Family Law

Financial Settlements

Calculating Appropriate Financial Provision

There is no standard formula for calculating appropriate financial provision on divorce. Instead, the court has a duty to consider all the circumstances of the case and to take into account a range of specific statutory factors set out in section 25 of the Matrimonial Causes Act 1973 (section 25 factors).

Welfare Of Any Child(ren) Of The Family

Before considering the individual section 25 factors, the court first considers the welfare of any child(ren) of the family under the age of 18.

Section 25 Factors

The court’s approach to the section 25 factors is to calculate and then distribute the parties’ available resources.

The section 25 factors are detailed as follows:

(a) the income, earning capacity, property and other financial resources which each of the parties to the marriage has or is likely to have in the foreseeable future, including in the case of earning capacity any increase in that capacity which it would in the opinion of the court be reasonable to expect a party to the marriage to take steps to acquire;

(b) the financial needs, obligations and responsibilities which each of the parties to the marriage has or is likely to have in the foreseeable future;

(c) the standard of living enjoyed by the family before the breakdown of the marriage;

(d) the age of each party to the marriage and the duration of the marriage;

(e) any physical or mental disability of either of the parties to the marriage;

(f) the contributions which each of the parties has made or is likely in the foreseeable future to make to the welfare of the family, including any contribution by looking after the home or caring for the family;

(g) the conduct of each of the parties, if that conduct is such that it would in the opinion of the court be inequitable to disregard it;

Division Of Parties’ Resources

When considering the section 25 factors, different judges may reach a range of different solutions on identical facts, all of which would be within their judicial discretion. However, a line of cases has established a standard approach to the way the courts consider a given set of facts.

The starting point is that assets accrued during a marriage (known as matrimonial assets) are divided equally, and the guiding principles applied are ”equal sharing”, ”needs” and ”compensation”. The matrimonial home is normally considered a matrimonial asset, so is divided equally between the parties even if it was owned by one of them before the marriage. In a small minority of cases, where there is a short marriage, no children, dual incomes and separate finances, an equal division of matrimonial assets may not be appropriate.

Where Equal Division Of Resources Adequately Meets The Parties’ Needs

Where an equal division of matrimonial assets adequately provides for the capital and income needs of each party and any children, this is the appropriate financial outcome.

Where Equal Division Of Resources Cannot Meet The Parties’ Needs

Where the needs of the parties and any children cannot be met by an equal division, an unequal division of resources may be appropriate instead. In these cases, needs are likely to dictate how capital and income are divided.

Clean Break

Where possible, the court seeks to achieve a clean break between parties on divorce, so that they are no longer financially dependent on one another.

Maintenance

Achieving a clean break may include providing one party with more capital, which is known as capitalising a party’s maintenance requirement. If there are insufficient assets to achieve a clean break, one party (the payer) may pay ongoing maintenance to the other (the payee). This maintenance generally ceases when one of the following occurs:

• The payee remarries.
• The payee dies.
• Further order of the court.

Sometimes, the court awards maintenance for a fixed period of time, for example, to enable the payee to become self-sufficient.

When deciding the level of maintenance to award, the court will consider all of the following:

• The needs specified by the payee in a budget, and any earning capacity they have.
• The standard of living during the marriage.
• The payer’s ability to pay.

Where The Parties’ Resources Exceed Their Needs

Where the parties’ resources exceed their needs, applying the sharing principle generally leads to an equal division of matrimonial assets.

The sharing principle does not apply to property that is inherited or introduced by one party during the marriage. The exception is where such property has become part of the matrimonial assets, for example, by being put into joint names or converted into a different type of property enjoyed by the family.

Where assets are entirely, or largely, non-matrimonial, the division of resources may be determined entirely by the claimant’s needs. These needs are generously interpreted. The financial provision may also include compensation for economic disadvantage (for example, because the party has given up a successful or lucrative career to look after children).

Child Maintenance

Child maintenance is a separate issue. The Child Maintenance Service (CMS) has primary jurisdiction for assessing and enforcing child maintenance, although the parties may agree child maintenance between themselves and have the agreement set out in a consent order.

