When a relationship breaks down and finances have to be sorted out, the law states that the result must be “fair”. A problem sometimes arises when there is a disagreement as to what amounts to fairness. This is particularly so when it comes to the question of whether maintenance should be paid by one party to the other and if so, for how long.
No decisions can be made until both parties have disclosed, truthfully and fully, their respective financial positions. The parties can help speed up this stage and reduce the costs involved, by cooperating openly with this important part of the process.
Once it is known what is involved, the starting point is that there will be an equal sharing of the capital in the financial resources. As an example, if there is £900,000 available in total assets, including the value of the matrimonial home, it would be easy, mathematically, to divide the resources equally, giving each party £450,000. It should be remembered that there are some cases where precise equality will not be appropriate but that is a topic for another occasion.
It would then be necessary to consider whether, in addition, a “fair” result required one party to pay maintenance to the other (in addition to any obligation to support children).
Can the parties be made financially independent of each other?
The law states that when arriving at a financial settlement, it is necessary to consider whether the parties can each be placed in a position where they are financially independent of each other (apart from any maintenance payments that might have to be made for the children). Such a solution is often referred to by lawyers as a “clean break”.
Will there be a maintenance order?
In the example given above, perhaps one party has an income of, say, £25,000, or even £75,000 or £150,000 and the other party is earning nothing or a small sum, perhaps £5,000. The court would be extremely unlikely to regard it as “fair” for the party with the much smaller income to be required to live off that when the other party has much higher earnings. It would, therefore be necessary to examine a whole range of factors to arrive at the required fair solution and whether that solution included a maintenance order.
These would include:
- The ages of the parties and the duration of the marriage
- The reasonable financial needs of each party
- The earnings or earning capacity of each party
- Whether it is reasonable to expect an increase in the future in the income of the party with the lower income and if so, when and by what extent
- Are there any or other factors which are relevant to the future earnings of either party (e.g. health, age etc.)?
- Does one of the parties have a greater share of the responsibility for looking after children, particularly if any of the children have needs (health, learning etc.) which would make it difficult for that party to gain permanent work to be self-sufficient? This responsibility might, in some cases, extend beyond the child attaining the age of 18 if the difficulties are particularly acute
- Was there any agreement between the parties during the marriage as to whether one of the parties would be expected to work?
- If there is to be a maintenance order, for how long should it be paid? (the options include for the joint lives of the parties or for a stated period).
- If maintenance is to be paid for a stated period, is there to be included the right for the receiver to apply for an extension?
If it is decided that there should be a maintenance order, then a decision will have to be made as to how much should be paid. That will involve using much of the information gleaned from the exercise referred to above.
In some cases, instead of there being a maintenance order, there will be a further adjustment of the capital. This would mean the “receiving” party being granted a higher (sometimes, much higher) share of the capital in lieu of maintenance.
What of the future?
There are those who argue that our system would be made easier to apply if a strict mathematical approach was adopted to the making of financial arrangements on divorce.
For example, in some countries, the capital is divided in a strictly pre-ordained manner and maintenance orders last for a specified period e.g. two years.
Others say that such an approach itself involves the potential for inbuilt unfairness e.g. where the party with the lower or no income, is of an age or has a health problem which will make it impossible to obtain or increase an earned income. In such situations, the discretion given to judges enables the result to be shaped according to the needs of the parties.
Whichever approach is preferred, it is very unlikely that there will be any changes in the near or even medium term as this would require new laws to be passed by Parliament, this means that the current law, as interpreted by the courts, will continue.
Our family department have a great deal of experience in this area. As always, sound, early advice is strongly recommended and is invariably beneficial. If you would like more information or some preliminary, confidential advice, please contact Carline Gayle-Buckle on 01926 491181 or email CarlineG@moore-tibbits.co.uk