Financial Aspects of Divorce and Separation
Financial Aspects of Divorce and Separation
When considering divorce your greatest worry will perhaps be the financial implications for yourself and any children of the marriage.
The parties may have separated for a considerable period of time before a divorce is eventually granted and therefore in the vast majority of cases it is appropriate, and indeed, in some cases, essential, that the financial aspects of separation and divorce are agreed and dealt with by way of a written agreement. This is often referred to as a Separation Agreement. Such an agreement takes the form of a contract. Assuming that both parties have had the benefit of independent legal advice before signing such an agreement, its terms should be binding on both parties and should not be capable of being altered or changed in any way even after the divorce is subsequently granted by the Court.
On separation, there is often a family home to consider –
• How will the mortgage or rent be paid if one partner leaves?
• Will it be possible to save the home for the benefit of the children?
• If the family home has to be sold, how will the proceeds be divided to ensure that both parties obtain the fairest deal?
Apart from the family home, there is the question of how savings or investments should be dealt with or how other family assets such as the car, furniture, or jewellery should be shared.
If there are children of the marriage, then maintenance for them must also be resolved, either by agreement between the parties or, failing that, through the Child Maintenance Service (Child Support Agency).
Often, all the above matters require to be dealt with at the same time. We must therefore ask you to provide us with detailed information about your financial circumstances to enable us to advise you effectively on the best solution available to you.
Where couples are divorcing, it is often appropriate to apply to the Court for one or more of the following orders: -
• Property Transfer Order – adjusting or determining the parties’ interest in a property. This usually involves the transfer of property into the sole name of one of the parties and is of particular value when one spouse wishes to remain in the family home with the children after the divorce.
• Capital Sum Payment Order – an order for payment of a capital sum on divorce or within a period of time specified by the Court. Payment might be postponed until after a certain event, e.g. until after a house has been sold. Alternatively, an order may be made that the capital sum is paid by instalments over a period of time, e.g. where the spouse has little capital but does have a high income.
• Periodical Allowance Order – usually made on divorce but can also be made after the divorce is granted where there has been a change in circumstances. On the death or remarriage of the recipient of such allowance, such an order ceases to have effect. The Court is likely only to make such an order where orders for the payment of a capital sum or the transfer or property would be inappropriate or insufficient in the circumstances. Accordingly, payment of a periodical allowance is the exception rather than the norm.
Incidental Order – orders for financial provision which give the Court flexible powers in dealing with a variety of matters, e.g. an order for the sale of a property, for the valuation of a property, regulating the occupation of a matrimonial home, the use of furniture, etc.
Pension Sharing Order – applies sometimes where one party has a pension policy (or policies).
This order enables the Court to make an order requiring a proportion of the value of the pension scheme to be transferred into a different pension scheme held in the name of the other spouse. It is crucial when advising on financial matters within divorce that all pension rights are considered.
When all the financial details have been settled, hopefully by agreement, an order is made by the Court dismissing all further financial claims by both parties against each other. This means that after the order is made, both parties are free to make whatever financial arrangements they wish without fear that their former partner will make any claim against them after divorce.
Unmarried Couples and Civil Partners – may equally require advice about financial issues when separating. Unmarried couples and civil partners do not have precisely the same legal rights and obligations as married partners.
Urgent advice should be sought if you are separating and are not a legal owner of the home in which you live as you may have certain rights to occupy the home either as a spouse or even as a co-habitee of the legal owner or tenant.