It is important that divorcing couples understand that simply by separating and dissolving their marriage does not terminate the financial claims that they have against one another by virtue of their marriage.
There is a common misconception that there is a ‘common law spouse’ meaning that couples who have not married have the same extensive claims to that of married couples. This is not the case. Married couples can, however, bring extensive claims against their wife / husband in the event of a divorce such as the following:-
- Lump sum orders;
- Periodical payment orders;
- Secured periodical payment orders;
- Transfer of property orders;
- Settlement of property orders; and
- Pension sharing orders.
Whilst a divorce and financial settlement go hand in hand, the two are not necessarily connected. The divorce process is somewhat simple – the divorce petition is issued by the Court and once the Respondent (the party who has not issued the proceedings) has completed and returned the Acknowledgement of Service the Petitioner (the party who has issued the proceedings) can apply for Decree Nisi. Decree Absolute which then formally dissolves the parties’ marriage can thereafter be applied for once 6 weeks and a day has passed from the pronouncement of Decree Nisi. The process to reaching a financial settlement is entirely separate to the divorce process. The connecting factor is simply that there needs to be ongoing divorce proceedings for a Financial Remedy application to be submitted to Court and the Decree Nisi needs to have been pronounced before the Court can make a legally binding Court order with respect of the parties’ finances.
The Court will always have regard to Section 25 of the Matrimonial Causes Act 1973 which is a checklist of factors which they take into account when considering how to divide assets on divorce. The point to note at the outset is that the Court has very wide powers and also that the way in which a Court determines a case is discretionary – that is, different Judges may have slightly different views none of which are inaccurate.
The first stage would be to prepare an asset and liability schedule to that there is clarity with regard to the totality of the financial assets within the parties’ “matrimonial pot” and full details of their respective income and outgoings would be needed. Both parties have a duty to make full and frank financial disclosure of all of that information.
The other point is that the length of the marriage including pre-marriage cohabitation is very important as we need to look at what the parties have built up together and therefore what forms their “marital pot” based on that period.
In simple terms, the Court considers three categories of asset when dealing with financial settlement on divorce, namely capital, pensions and income. The Court has wide discretionary powers to make orders in respect of any of these forms of asset and in essence applies the statutory list of factors in Section 25 of the Matrimonial Causes Act 1973 to those assets.
The starting point for the Court is to divide capital and pensions equally but there may be reasons to depart from equality in one party’s favour. There is no presumption that income will be shared but spousal maintenance claims can arise in circumstances where there is an income need.
It is critical that at the time of any divorce the finances are also considered as it may be important that there is a clean break. This would mean, therefore, that no further claims could be brought by either party against the other later down the line. If the finances are not resolved at the time of any divorce, then either of the party’s financial claims against the other remain live until such time as a financial Consent Order has been entered into and approved by the Court.
If you require detailed advice regarding the division of assets following divorce, then please contact me or any other member of the Family Team.
