Finances and divorce
Nick Ingrey

Finances and Divorce

One of the most important areas to consider when going through divorce or dissolution proceedings is how the financial claims arising out of the breakdown of your marriage/civil partnership are to be addressed.

The financial claims arising out of the breakdown of a marriage or civil partnership are resolved by references to the statutory criteria, which are set out in Section 25 of the Matrimonial Causes Act 1973 (as amended). The overriding objective is to achieve a fair outcome.

In cases where there are dependent children to consider, the Court’s primary consideration will be to ensure that the children and their primary carer are securely housed.

Essentially, a two-phased exercise will be conducted against the background of the Section 25 criteria, namely:

  • computation of the parties’ resources as identified in Section 25(2)(a) MCA 1973;
  • distribution of those resources by reference to the three principles of need, compensation and sharing.

The principle of need involves consideration of the financial needs, obligations and responsibilities of the parties; of the standard of living enjoyed by the family before the breakdown of the marriage; the ages of each party; and any physical or mental disability of either party. The parties’ needs are assessed generously, and are not a determinative factor to entitlement.

The principle of compensation is aimed at redressing any material prospective financial disparity between the parties arising from the way they conducted their marriage. The concept of compensation for relationship-generated disadvantage might also extend to disadvantages directly related to entry into, or exit from, the marriage. In the case of McFarlane, justification for compensation involved the sacrifice of the wife’s career so that she could look after and care for the family. It might equally seek to address the value of benefits which, on divorce, a party may lose the chance of acquiring.

The principle of sharing reflects an acknowledgement that marriage is a partnership of equals and that when it ends, fairness requires each party to receive an equal share of the fruits of that partnership - unless there are good reasons to the contrary. This approach is influenced by the contributions which each party has made, or is likely in the foreseeable future, to make to the welfare of the family, and to the duration of the marriage. This principle also involves, where exceptionally appropriate, consideration of each party’s conduct, if it would be inequitable to disregard it.

In most cases, the distribution exercise starts and ends with the principle of need, as more often than not there are insufficient assets to provide for the requirements of both parties.

In practice, District Judges, who deal with the majority of the financial claims arising on divorce, seek to quantify the available resources before focusing upon the welfare of the parties’ children as they undertake the distributive exercise described above. In a vast majority of cases the Court then addresses the following sequential objectives:

  • firstly, aim to house the children and their primary carer;
  • secondly, seek to house the secondary carer, both to facilitate contact and to avoid discrimination and unfairness;
  • thirdly, divide any surplus so as to achieve a fair result, always recognising that fairness will generally require the fruits of the marriage to be divided equally, unless there are compelling reasons to the contrary; and
  • finally, wherever possible, seek to terminate the financial independence between the parties at the earliest date practicable. If a “clean break” will not produce a fair outcome, aim to augment the capital provision by sharing the parties’ available income by way of an appropriate spousal maintenance order.

How can we help?

Our team has extensive experience in dealing with the financial claims arising out of the breakdown of a marriage and a civil partnership. The team regularly handles cases involving business, properties, trusts and other assets, sometimes totalling millions of pounds. Irrespective of the extent of the assets which are involved, it is vitally important that the financial claims arising out of the breakdown of the marriage are resolved and you take professional advice at the earliest opportunity.

 

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