Family Law Guide To Finances on Divorce & Civil Partnership

What about Pensions?

The Court has three options when considering pensions. The first is known as ‘off-setting’ which means that the court will look at the Cash Equivalent Transfer Values (or ‘CETV’) of the pensions and decides that the person without significant pensions should receive a balancing capital payment in from some other source, eg savings or the family home.

The second option is a ‘pension sharing order’. This means that part or all of an existing pension (or more than one fund) is divided and and passed over to the other person which can either be invested with the same pension company or invested in a new pension.

The third option, which is not often used, is ‘pension attachment’, also known as earmarking. The court has the power to order that a proportion of a pension, once received both as to the annual income and the lump sum, should be paid to the other spouse. The court has the power to order that a proportion of any death in service benefits should be paid to the other spouse as well.

Are there any other options if we can’t agree?

A relatively new and increasingly popular method of resolving family disputes where parties cannot agree but are reluctant to attend court is family arbitration.

Family arbitration is a process which must be agreed to by both parties and involves a suitably qualified person called an arbitrator to adjudicate on family law issues. Many consider family arbitration as a more attractive alternative to Court as it is confidential and entirely within the parties’ control, can be faster and more cost effective than a court application and the parties themselves can chose which arbitrator should adjudicate on their matter.

There is no fixed procedure and the arbitrators have powers similar to judges including:

  • Case management issues  e.g.,  evidence and the extent of disclosure;
  • Make interim decision for maintenance;
  • Appointing  an expert
  • Reach final decisions called an ‘award’ which is binding on the parties.

What will happen if we can’t agree?

If all attempts at resolving the financial aspect of a divorce or dissolution have been exhausted, the most usual course of action is to make an application through the court for a Financial Order or ‘Ancillary Relief’ as it is sometimes known.

Form A and onwards

An application for a Financial Order can only be made after the divorce or civil partnership dissolution proceedings have commenced.  Either the petitioner or the respondent in the divorce or dissolution can commence proceedings. Whilst this application runs parallel with the divorce, it should be looked at separately and regardless of whether the parties are petitioner or respondent in the divorce, the person who makes the application is called the ‘Applicant’ and the person who responds to the application is called the Respondent.

The application is made on a Form A and filed with the court, together with a fee. The court will then forward the Form A to respondent and provide a directions timetable setting out the dates for the first stages of the application which includes the date by which the parties are to file and serve their financial disclosure and when the first hearing is going to be (the First Appointment).

Financial Disclosure must be in the form of a court pro-forma document called a Form E which is a questionnaire setting out in great detail the financial circumstances of each party to the application listing the documentary evidence that is required in support of the Form E and which is normally attached.

After Forms E have been filed with the Court and exchanged between the parties the following documents must be filed and served:

•A Statement of Issues which should set out what is disputed between the parties;

•A Chronology setting out all of the important dates in the marriage;

•A Questionnaire setting out the further information that is sought from the other party.

•Confirmation on a document called a Form G on whether or not the First Appointment can be used to negotiate a settlement (i.e. used as a Financial Dispute Resolution hearing (FDR) – see below) or whether it is not ready to proceed as such.

First Directions Appointment

The First Appointment will take place at court in front of a District Judge or Deputy District Judge not less than 12 weeks and not more than 16 weeks after the Form A was filed. Both parties must be in attendance.

The reason for the First Appointment is to define the issues between the parties with a view to saving costs.  The Judge will determine the extent to which both parties should answer the Questionnaires and produce the documents requested by the other.  Directions will be given on valuation evidence, obtaining and exchanging expert evidence, and any further evidence which needs to be produced by either party.  Consideration will be given to dealing with the matter as a Financial Dispute Resolution Hearing (FDR – see below) which will usually only be the case if no further evidence is required.  If an FDR hearing is not appropriate at this stage then the Judge at the will list the matter for an FDR hearing on a different date.

The Financial Dispute Resolution hearing or FDR hearing as it is more commonly called is a hearing designed to aid negotiations and settlement. This is done by the parties putting their respective positions to the judge and the judge more often than not giving an indication as to how the judge at a final contested hearing would decide the case.

The hearing is ‘without prejudice’ which means that if the parties fail to reach an agreement  and the matter proceeds to a final hearing the judge at the final hearing will be different to the one at the FDR who will not be aware of any indications made. The reason for this is to encourage to parties to reach an agreement without the fear that the discussions will be relied upon at a final hearing. Furthermore, 7 days prior to the hearing, the applicant must file with the Court details of all offers put and any responses to them. These offers include any ‘without prejudice’ offers which will be removed from the court file prior to the final hearing.  If an agreement is reached at the FDR, this will be drawn up into a Consent Order which can then be sealed by the court.  If an agreement is not reached, the case will be listed for a final hearing. If an agreement has been reached the judge will implement this agreement into a Consent Order.

 

Final Hearing

Final Hearings are rare but do happen if it has not been possible for the parties to reach an agreement. Both parties will attend a final hearing where they will each give evidence to the Court and after all evidence has been put, the Judge will make a determination on how to divide the finances.

Can we achieve an ‘out of court settlement’

Court applications such as Financial Order or ‘Ancillary Relief’ applications as they are sometimes known, are usually viewed as a last resort. ‘Out of court settlements’ are the norm as the majority of cases are either resolved during mediation, during the collaborative Law process or by the parties’ representatives through negotiating a settlement.

If this happens then a document called a ‘Consent Order’ is drafted setting out the agreed terms and is filed with the court following Decree Nisi or Conditional Order for the Judge’s consideration. Normally if the agreement itself is fair and the state Judge does not require any further information the Consent Order will be approved and ‘sealed’ by the state Judge.

What is the best way to divide the finances following divorce or dissolution of Civil Partnerships

Dividing the finances or ‘matrimonial pot’ following divorce or dissolution can be extremely tricky and every case is different. The law surrounding this area is complex and the Courts often have a wide discretion on how the pot should be divided making it difficult for unrepresented parties to agree between themselves.

Dividing the finances following divorce or dissolution is always a court process and therefore a useful starting point is to think what a judge would have in mind when considering what financial orders should be made.

The court takes into account all of the circumstances of the case and the first consideration is to the welfare of any children of the family. Furthermore, the court will have regard to the following matters:

a) The income, earning capacity, property and other financial resources which each spouse has or is likely to have in the foreseeable future including, in the case of earning capacity, any increase in that capacity which would be, in the opinion of the Court, reasonable to expect a person to take steps to acquire;

b) The financial needs, obligations and responsibilities which each spouse 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 spouse and duration of the marriage;

e) Any physical or mental disability of each spouse;

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

g) The conduct of each spouse, if that conduct is such that it would, in the opinion of the Court, be inequitable to disregard;

h) The value to each spouse of any benefit which one spouse, because of the divorce, would lose the chance of acquiring;

The judge’s main aim is to achieve fairness and often, reasonable need is the overarching factor. The Courts will require both parties to have disclosed their financial affairs openly and honestly before a decision can be made.

 

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