Divorce - Sorting Out the Finance
 Divorce is said to be one of the most traumatic events in a person’s life, along with bereavement and moving house. The divorce process itself need not be a stressful one. It can be however if you misunderstand what exactly is involved in obtaining a divorce and what this really means in terms of any financial settlement. Many believe that a divorce automatically includes the settlement of financial matters – and for this reason some people decide not to obtain a Final Order with regards to financial matters.
Anyone concerned about the financial aspects of their relationship will need specialist legal advice. Woolley & Co offer an initial free half hour telephone assessment to discuss the key issues.
Why don't people sort out the finances?
Generally speaking people will give one of the following 5 reasons for not sorting out the finances at the same time as they obtain a divorce, but to be honest none of these reasons are good ones:
- We have no assets so why should we pay someone to obtain an order merely dismissing all our claims.
- We will sort them out between ourselves – we do not need somebody else to tell us how to sort out our financial arrangements as we are still amicable.
- I have had a quote from a solicitor to sort out financial matters and I can’t afford it.
- We have agreed the matter between ourselves and therefore see no reason to involve anybody else.
- We have decided that we have both had enough stress going through the divorce. We are going to let matters rest for a little while and come back to settling our financial matters perhaps when the children are older.
The Reasons you Shouldn't Delay
Unfortunately anyone thinking that matters will get easier as time goes by is sadly mistaken. There are any number of circumstances that could create problems if this approach is taken. For example, if one party receives an inheritance or wins the lottery after the divorce and no Final Order dismissing claims has been obtained the other party may still have a claim on that ‘new money’. Even if they don’t have a claim, the cost of defending their action may be more than if matters had been dealt with alongside the divorce.
If the parties have no assets then matters are relatively simple to resolve by agreement. The parties can enter into a Consent Order dismissing all financial claims they have against each other by virtue of their marriage to one another. There is no reason therefore to avoid ‘sorting it out’.
Likewise, if you have already reached an agreement between yourselves then embody it in a Consent Order. Any agreement you reach between yourselves does not become legally binding unless it is in a Court Order. Before an Order is made one party could go back on their word and although you can attempt to prove that you had an agreement to the court, the cost of doing so, is likely to be significantly higher than if you had had the matter dealt with appropriate at the time of the agreement.
Property
Most people realise that if they sell a property that is not their main residence there will be capital gains tax issues. What people fail to appreciate is that the Inland Revenue will only give you a period (the current tax year) in which you obtain your divorce before one party may be liable for capital gains tax. Therefore, by delaying matters, you may incur a tax charge which can be avoided.
Child Residence
Waiting for the children to come of age will change the position of the person who lives with the children. That is to say that their needs will change, and therefore financially they may be in a less well off position to argue than they would have been had they settled when the children were younger.
Valuation
The question of what each asset is worth can be very difficult. It is an issue that must be resolved before an agreement can be reached. Timing can make all the difference. If an agreement cannot be reached the court will require up to date values of all assets at the time that the court is considering the settlement. This could be some time after the divorce. The court will not use values at the time that you separated if this was sometime ago. This can seriously disadvantage you if you have been paying for a property for sometime after a divorce as the party who has not been paying may well benefit from the payments you have made and visa versa. Obviously each party will want the valuation that is most advantageous to them. This in itself may cause arguments. You could be disadvantaged significantly by waiting.
You may have read about the case of footballer, Ray Parlour. His ex-wife was awarded one third of his future earnings in a ruling which overturned conventional divorce law thinking. This can happen in family law; all of a sudden a case comes along and changes everything. No-one can guess what will happen to the law in the future. Your case will be governed by the legislation and case law which is current at the time.
If your spouse does not wish to finalise financial matters, ask yourself why. If everything is amicable and agreed then why not have it embodied in a Court Order? Are they really hoping that you will get back together, or do they still wish to keep some degree of control over you? If you have obtained a divorce, bring your financial relationship and obligations to an end too and get a Final (Ancillary Relief) Order.
If you are the respondent within the divorce proceedings and you re-marry, you will be barred from making any financial application in the future. This may mean that your ex-spouse could retain matrimonial assets if they are in their sole name and you will not be able to make a claim for financial relief. You may be able to make a different application other than one under The Matrimonial Causes Act but you are likely to recover less, if successful, than you would have been able to under The Matrimonial Causes Act. No other legislation gives the court such wide powers to deal with a person’s assets.
Our advice is, if you have decided to divorce or you are divorced; see to it that all matters are properly concluded by obtaining a Court Order either by agreement or by a decision of the Court bringing your joint financial relationship to an end. It may seem costly now, but failing to deal with matters properly at the time could cost you a lot more in the future.
Article added February 2007. Please take advice before acting on anything you have read.
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