Divorce and financial implications
Obtaining a divorce can be a stressful and emotional process.
You will have to make some very important decisions that will affect the rest of your life.
Receiving thorough and professional advice can help enormously in assessing your options and addressing the necessary legal formalities. Our lawyers are well-versed in making the process as straightforward as possible.
There may be several issues to consider; from deciding future arrangements for your children, to dealing with your finances.
The process of getting divorced is dealt with separately from the division of assets and the arrangements for the children. Obtaining a divorce is a simple procedure; reaching a decision about the finances is where matters can become more complicated.
How long does the divorce process take?
It is a paper process which typically takes around five to six months but it can take longer if there are financial matters to be resolved.
How is the divorce initiated?
Either party can apply for a divorce by lodging a divorce Petition at Court. The applying party is called the Petitioner, and the receiving party is called the Respondent.
You can only apply for a divorce if you have been married for at least one year.
You will need to prove to the Court that the marriage has irretrievably broken down, evidencing one of five specific facts:
1. The Respondent’s adultery
2. The Respondent’s unreasonable behaviour
3. The Respondent’s desertion for 2 years (this is rare and difficult to prove)
4. Separation for 2 years and parties both consent
5. Separation for 5 years – there is no need for the Respondent to consent
The Petition can be agreed with the Respondent before it is sent to Court. In any event by far the majority of Petitions are undefended.
What happens next?
As the law currently stands, the receiving party must acknowledge service of the petition and state whether or not they intend to defend the divorce. If undefended, the Applicant can make an application for the first decree of divorce, the Decree Nisi. This order is pronounced by a judge and shows that the marriage has irretrievably broken down. It does not, however, dissolve the marriage at this point. There is a mandatory six week and one day time period after the Decree Nisi is pronounced before the Applicant can apply for the Decree Absolute. This is the final order of divorce, and dissolves the marriage.
Once the Decree Nisi has been pronounced, the court can make an order dealing with the parties’ assets. It can be unwise to apply for Decree Absolute until financial matters are settled, as a spouse has certain benefits (for example, with regard to a pension) during marriage which they lose once the marriage has been dissolved.
The procedure will be different when the new no-fault divorce law has been implemented.
What if I live abroad, have property abroad, or if my spouse is abroad?
It may be that you have the option of beginning divorce proceedings in more than one country. We help clients decide which jurisdiction is better for them and their family, as this can have an impact on the financial outcome of divorce proceedings, the time and costs involved, and the arrangements for children.
“Forum shopping” is the term used to refer to situations where parties, because of their personal circumstances, have the option to start proceedings in more than one country, and where issuing proceedings in one particular country may be more advantageous to one of the parties. Choosing a jurisdiction in which to make a financial claim is often critical for wealthy couples with different nationalities, or for couples who divide their time between different countries. It requires consideration at an early stage.
The jurisdiction in which your divorce proceedings take place can affect the size of the divorce settlement, the assets which can be taken into account in the settlement and the disclosure requirements.
Will I have to go to court?
The divorce itself is a paper/online exercise, so you do not have to attend court.
Finances on divorce
How do the financial proceedings fit in with divorce proceedings?
The Court deals with the financial aspects of the divorce separately from the divorce itself. A financial application can be lodged with the Court at the same time as the Petition.
In addition to the consequences of marriage breakdown for children, the financial implications of divorce are the significant consideration for parties going through divorce proceedings.
Professional advice is crucial before making important decisions, for example in relation to the matrimonial home.
Deciding on the terms of a financial settlement on divorce can be agreed outside the framework of the court, in which case an order can be drafted which specifies how relevant assets are to be dealt with, and what maintenance is required for the former spouse and children (if applicable).
Sometimes, however, matters can become complex and contentious particularly with regard to high value financial claims, and parties can find themselves unable to agree between themselves meaning that court intervention is necessary. There may be tax considerations, enforcement concerns, problems with disclosure, inherited assets to consider, family businesses, trusts, pensions, and perhaps the need for emergency remedies.
What happens when there are more complicated aspects to financial proceedings, for example, one of the spouses has an interest arising under a trust?
Trusts are a tax-efficient means of protecting resources for future generations. During a divorce, there are often disagreements over how to treat these trusts. It is important to consider the circumstances under which the trust was created, where it was created, and where the assets are. Have there been distributions from the trust during the marriage? The courts have the power to very certain types of trusts or take them into account as a resource.
If there is an international element, or trust, tax, or corporate issues, we have expert in-house support to draw upon from experienced tax and trust lawyers.
Seeking expert legal advice is also necessary for trustees, when the settlor or beneficiary of a trust is contemplating marriage, or going through a divorce or separation.
What kinds of financial awards might the Court make?
The financial awards the Court can make are called “financial remedy orders”. The Court can order the transfer of property, shares, or other assets, or the payment of a lump sum, and make pension sharing orders.
The Court may also decide to order a “clean break”, which may comprise of one capital payment (which may be paid in instalments), which will completely end the financial relationship between the parties. The aim of a clean break is to allow the couple to separate without any further financial responsibility for each other. Frequently, the assets are insufficient to permit a clean break in which case maintenance will be payable.
The Court can make orders for maintenance for a spouse (for life or for a fixed period) and children (although the Child Maintenance Service has a role here).
How is the law likely to be applied in my circumstances?
The Court has a wide discretion and there are no fixed percentages or formulated outcomes. The Court will decide the award on a case-by-case basis, considering the individual circumstances of each application, and applying the principles which have emerged from the body of case law.
In the exercise of its discretion, the Court will apply the statutory criteria from the Matrimonial Causes Act 1973, section 25 in order to achieve a fair outcome. These criteria include:
- The length of the marriage;
- The age and state of health of each party;
- The couple’s standard of living during their marriage;
- The respective contributions that each party to the marriages has made;
- The income, earning capacity, property, financial resources (now and in foreseeable future both in this jurisdiction and worldwide) of each party; and
- The financial needs, obligations and responsibilities of each party.
How will the Court divide the assets?
The Court will take all the assets into account and first consider the question of needs (of the parties and the children). It will be the determining factor. If the parties’ needs can be met, then the sharing (of matrimonial assets) the majority of cases, the assets do not exceed the needs in which case needs will principles will be engaged. When applying the sharing principle, the court may leave non-matrimonial assets such as inherited wealth or assets generated before the marriage out of account and share the matrimonial assets equally.