What do I need to think about when working out a financial settlement?
Unlike a number of jurisdictions around the world, England does not have a set formula for determining who gets what in the event of a divorce. This means that rather than take a ‘one size fits all’ approach, financial settlements can be far more flexible.
The starting point is that matrimonial assets will be divided equally, however there may be good reason for departing from that. The most common reason for departing from equality is that there is simply not enough money to go around, and it may be that more assets are given to the parent with primary care of the children for a period of time, because they have a greater need for it.
In deciding how a married couple’s assets and income should be divided upon divorce, the primary source of law is section 25 of the Matrimonial Causes Act 1973. Even if you aren’t intending to have a court decide the outcome for you and your spouse, the legislation should be the starting point for negotiation.
The court must “…have regard to all the circumstances of the case, first consideration being given to the welfare while a minor of any child of the family who has not attained the age of eighteen…”. The court must also have regard to the following factors in particular:
1. Current and foreseeable financial resources of both parties
There would be full and frank financial disclosure of the current financial circumstances, to include details of all property assets, bank accounts, business interests etc. The court can also take into account any asset that you or your spouse will have in the short term.
2. Current and foreseeable financial needs of both parties
You and your spouse would need to work out how you are both going to be housed and how you are going to meet your outgoings. You may need to find out what your respective mortgage capacities are, and how you can maximise your incomes both through employment and any benefits you may be entitled to.
3. Standard of living enjoyed during the marriage
The reality is that there is only one pot of money. Following the breakdown of the marriage that pot has to stretch to two households rather than one, and it is rare that the standard of living post marriage is the same as that during the marriage. However, where possible there should be parity, so that one of you isn’t in a one bed flat whilst the other is in a 4 bedroom semi-detached.
4. Ages of the parties and length of the marriage
The ages of you and your spouse are relevant mainly for earning capacity and provision for retirement. For example, the older you are, the less your potential to earn and increase your earning capacity. A short marriage may justify a departure from equality.
5. Physical or mental disability of either party
If one of you needs more of the matrimonial resources due to a disability then this will be taken into account.
6. Current and foreseeable contributions made by each party to the welfare of the family, including looking after the home and/or family;
If one of you has contributed significantly to the marriage beyond that which the other has, and your respective housing needs and income needs and entirely met, potentially the person with the greater contribution could receive a greater share of the surplus assets to reflect that.
7. Conduct of each party, if it is so serious that it would be unjust to disregard it
Conduct would include, for example, domestic violence to the extent that you were unable to work.
8. Any benefit of value to either party that will be lost due to the ending of the marriage.
This could be for example, rights under a widow’s pension, or survivorship on a property.
Ultimately the settlement that you reach must be fair and reasonable in all the circumstances.
If you would like help in determining what a fair and reasonable settlement could look like for you, please call Claire Tollefson on 01892 506 191 for a telephone call to discuss your circumstances.