Parties to an order for child maintenance made on or after 3 March 2003 (excluding a school fees order and an order for costs attributable to a child’s disability) continue to be able to apply to the CMS provided the order has been in force for one year.

Financial remedy proceedings are expensive, and parties should be encouraged to resolve issues sensibly and constructively wherever possible. Sometimes, it becomes necessary to make an application to the Court, as the parties are unable to agree a division of their assets or perhaps, one party has not provided the other with adequate financial disclosure to enable them to reach an informed decision.

How Much Does It Cost To Negotiate And Conclude And Financial Agreement?

Please see full details of our Bespoke Divorce and Negotiated Financial Settlement Packages.

For those matters that cannot be resolved through negotiation then it is likely to become necessary to make an application to the court for a Financial Order.

What Does It Cost To Be Represented In Contested Court Proceedings For A Financial Remedy Order?

Every case is unique, and the costs involved will depend upon the circumstances of your particular case. The approximate costs detailed below are intended to be a guide for an average case, which does not include complex legal or factual issues or substantial financial resources. As such, the costs of your case could be more or less than the estimates detailed below.

Costs up to a First Directions Appointment (FDA)

The approximate costs of representing your interests up to and including representation at the FDA will be in the region of £3,750.00 inclusive of VAT and the court application fee (currently £255.00).

Costs from the FDA up to and including the Financial Dispute Resolution Appointment (FDR)

If the case proceeds to an FDR Appointment, as most cases do, then you can expect to incur further costs up to and including representation at the FDR hearing in the region of £3,500 – £5,000.00 including VAT. Further costs will apply if you elect to be represented by a barrister at the FDR hearing.

Costs from FDR hearing to a Final Hearing

In our experience most cases resolve either at the FDR hearing or shortly thereafter. However, if your case does progress to a final hearing then expect to incur further costs in addition to the costs detailed above of between £4,000 to £6,000 including VAT with an additional cost of instructing a barrister of between £2,500 and £4,000 including VAT. The precise cost will depend upon the seniority of the barrister and the complexity of the issues in the case.

Implementation of Order

In addition to the costs estimated above, you are likely to incur further additional costs in relation to implementation of an Order. We would suggest a budget of between £750 and £1,750 including VAT for implementation work.

Disbursements

In addition to the costs detailed above, you are likely to incur disbursements (out of pocket expenses) of between £750.00 and £1,500.00 depending upon the issues in the case. Examples of these costs include the obtaining of a property valuation report or a pension report.

Fortunately, most parties, with the assistance of their solicitor will ultimately be able to reach an agreement with their former spouse which avoids the cost and conflict of issuing court proceedings. In such cases the agreement is recorded in a formal document, commonly referred to a Consent Order.

What Is A Consent Order?

A consent order is an order in the terms applied for, to which the other party agrees. In many cases the consent order is prepared by the solicitor who represented the Petitioner in the divorce proceedings following negotiation between the parties via their respective solicitors and, importantly, without it being necessary to issue a formal application to the court for financial remedy proceedings.

In court proceedings for a financial remedy, a consent order is an order which the parties agree should be put before the court for anticipated approval, to compromise proceedings brought by either, or both, of them, for a financial remedy.

Once approved by the court, the terms are binding upon the parties and the matter is concluded.

Will The Court Always Approve The Consent Order?

The court will not necessarily approve a consent order just because the parties agree the terms. However, if the order is drafted by competent legal representatives, the court is very likely to approve it. They are entitled to assume that parties of full age and capacity know what is in their own best interests, particularly when they have legal representation. Accordingly, the court will approve a consent order unless it has reason to think there are circumstances into which it ought to inquire.

What Does A Consent Order Cost?

We can prepare a Consent Order to reflect the terms of an agreement negotiated directly with your former spouse at a fixed fee cost of £650.00 including VAT and the court application fee.

For initial legal advice about Financial Settlements and Financial Orders please schedule a free 30 minute consultation at a date and time convenient to you by using our online booking calendar.

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