Your Finances And Divorce
What are the financial implications of a divorce?
There are several financial implications of a divorce. Once a divorce petition is issued, you both have certain financial claims against each other. These have to be dealt with either by an agreement reached by the two of you, put into a consent order and approved by a court, or by the court making an award. Your financial claims stay alive against each other if you don't deal with it. If you get divorced and think you're fine, and suddenly win the lottery, your ex-partner can come back out of the woodwork and make financial claims. Or, ten years down the line from your divorce, when you've met someone else, you've started a new life, moved into a new home, they return and make financial demands. You do need to shut the door on your divorce with a financial settlement or a court order. Its very important and so often people get that wrong.
Why is my partner entitled to my assets if we divorce?
Your partner is entitled to some of your assets if you have them on divorce because that is the law. How much they will get and what percentage depends on how long you've been married and what the assets are.
What is an 'asset'?
An asset is anything that you own. So it can be your home, TESSAs, PEPs, ISAs, bank accounts, building society accounts. It can be property in the home, so if you've got collections of jewellery or pictures. Or if you've got horses or cars. Anything that you own is an asset. If you've got trusts, or interests in a trust; that is an asset. Anything of value; it is an asset. If it has been built up during the marriage it is a matrimonial asset that is capable of being shared out between you. Even assets you had before the marriage can be brought into what we call the "pot of assets" and taken into account by a court.
What are the main criteria for deciding who gets what in a divorce?
The main criteria for deciding who gets what are laid down by laws and statute and case law. And it says: how long you've been married is a determining factor; what the assets are; whether you've got children; what your lifestyle is; all sorts of criteria. In fact, if you want to look it up, you can look up section 25 of the Matrimonial Causes Act, 1973, and that sets out in black and white what the starting point is that the courts look at. They also take into account your age, your earning capacity, and the disparity between your earnings. So in other words, if he's earning hundreds of thousands and you're earning five thousand, that is something they'll take into account. So all of these are factors that they take into account.
What is the maximum percentage of my assets my partner could get?
In law, there is actually no maximum percentage of assets that any partner can get from a divorce settlement. However, as a starting point, the divorce courts these days look at dividing the financial assets equally, except if there's reasons not to do that. A reason not to divide the assets fifty-fifty would be if there marriage was very short, or if one of you brought all the assets in before the marriage, or made a fantastic financial contribution. If you're a pop star or a property developer who's so brilliant – a genius – that you've made all the money before the divorce, then you would receive a greater percentage of assets. However, there's no maximum percentage laid down by the law.
What is a financial settlement?
A financial settlement is how you either agree to divide up all your assets and what remains are you're going to get and the kids are going to get or either it is awarded to you by the court in other words if you go to court, what the court impose on you if you don't agree.
What are our joint assets?
Joint assets are ones that are matrimonial assets. That means, what assets would be taken into account by the court. In other words, can you have assets that the court will ignore in a financial settlement? Well, there are some assets, for example, if you inherited a lot of money. Say you inherited a million pounds and you've got fifty million pounds, then the court might decide that what you inherited way before the marriage should not be taken into account. Or if you earned and owned a lot of assets before the marriage, then, again, the court can ring-fence some of that. But where you have few assets and you inherited a little bit of money, the court will consider that a joint asset anyway. There's very little you can get away with these days.
What is involved in negotiating a settlement?
In order to negotiate a financial settlement during a divorce, you have to disclose your finances, tell the other side what you've got. This is so that a) your divorce lawyer can advise you what to settle on financially, and b) the other side can get advice on what to settle on. Normally this financial disclosure is covered on a complicated form called a Form E. A Form E can be downloaded from the internet or from a divorce court, and you use it to set out all your financial information clearly. All your bank accounts, your insurance policies, your interest in houses, your interest in companies - it's all laid out on that form. This financial form, very importantly, also covers your expenses; until we know what your expenses are, we can't advise you as divorce lawyers what you'll need in a settlement.
What are my expenses?
In a settlement you need to know what your expenses are, and expenses are anything you pay out for. So, for example, you have expenses in the home; your mortgage, your ground rent, your service charges, your water rates, or the cost of running the home. Then, you have your personal expenses. For example how much does it cost you to buy your clothes, your shoes; how much does it cost for entertainment or going on holiday? How much do you spend for the children? All of those are expenses, and you have to add up all of them to see how much do you need from your partner, or how much you personally need and how much you will have left to pay to your partner. So, a starting point from any settlement is to know what you spend out.
What is a Form E?
A Form E is the document that we use, whether we negotiate outside of court or in court, to establish what the full extent of your expenses are, or your assets are. You have to swap over that financial information on form E in order to get a settlement.
Who decides how joint assets are divided, and based on what criteria?
A divorce court will decide the criteria for any financial settlement based on all of your assets together. If you don't go to court, then you can decide a financial agreement between the solicitors on advice, or in mediation. If you do go to court for your divorce, the court takes into account law, statute, etc. and then decides having seen and heard all of the assets and all of the evidence, who should get what. The first thing the divorce court does is decide who is going to live where, how much money is left, and who should pay maintenance to whom and how much. The children's maintenance is looked at first, and then whatever's left is paid to the wife.
What financial details do I need to divulge in a divorce and why?
You must divulge all your financial details in a divorce. You must not lie. Invariably, people who lie during a divorce are found out. Your divorce lawyer will bank on you being honest about your finances. If you do lie and it comes out, you will be penalised in a financial settlement. That means your partner could end up getting a lot more if you tell a very silly little lie.
