial resources each party currently has or is projected to have.
b) Financial needs, obligations, and responsibilities of each party in the foreseeable future.
c) Standard of living enjoyed by the family before marriage breakdown.
d) Age of each party and duration of the marriage.
e) Physical or mental disabilities of either party.
f) Contributions to family welfare, including-household responsibilities.
g) Conduct of each party if deemed inequitable to disregard.
h) Value lost due to the dissolution of the marriage regarding pensions and other benefits.
Orders Overview
Explore specific orders:
Maintenance Orders: Periodical payments for ongoing support.
Lump Sum Orders: One-time payment usually related to asset division.
Transfer/Settlement of Property: Adjustment and transfer orders.
Pension Sharing and Attachment Orders: Adjustments related to pension entitlements.
Interim Maintenance
Statutory Reference: Section 22 of the Matrimonial Causes Act 1973.
Allows periodic payments to one party for maintenance purposes.
Payments can be backdated to petition date but are typically bound to end upon the final order.
Important Case Reference: TL v ML [2006] 1 FLR 1263: Payments should reflect immediate rather than long-term needs.
Example: In wealthy cases, maintenance can be substantial; F v F [1995] 2 FLR 45 highlighted a £360,000 annual payment reflective of prior lifestyle and maintenance failures.
Legal Services Orders and Cost Allowances
Provision: Section 22ZA MCA 1973.
Orders can mandate a party to cover another’s legal costs, linked to divorce or related proceedings.
Criteria for the order requires proving inability to obtain legal services without these payments.
Maintenance - Periodical Payments
Statutory Reference: Section 23(1)(a) MCA 1973.
Legal obligation for periodic payments for an ordered term.
Payments can be for a specific duration or joint lives.
Payments may be altered based on application due to changing circumstances.
Automatically terminate on the death of either party or remarriage of the receiving party.
Court duty to assess for clean break opportunities: “the court must consider a termination of spousal maintenance with a transition to independence as soon as it is just and reasonable” (SS v NS [2015] All ER (D) 70).
Lump Sum Orders
Statutory Provision: Section 23 MCA 1973.
Allows the payment of a lump sum ordered by one party to the other or for a child’s benefit.
Payments may be deferred and structured over time.
Property Adjustment Orders
Reference: Section 24 MCA 1973.
Adjustments in property ownership to transfer interest to one party or child.
May also include sale orders establishing how proceeds are to be divided.
Sale and Division of Proceeds
Reference: Section 24 MCA 1973.
Allows property to be sold post-order and proceeds distributed among the parties.
Necessary considerations include property valuation, mortgage balance, and sale costs.
Pensions
Three approaches regarding pension division:
Offsetting: Taking assets in exchange for pension value.
Earmarking: Attaching part of pension fund to one party, payable at retiree’s pension event.
Pension Splitting: Dividing pension fund directly between parties.
Pensions (continued)
Pension Sharing Orders: Adjusting shares under Section 24B MCA 1973; can specify amounts or percentages.
Earmarking Orders: Sections 25B to 25D MCA 1973 detail employer's obligations to share pension income with another party.
Importance of proper financial advice is emphasized.
Child Support
Post-1993 conditions where the court cannot intervene in payments from non-resident parents.
Delegate power to initial CSA (Children’s Support Agency), now transitioned to the Child Maintenance Service.
Maintenance calculations can be computed online: www.gov.uk/calculate-your-child-maintenance.
Child maintenance can be included in divorce financial settlements, enforceable by the court.
How the Court Applies Section 25 Factors
Assets are presumed to be divided equally initially.
Rebuttal of equality can occur under specified circumstances as outlined in White v White [2000] 2 FLR 981.
Three Strands of Fairness: 1) Needs, 2) Compensation, 3) Sharing.
Departures from Equality
Factors leading to unequal asset division include:
Inheritance pre- or during marriage, pre-marital contributions, post-separation earnings, and business assets.
Noting the ways courts have differentiated assets as matrimonial or non-matrimonial based upon these factors and respective case law such as Rossi v Rossi [2007] and K v L [2010].
Wealthy vs. Less Wealthy Considerations
Wealthy parties may have needs interpreted broadly.
Less wealthy parties typically prioritize needs over sharing compensations.
Procedure for Financial Claims in Divorce
Process Summary:
Application form submitted to court.
Served upon the respondent and any third parties affected.
Completion and exchange of Form E at least 35 days pre-first appointment.
Submission of a chronology, statement of issues 14 days pre-first appointment.
First Appointment (FA).
Financial Dispute Resolution Appointment.
Final Hearing.
Form E Details
Essential template containing:
Total assets and liabilities of each party, income/outgoings, and future financial requirements.
Must include historical marriage details, contributions, and conduct.
Consent Orders
Used when matters can be settled without extended litigation.
Involves drafting formal agreements subject to court approval.
Illustration: Example used in practice.
Alternatives to Court Process
Preference for resolving disputes outside court channels.
Methods include mediation, negotiation through solicitors, and collaborative law.
Importance of fair settlements and proper legal guidance in all alternatives discussed.