In seeking to explain the rationale behind the components to financial settlement on divorce, the Act gives primary consideration to the welfare and needs of any dependent children involved. Furthermore, Section 25 of the act also lays out other matters to be taken into consideration by the courts.
These are the following:
- The income, earning capacity, property and other financial resources which each of the parties to the marriage has or is likely to have in the foreseeable future;
- 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 before the breakdown of the marriage;
- The age of each party to the marriage and the duration of the marriage;
- Any physical or mental disability affecting either of the parties to the marriage;
- The contributions made by each of the parties to the welfare of the family, including any contribution made by looking after the home or caring for the family;
- In the case of proceedings for divorce or nullity of marriage, the value to either of the parties to the marriage of any benefit (for example, a pension) which, by reason of the dissolution or annulment of the marriage, that party will lose the chance of acquiring.
It is these considerations that inform the court’s approach to all components of divorce financial settlements, including those listed below.
Spousal maintenance is any regular payment made by one former spouse or civil partner to another who is otherwise unable to live a financially independent life.
The sum will be calculated on the basis of various factors, including:
- How much the non-independent party needs to live on
- How much income the respective parties have
- The potential earning capacity of the non-independent party
Spousal maintenance may not be paid at all if the marriage or civil partnership lasted less than five years. If it is paid in this situation it will only be paid for a specified period; this is known as a “term order”.
When a couple has been together for a long time, or if an ex-partner is unable to work, spousal maintenance may be paid for life.
Spousal maintenance may also be paid as a lump sum amount as part of a clean break settlement – please see below.
Some divorcing parties may wish to obtain the finality of a “clean break” settlement on divorce, whereby all financial obligations are ended.
A clean break can incorporate a sum in respect of spousal maintenance. This could be a lump sum which is then put into a savings account or invested in a way that provides a regular income.
One advantage of a clean break settlement is that the divorcing parties become free of financial ties once it has been agreed upon or ordered by the court. However, a clean break settlement cannot take account of child maintenance payments – these are a separate matter.
Division of Property
Around one-third of all divorces in the UK involve shared assets worth between £500,000 and £1 million, and in most cases this is largely accounted for by real estate property. But it is not only the value of the asset that is important; usually the property concerned also serves as the family home.
Courts have the power to order both the sale of property and to determine how the proceeds of a sale are to be divided. It is useful to note that the courts do not assume a 50/50 split of assets to be the starting point in a financial settlement and each case will be examined based upon the individual circumstances.
Additionally, the court can order the ownership of one property to be transferred from one divorcing party to the other to form part of the financial settlement.
In England and Wales, courts can apply a ‘Mesher’ order which allows deferral of the sale of the home until a trigger event, such as when the youngest child turns 18 – this then enables one party to stay in the family home to bring up the children in the knowledge that following the date of the trigger event, the house will then need to be sold.
A court may also make a ‘Martin’ order, typically when there are no children involved, which will defer the sale of a property and entitle one party to remain living in the house for life or until they remarry.
Other than the family home, the pension of the main earner is often the most valuable asset in a marriage, so it is particularly important that this component of a financial settlement is given proper attention. Up until December 2000, a spouse who had not worked during the course of a marriage was often left with no pension entitlement on divorce.
Because pension assets are split immediately this can help form part of a clean break settlement. Division of the pension pot can be sought from the court as part of a Pension Sharing Order.
Pensions are divided as a percentage of a stated amount determined by the scheme managers, with the amount to be transferred calculated the day immediately prior to the date on which the pension sharing takes effect.
In exceptional cases, courts may make a Pension Attachment Order instead of a Pension Sharing Order. However, in contrast to pension sharing, a Pension Attachment Order obliges a pension scheme to pay the non-member’s former-spouse or civil partner a stipulated percentage of monthly payments or cash lump sum upon the member’s retirement.
However, a Pension Attachment Order has several disadvantages. For example, it may prevent a clean break settlement or result in the loss of monthly payments to the other party if the pension scheme member dies without life assurance before reaching retirement.
Lawyers for Financial Settlement on Divorce
Divorce is inevitably an emotional and stressful process and not every couple will need to go to court to reach a financial settlement, however, by seeking reliable, experienced legal advice, you will give yourself the best possible chance of reaching a financial settlement in your best interests and of avoiding any unnecessary stress or contention.
Here at Wellers, we are committed to making the divorce process clearer, simpler and as amicable as possible. Talk to our divorce lawyers today about your situation, your aims, so we can discuss how we can help you through the process.
Contact our office in Bromley today to arrange an appointment with a family law solicitor on 020 8290 7992. For our Surrey team call on 01372 750100, for Sevenoaks the number is 01732 457575 and for central London please call 020 7481 2422.