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The best way to resolve a Family Law dispute is by discussion, compromise and agreement. The Court rules are intended to help the parties to achieve fairness in the division of what they own separately and together.
Before you can seek advice on what you might expect to receive by way of settlement or Court Order the matrimonial assets need to be identified and valued. These include:-
• Capital assets;
• Pensions, either expectation, future expectation or in payment.
Orders for sale
The Court has the power to Order the sale or transfer of any capital asset but also has to consider what is sensible to divide or sell.
Lump Sum Orders
A lump sum order is an order requiring one party to pay a capital sum to the other party. This can be a one off payment by a specified date or a payment in instalments to be paid by a specified date.
Transfer of Property Orders
Property is not limited to real property that is to say buildings on land but includes any asset that has a money value. This can include shares, policies and council tenancies. An Order can be made to require one party to transfer all of their interest in the asset to the other party or part of their share to the other party.
Pensions are assets that are often misunderstood and even overlooked. They are rarely assets that are immediately realisable during the divorce and therefore have less short term importance. In the long term they can be the most valuable assets and need to be considered very carefully.
There are different ways that pensions can be included in financial settlements:-
• By giving one party a bigger share of other assets to offset the loss of sharing in a pension;
• By Earmarking part or all of a future lump sum payable on the death of one of the parties or by requiring one party to exchange part of their pension income payment for a lump sum at retirement and earmarking part or all of that lump sum to the other party;
• By Pension Sharing which is the mechanism by which a party who has pension rights transfers some of those pension rights to the other party who then acquires a pension fund in their own name.
Pension Sharing avoids the problems of pension Earmarking in that it allows the parties to still have a clean break and is therefore not affected by death or remarriage and allows both parties to have their own pension assets invested in their own names to deal with as they please. Pension Sharing can only be achieved by the making of a Pension Sharing Order and the share of the pension must be expressed as a percentage of the whole of the pension fund.
Pensions are assets that are usually not immediately available. They are in fact an expectation of a future capital sum and income stream. The common starting point for valuing a pension is a calculation of the Cash Equivalent Transfer Value (CETV) of the pension which is available from the pension provider. A pension fund member is entitled to one CETV without charge in any 12 month period for divorce purposes. CETV’s requested in other circumstances may be chargeable. The CETV is an indicator as to how much capital would be needed to buy a pension at retirement producing the same income and benefits as the pension fund holder currently can look forward to. In certain cases a CETV is not a sufficient valuation tool and an expert actuary valuation may be required.
How the object of achieving fairness of outcome is undertaken by the Court
There is not an arithmetical solution to the problem posed by asking how family assets are divided.
The Court has to take into account all the circumstances of the case.
The first consideration is given to the housing needs of any dependant children of the family.
• The property and financial resources of both parties and the income and earning capacity of both now and in the foreseeable future. This will include any increased earning capacity that the Court could reasonably expect either party to try to achieve.
• The financial needs, obligations and responsibilities of both parties both now and in the foreseeable future.
• The standard of living which the parties enjoyed before their marriage broke down.
• The ages of both parties.
• The length of the marriage.
• Any physical or mental disabilities which either of the party to the marriage may have.
• The contributions of each party to the welfare of the family including any contribution in caring for children and looking after the home both in the past, present and foreseeable future.
• The conduct of the parties towards each other is only taken into account where it is exceptional and this means that it is usually not taken into account.
• The value of any benefit such as a pension which either party would lose the chance of acquiring by virtue of divorce.
To help you follow the process you need to consider the following matters:-
1. Identify the assets owned solely and jointly.
2. Identify future needs.
3. Consider the present needs and resources in the light of the factors the Court would consider.
4. Consider the issue of fairness, sharing and compensation. The contributions which parties make to a marriage may be very different and yet valued in the same way. For example one party may go out to work and generate all of the income. The other party may not be gainfully employed outside the home but devote time to making a family home and caring for children. Those contributions are very different but despite their differences there can still be equal value.
