Divorce and Money
When it comes to dealing with money and divorce, it is important to know what has to be taken into account and the powers available to arrive at fair decisions.
For most couples, the basic problem is how to finance two separate households from income and assets which previously provided for only one.
The first consideration of the courts is the welfare of any children, although in most cases they have little power to order maintenance for children because that function is currently performed by the Department for Work and Pensions although parents can make their own financial arrangements and the Child Maintenance Options website offers information on this. See also our articles on divorce and child custody and divorce and child maintenance.
The Matrimonial Causes Act 1973 sets out the factors to be considered by the courts in deciding questions about money. The courts will consider:
- on the one hand, the income, earning capacity, property and other financial resources available and, on the other hand, the financial needs, obligations and responsibilities, which each of the parties to the marriage has or is likely to have in the foreseeable future;
- the standard of living enjoyed by the family prior to the breakdown of the marriage;
- the age and health of each party to the marriage and the duration of the marriage;
- 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 looking after the home or caring for the family;
- the value to each of the parties to the marriage of any benefit (for example, a pension) which, by reason of the dissolution or annulment of the marriage, a party will lose the chance of acquiring.
Essentially, the courts, or the solicitors or mediators negotiating in anticipation of obtaining a court order, will apply these factors to the family assets which are available to be split between a divorcing couple. It is a process of listing all sources of finance to discover how big a cake is available to be cut up and then achieving a fair and reasonable division.
The court has virtually unlimited powers to transfer and divide assets between spouses and usually does this by using the following types of order, for one or other of the spouses, or for the child(ren), together known as ancillary relief:
- an order for maintenance pending suit;
- a periodical payments order;
- a secured provision order;
- a lump sum order;
- a property adjustment order; and
- for a spouse only, a pension sharing/attachment order.
In exercising its powers, the court has an obligation to consider whether to make an arrangement which will bring about a ‘clean break’ between the parties as soon as is reasonably possible. In most cases this does occur.
Recent case law has made significant changes to the approach of the courts when ruling on the division of assets on divorce. In general, ‘matrimonial property’ (wealth generated during the marriage) is regarded as warranting an approximately equal division and non-matrimonial property (which is brought into the marriage or created independently after it ceases) and belonging mainly to the prerson introducing or creating it.
In 2017, the Court of Appeal ruled that a future inheritance which is certain could be taken into account in the financial settlement also: certain inheritances are relatively common in countries with ‘forced heirship’ laws.
A landmark case in 2010, however, changed the landscape in ‘big money’ cases in which a pre-nuptial agreement is made. In it, the Supreme Court ruled that a ‘pre-nup’ agreed between a German heiress and her ex -merchant banker husband should stand. In the view of the court, both the ex-spouses were sophisticated adults who should be bound by what they agreed in advance would happen if their marriage failed.
In 2015 two important cases were decided. In one, the Court ruled that a woman whose ex-husband was retiring should not continue to receive the previously ordered maintenance for life and that she should get a job to support herself. In a second, a woman who divorced her then impecunious, but now multi-millionaire husband more than a decade ago was given the right to open an application for financial support from him.
Also in 2015, the Supreme Court delivered important judgments allowing wives whose ex-husbands had under-disclosed the true amount of their wealth to reopen their previously agreed financial settlements.
The thing that surprises most clients is that the courts will not take conduct into account except in the most extreme circumstances and if it would be unjust to ignore it. The courts are mainly concerned with practical money matters.
The announcement of a review of the area in 2016 was made even more timely by cases decided late that year and early in 2017 which gave highly mixed messages, throwing the whole area into more uncertainty again.