ANCILLARY RELIEF (FINANCIAL SETTLEMENTS) IN THE UK
In England and Wales when a couple arrives at the conclusion that the marriage is at an end there are various factors that need to be considered when deciding to part ways. As well as the divorce procedure itself, arrangements need to be made with regards to children and assets of the family.
Usually the couple is able to arrive at an amicable agreement when it comes to arrangements regarding contact and residence of the children. If they are unable to then applications can be made by either party to the court in order that the court may intervene and decide on the couple’s behalf. The court will always have the children’s best interests at the forefront of its decision-making process.
More complicated and sometimes taking longer to resolve than the arrangements regarding children are the decisions regarding the divisions of the assets of the family. Even if an agreement is reached between parties in terms of a financial settlement, it cannot be made final until the Decree Nisi has been pronounced in the divorce proceedings, which is known as the half way point of the divorce.
In the case that parties are unable to reach an agreement in terms of a financial settlement, an application can be made to the court for a judgment to be made as to what and how much the applying party is entitled to from the family assets. In addition to the matrimonial home, during the course of a marriage parties can accumulate investment properties, pensions, company shares, savings etc.
The courts in England and Wales have the power to make a financial order setting out that a property be sold or transferred, the payment of a lump sum from the sale of assets to either party, a share of the pension or in the case there are children of the family and the spouse looking after the children is not working, then maintenance payments can also be ordered.CLEAN BREAK
It is highly recommended upon divorce to achieve a clean break in terms of splitting the matrimonial assets, which will then be divided amongst the couple, resulting in a complete separation once the marriage has ended. However, in the case that there is an obligation to maintain children of the family, a clean break is not always possible.
This is usually the case where a spouse (usually the husband) is a high earner and the other spouse (usually the wife) looked after the children and did not work. On the finalisation of a divorce it would not be possible for the non-working spouse to maintain themselves and the children if the children remain resident with them in the case that they have no income. In such cases the courts would allow for a maintenance order but with a time limit attached so as to allow the non-working spouse to retrain and re enter the workforce with a view to eventually independently maintaining themselves financially.PENSIONS
In relation to sharing or splitting pensions, the following options are available:
- Pension sharing: You can receive a percentage share of one (or more) of former spouse’s pension. Either this will be transferred into a pension in the applying spouse’s name or they can join the existing pension. If the applying spouse has no pension, they will need to set one up.
- Pensions offsetting: The value of the pension is offset against other assets i.e. the applying spouse may retain a greater share of the matrimonial home in return for allowing their former spouse to retain their whole pension.
- Deferred pension sharing: If the former spouse with the pension has already retired and are receiving their pension, but the other spouse has not retired and are too young to receive their pension. An agreement can be made to share the pension at a later date but as this option can be more complicated to arrange than a pension sharing order, the costs legal involved can be higher.
- Deferred lump sum: A lump sum is received from the former spouse’s pension when they retire.
- Pensions attachment order: Once the pension payments to your former spouse begin, either some of the pension or a lump sum can be received.
The basic State Pension cannot be split in the case of divorce.
The rules that courts use for the division of matrimonial assets are contained in section 25 of the Matrimonial Causes Act 1973. These rules consider for each party the matters of income, property, financial needs, obligations, standards of living, age of the parties and many other factors.
There is a growing tendency for the courts to concentrate on the needs of the parties when deciding on financial matters, even when the couple is wealthy with numerous assets. In the case where a couple has young children the court works on the assumption that the children will stay with the wife and they will require a home to live in. The court usually offsets assets, which in practical terms equates to the wife remaining in the matrimonial home with the property being transferred into her sole name and the husband in exchange retaining other assets, for example, retaining the whole of his pension.
However, in the case of White v White (2000) the House of Lords emphasised that the starting point for a split in matrimonial assets should be on an equal basis, based on the equal contribution by the parties whether a spouse is an income-earner or a home-maker.
It is imperative for a couple considering separation or divorce to seek expert legal advice at an early stage so as to ascertain what matrimonial assets can be split in which proportion and how. At TWS we can advise in relation to all aspects of divorce proceedings in the UK and are happy to assist with any queries that you may have.
Please contact one of our experienced family lawyers today for more details. Email us at firstname.lastname@example.org or call +971 4 448 4284.