Divorce and Financial Resolutions - The Process

With divorce rates on the rise again, most likely due to the financial pressures that most of us now live under, more and more people are not only facing the prospect of being divorced but the convoluted machinations of the divorce process itself. Often the two messiest and most contentious issues that couples need to resolve in any divorce case are the custody of the children and the division of finances. This article looks more closely at the second of these but of course all issues are intertwined.

To understand how financial disputes can be resolved it is useful to begin by looking at the broader divorce procedures. Despite the fact that divorce is far more socially acceptable these days, the judicial process still requires that one party in a marriage is deemed ‘at fault’ for the breakdown in the marriage and so to instigate a divorce an individual must complete a petition to the courts on the basis that their partner has committed adultery or unreasonable behaviour, or has deserted them for two years. Other grounds for divorce include a separation of over two years where both parties agree to it or five years of living apart. This petition is not only filed to the courts but forwarded to the other partner to sign and if all parties are in agreement, and if there are sufficient grounds for divorce, a judge will first grant a decree nisi . The decree nisi allows a 6 week window for objections to be raised, after which the prospective divorcees can apply for a decree absolute which confirms the divorce.

The granting of a divorce can be contested by either party involved but it is unusual for it to be overturned and therefore the majority of disputes that occur during the process are likely to be a result of conflict surrounding the distribution of finances and the arrangements and responsibilities towards children (often referred to colloquially as ‘access’). Where there are very few reasons for conflict, dispute or disagreement - in other words, there are no financial assets to split, there are no children involved or these issues have been resolved and agreed in advance of the case reaching court - then the case can be resolved as a summary divorce.

Where there are financial and custodial disputes to be resolved there are a number of different approaches that can be taken to reach (preferably) an agreement or a (at least) a decision on the issues. These approaches include legal negotiations, court rulings, family mediation and the new tactic of collaboration. Which route a couple takes needs to be decided early on in the proceedings so it is important to fully consider all of them at the outset.

Negotiations/Court Ruling
The traditional path that most people still take however is to pursue the case in court and then negotiate through their legal teams whilst the court proceedings are ongoing in an attempt to find a resolution which can be presented to the court, rather than relying on the judge to reach a conclusion. Each party’s lawyers correspond with each other’s on their behalf, representing their best interests, so that the two parties do not have to physically meet. If an agreement cannot be reached, the family court will make a discretionary decision based upon the evidence that they hear in regard to the financial aspects of each party and the marriage.

The framework for the judicial process involves:

• an initial application to the courts and subsequent provision of all relevant financial details and documents
• a First Directions Appointment (FDA) 12 weeks later to define the disputed issues and what needs to be done to resolve them
• a Financial Dispute Resolution appointment (FDR) where all parties attend to negotiate a resolution with suggestions from the judge
• a Final Hearing where a new judge will rule on the case if no agreements have been reached

An agreement through negotiation can be reached at or between any of these stages and presented to the court as a ‘consent order’.

Where agreements really are not feasible the full court process may be the only option but even when agreements can be presented to court the financial burden of communicated and operating through lawyers can be severe.

© Stuart Mitchell 2012
If you want to find out more about the most effective ways of resolving financial disputes during divorce proceedings then visit Family Law Solicitors London.

Divorce and Financial Resolutions - The Finances

Divorce (Photo credit: Wikipedia)

The previous articles in this series looked at the procedures and processes involved in reaching financial resolutions during divorce proceedings, as well the ways in which divorcing couples can work together to make the negotiations smoother, more productive and most importantly, more amicable. Having done so, the following article outlines the actual financial issues that need to be resolved and some of the decisions and agreements that can be arrived at.

Before taking any course of action both parties must fully disclose all of their financial details. to the court if necessary or to the other party during collaborative processes. Obtaining this information may involve the arrangement of valuations and some level of input from financial experts with the most obvious example of this being the need to value properties. The actions that will need to be taken to fully detail each party’s financial position will be determined either at the outset of mediation or collaboration or by the judge at the first court hearing.

The financial elements that have to be distributed at divorce are not just limited to shared assets such as property, possessions, investments and savings, but also shared debts, individual assets that have been accumulated during the relationship and even future earnings or income that have been impacted by the relationship and the input of the other party.

For financial disputes that end in court, judges will therefore, consider a myriad of different factors in order to achieve a fair distribution of assets, which will not necessarily equate to a fifty-fifty split. These factors can include not just the financial contributions and position of each party during and after the marriage but their physical inputs into the maintenance of the family unit and their responsibilities towards children and family going forward. In considering all of these factors courts and judges consequently have a large amount of discretion and so leaving financial disputes to the courts can introduce a significant degree of uncertainty for the couple. The best way of achieving a resolution in which the couple feel they have a degree of control is to follow either the of the mediation or collaboration routes.

When a decision or agreement is reached there are a number of ways in which individual assets can be distributed, whether they are liquidated (sold) with the proceeds split, assigned to one individual (maybe counterbalanced by another asset) or left in shared ownership. For example, a family home can be sold (with the sale monies distributed), assigned to one party if it is deemed that party has a need for a stable home in the immediate future (where children are involved especially) or can even remain in shared ownership with one partner keeping a silent share (again if there is a particular need to keep a child’s home life stable). Pensions, on the other hand, can be split with the partner being apportioned a slice of the pension fund, a lump sum payment or a share of its income payments.

Partners can even be ordered to make regular cash transfers from their income to reflect the contributions of the other party to their wealth (maintenance payments). For example a wife who made career sacrifices to support a family and her partner whilst her partner continued to progress in his career may be entitled to continue receiving a slice of the proceeds of that career progression. These payments can be set to run up until certain criteria are met such as until the receiver remarries, gets a job or their children leave home. Conversely, a decision or agreement which frees both parties from any such financial responsibility to each other, regardless of their future wealth and changes in circumstances, is called a clean break.

As mentioned above the most important factor to consider in divorce resolutions is the welfare of children and ultimately the best way of ensuring that they receive the most advantageous outcome from a distressing process is usually to take the more empowered, collaborative and amicable routes of mediation or collaboration. Doing so can encourage couples to reach agreements, as opposed to enforced decisions, and get there with more of their wealth intact to invest in their children’s futures.

© Stuart Mitchell 2012
If you want to find out more about the most effective ways of resolving financial disputes during divorce proceedings then visit Solicitors London or if you are interested in how to better spend your money on your child’s future visit Junior ISA.