When facing a divorce ‘What am I entitled to?’ is probably one of the most frequently asked questions by clients, but the most difficult to answer.
Whilst there is no substitute for receiving tailored legal advice for your divorce, there are some things to bear in mind which go a long way to answer this question.
The following is equally applicable in the dissolution of civil partnerships but it does not apply to those who live together without formalising their relationship whose entitlement will be determined by property law. In such cases the courts have no power to transfer assets from one party to the other without establishing ownership. If there are children, it may be possible to make claims on their behalf, including those over property, but the ability to do this is a lot more restrictive and generally depends on there being substantial resources available. Even if such a claim is successful it will only last during a child’s minority or dependence.
Disclosure and entitlement
In a divorce the first stage is to ascertain what is available for distribution. Both parties have to declare what their financial positions are in terms of capital, liabilities, income and income needs. Without such information, it is impossible to predict what any likely settlement will be. This exercise cannot be underestimated. People may try and circumvent the process by either refusing to divulge their financial information completely or by only partially disclosing their worth. However the courts will not tolerate such behaviour and procedures can be put in place to ensure compliance.
Once this process of financial disclosure is complete the next stage is to then assess “entitlement” and consider what a likely settlement will be. When undertaking this exercise, legal advisors will consider what a court is likely to order or award a particular party. A couple can attempt to agree alternative arrangements but the court will still need to approve any such agreement in order for this to be legally binding.
When looking at entitlement, there is no mathematical formula which exists. The court will be guided by the following:
- First consideration is given to any child who is under 18;
- The income earning capacity, property and financial resources;
- The financial needs, obligations and responsibilities each has or is likely to have;
- The parties’ standard of living;
- Age and duration of marriage;
- Any physical or mental disabilities;
- Contributions (financial and non-financial);
- Any benefit which a party will lose the chance of acquiring by virtue of the divorce.
The principles of Need, Compensation and Sharing
The court has also identified three guiding principles which are Need, Compensation and Sharing, albeit the principle of compensation has been confined to a small number of unique cases. Sharing in this context means an equal division.
Any judge is obliged to consider these factors when deciding what should occur regarding financial matters. The application of the factors is a discretionary exercise which means that there is not one correct answer, but there is a band of reasonableness into which possible outcomes can fall.
The following does however assist in getting closer to a definitive answer as to entitlement:
- Generally cases will fall into one of two categories; those of needs and those of sharing. Those falling into the latter tend to involve the sharing of the matrimonial assets as opposed to those which are non-matrimonial and were acquired prior to marriage or co-habitation which leads to marriage, or after separation. The exception is the matrimonial home which is generally considered differently even if it was brought to the marriage by one party.
- A person’s entitlement will generally be the greater of that based on needs and that of sharing.
- Needs is also a fluid concept but tends to involve a need for housing, a need for income, including income in retirement. A person’s needs will be assessed through the prism of the available resources so where resources are tight, needs will be assessed more restrictively.
- The older the parties are the more important is the need for provision in retirement i.e. a share of the pension assets, if there are any.
- In the majority of cases, once both parties’ housing needs have been met from available resources (taking into account their mortgage capacities) there may be very little or anything left.
- If there are only sufficient resources to rehouse one party, priority will be given to the party with whom the children spend the majority of their time. If however resources are sufficient to rehouse both parties, they generally should be rehoused as far as possible in property of an equivalent size and standard.
- The courts will consider the parties’ standard of living when assessing need particularly where resources allow but equally the court accepts that a lower standard of living is expected when parties separate.
- If there is a deficit between a party’s income and income needs the court may order the other party to plug the difference by ordering the payment of spousal maintenance. If however that person’s income will only realistically cover their own income needs the court will not make such an order.
- Spousal maintenance may not be open ended but termed for a specific period to allow the financially weaker party to adjust and obtain financial independence.
- Child maintenance is usually assessed by a rigid mathematical formula based on the gross income of the payer and dealt with by the Child Maintenance Service rather than by the court. If a person has a maximum assessment via the Child Maintenance Service they can apply to the court for “top up” maintenance. Orders for school fees can also be made by the court. Any child maintenance payable will affect the parties’ income positions and therefore directly affect the amount of spousal maintenance payable.
- Where co-habitation leads to marriage it is the entire length of the co-habitation and marriage which will be taken into account. The longer the marriage the more the sharing principle is engaged. Therefore marriages which are short and childless, particularly where finances have been kept separate, may be treated differently. Needs may be assessed more restrictively and involve an assessment of the need to transition and put them into a similar position prior to the marriage rather than placing them in a much more favourable position.
- The court will not favour financial over non-financial contribution and will not forensically analyse the extent of any financial contribution in a marriage. Arguments based on inequality of contribution are unlikely to get any traction with the court.
- Conduct is very rarely taken into account. Extra marital relationships certainly will not by themselves have any effect.
Entitlement and settlement
It is by the application of the above points that a person will get a sense of their entitlement. As there is no precise mathematical formula, there is quite often no precise answer. Those cases that are based on need, will inevitably involve an exercise of quantification of these needs which is often subjective but best achieved by being as objective as possible.
There is no substitute for specialist tailored advice on entitlement. Our lawyers at Bishop & Sewell have vast experience in advising clients on appropriate financial settlements. Even for those who feel that they can reach amicable agreement with their partners directly are best advised to get specialist advice on their entitlement so they can then have informed and productive discussions.
Any agreement reached with or without the benefit of professionals will also need to be formalised and the terms of the agreement incorporated into a draft order. Specialist advice in the drafting of an appropriate order is essential. The order is then presented to and approved by the court. Only once approved, will it be legally binding.
If you need expert advice on divorce or family relationship issues more widely, please contact David in our Family & Divorce team. Alternatively, you can email firstname.lastname@example.org or call 020 7631 4141.