A Guide to Divorce Settlements

Divorce settlements can be challenging, complex and lengthy, particularly if a couple cannot reach a mutual agreement over one or more issues.

When it comes to dividing up the assets of the marital home, the outcome can be especially difficult if one spouse stays in the house and one moves out. Who gets what? What happens to the property that was purchased with “joint” money ? How is the equity divided?

These are tough, but not impossible questions to answer. The agreement will depend on the couple’s monetary assets based on “the totality of their relationship”, which includes all aspects of the marriage including the length of time spent together, assets acquired over that time, debt accrued during that period and responsibilities undertaken for one another .

Marriages or civil partnerships that have lasted many years, decades perhaps are more complex in that there are greater emotional ties and assets involved. This makes the process of settlement even more difficult.

Preparation for Settlement

In a marriage or civil partnership, finances can be one of the main areas of contention. The main or only provider from a financial perspective must continue to provide financial support to the spouse during proceedings until such time as a divorce or dissolution is reached.

Even if the main earner leaves the home, the remaining spouse is entitled to request a contribution towards household bills which is payable until the divorce is finalised. If the partner refuses to contribute, this can increase feelings of hostility which can make proceedings difficult and often results in a breakdown in communication. If the supporting partner fails to contribute, the spouse can apply to the court for an interim financial order. This order will ensure that certain financial needs are met until such times as a settlement is reached.

When divorce proceedings begin, it is recommended that individuals take a number of steps to ensure that they are protected from a financial perspective. This can include:

Closing joint bank and credit accounts, particularly if there is concern over one party or abuse is suspected.

Where the home is owned by just one of the couple, the other can register their home rights. This will stop the house being sold without agreement by both parties.

In some cases, a spouse may attempt to hide or dispose of assets to prevent them from being included in the divorce settlement. Where this is suspected, it is important to obtain legal advice.

Children and Finances

Children are an important consideration in any financial settlement. The main considerations with regards to the children of the marriage/civil partnership is who will look after them and how much child support will be paid if one spouse does not live with the children on a full time basis

It is important to remember that while there may be a deterioration in the relationship between a couple, the welfare of the children should be paramount. This is particularly relevant if the children are under the age of 16 years. Children have several basic needs, one of which is access to a home. This may mean that the child and the remaining spouse can live in the home and the spouse who left may be required to pay maintenance. In some situations however, this is not possible or appropriate, usually when the home must be sold.

Fairness

There is no legal calculation that defines how assets and finances should be split during a divorce. The reason for the divorce will be one of the main driving factors behind the financial award that the couple can claim as individuals. However, this is only applicable in very specific circumstances. It would not, for example mean that if the grounds for divorce were due to adultery, the spouse is not entitled to higher amounts of compensation in the financial settlement. A number of elements will be taken into consideration such as:

The income of each party and any other sources of finance. Each party must provide evidence of their finances such as earning and pension entitlement.

The financial requirements of each party

The duration of the marriage or civil partnership. When a marriage or partnership has lasted for many years, the individual with the lowest wealth will often be awarded a higher settlement and maintenance payments.

How much investment each party has made to raising children and the family home.

Living standards of the family before the relationship began to break down. Standard of living is often used when there are significant assets to be divided as part of the settlement.

Options

The purpose of a settlement is for each spouse to define what they believe to be acceptable based on their circumstances. Arrangements will consider issues such as debts, income and assets.

Often, a clean break agreement will be drafted. This means that the couple will finalise their relationship by dividing everything they have owned including pensions, property and investments. This agreement allows a final settlement which, once agreed cannot be disputed or additional claims made in the future.

One of the most effective alternatives to this agreement is payment of spousal maintenance for an indefinite period of time or on a temporary basis. This may be suitable for a couple where one party has taken a step back from their career to raise children or maintain the home and they will require financial support as they re-enter the world of work or training.

There are many considerations that must be made when couples settle their finances. These include:

Who will live in and keep the family home or whether the property will be sold.

How pension funds will be divided

Any issues around life insurance or investment policies

Changes that may need to be made to wills. When a divorce is complete, the former spouse will be automatically removed as beneficiary.

 

Negotiations

The settlement process may be complicated and may need advanced levels of negotiation.

Once divorce proceedings are underway, it is strongly recommended that couples reach a decision outside of court and without intervention. Negotiations can begin when each party has made a full and honest disclosure of their financial position. Where one spouse is untruthful about their position, this can result in a decision being overturned.

Once the disclosure is made, objectives will be defined. This is followed by negotiation in terms of assets and financial arrangements. An application to the court for a consent order may need to be made. The court will then evaluate the agreement and confirm whether it is fair and reasonable. If they believe it to be so, they will issue an order.

Where couples cannot reach an agreement, the court will intervene, assessing the position of each individual and setting out the arrangements.

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