There is no place for discrimination between the parties when it comes to consider the division of the matrimonial assets.
Wealth that was acquired before the marriage may be a reason for departure from equality but that is going to be of reduced effect with the passing years of the marriage. Inherited wealth may be a reason to depart from equality of division but that largely assumes that assets exceed liabilities and that housing needs could be met without recourse to those assets.
The effect children will have on the division of matrimonial assets
If there are children of the family their needs have to be considered first.
If there are no children of the family
A couple without children who are financially independent of each other may find it easier to divide their assets. If the marriage is short a couple may expect to each take what they have brought into the marriage, divide any jointly acquired assets (the marital aquest) evenly and enter into a clean break Order. In a longer marriage where the financial arrangements of the parties have been mixed together there is a greater tendency towards an equal division provided this means that the needs of each of the parties are met.
Types of orders relating to the former matrimonial home
The Orders that the Divorce Court can make about the family home include:-
• The immediate sale of the property and division of the proceeds.
• A postponed sale. This is usually only entered into where there are children of the family and until they complete their education. The house would then be sold and the proceeds divided as determined by the Order.
• A transfer of one parties interest in the house to the other outright with nothing in return.
• A transfer of one parties interest to the other with a lump sum payment in return.
• A transfer of one parties interest to the other with a charge back to receive a specific sum in the event of eventual sale.
The Court has power to make orders for the payment of periodical payments usually monthly by one party to the other party of the marriage. These periodical payments orders can be for the benefit of the other party, that is to say spouse maintenance or can be for the benefit of children of the family, child maintenance. However in most cases the Court does not have power to make orders in respect of child maintenance save where the arrangements have been agreed between the parties. In most cases where there are difficulties about agreeing child maintenance the Court does not have jurisdiction and the Child Support Agency has jurisdiction.
Spouse maintenance can be on a short term or long term basis. Short term maintenance is called Maintenance Pending Suit (MPS) and lasts until Decree Absolute.
Long term spouse maintenance by way of periodical payments (maintenance) can be expressed for joint lives or for a fixed term.
More about maintenance for children
If your children come within the jurisdiction of the CSA, then you can only make a Court Order by consent. Most parents will seek to agree an amount rather than use the CSA but the CSA formula is a useful guideline.
The Court does have power to vary an Order that was originally made by consent so there can be an application to Court to change the amount of maintenance that was originally agreed. However if there has been an application for a Child Maintenance Order by consent it is only guaranteed to last for 15 months before there can be an application to the CSA. If the CSA assessment is completed the Child Maintenance Order made by the Court is discharged and replaced by the CSA assessment.
Children outside the CSA regulations. Examples of such cases are:-
• Where children are not blood relatives.
• Children whose parents are habitually resident abroad and not employed by a UK based company.
• Disabled children who need more than the CSA formula provides.
• Where one parent earns more than the CSA limit.
In these cases a Court could hear an application for children’s maintenance.
More about spouse maintenance
An order requiring maintenance to be paid by one spouse to the other will state how long this payment should be made for and can include:-
• Until a specified date that cannot be extended.
• Until a specified date which is extendable if an application is made before that date.
• For life, not ending and therefore continuing until the death of either party.
Spouse maintenance ends if the party receiving maintenance remarries or if either party dies.
An order for spouse maintenance can be varied by the Court.
The capitalisation of maintenance
In appropriate cases it can be agreed or in the absence of agreement ordered by the Court that the maintenance should be capitalised and paid as a one off lump sum. The benefit of this procedure is that it gives both parties a clean break. Unfortunately the amount to be paid to the end of the maintenance claim cannot be calculated exactly. There are various calculations and formulas which can be used to calculate how much capital will be required to compensate one party of the marriage for the end of their maintenance order. It will be easily understood that this is not a straightforward calculation and whilst it may be attractive to the party who has the power to fund the capital provision it may not be as attractive to the party who receives it.