divorce and financial resolutions

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Divorce and Financial Resolutions

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PART 1 - The Process

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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

2012 Stuart Mitchell Page 1 of 6
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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 proceedingsso 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 partys lawyers correspond with each others 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 presentedto 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.

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PART 2 - Working Together

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The holy grail of divorce proceedings, for all those involved, is to reach an amicable agreement

between the divorcing parties on all issues regarding finances (and custody) as swiftly as possible,

instead of relying on a judge to make a court ruling which may not best suit one or both of the

parties. The more conflict there is, the more expensive the process is, the more damage is done to

the relationship and, most importantly, the more damage is done to the children involved and their

own relationships.

Mediation

One process which can minimise conflict and cost is mediation. At the heart of this process is the

idea that both sides will meet face to face with a neutral mediator (who may or may not be a trained

lawyer) to discuss and resolve particular sticking points. The mediator cannot advise the divorcingcouple, only facilitate their discussions. This may involve suggesting that parties should seek further

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advice in financial or legal matters if they deem it necessary however. Both parties can still consult

individual lawyers outside of the process but their lawyers are not allowed to take part in the

meetings themselves. At the end of discussions, the mediator will write up and prepare the agreed

terms so that each legal team can sign them off - entering into a legally binding agreement in doing

so.

Mediation can prove significantly cheaper than following the court route with costs estimated at 500

per person compared to costs in the region of 5k to 20k for court hearings. Furthermore, the wider

good that face to face discussions do to the relationship between the parties and therefore the

handling of their children can be immeasurable.

Collaboration

A relatively new technique which is gaining in popularity is that of collaboration. In a collaborative

divorce procedure, each party appoints a specialist collaboration lawyer and the individuals and

their lawyers all meet face to face (as opposed to traditional correspondence between lawyers) todiscuss and hopefully resolve disputes without the need to go to court. Collaborative lawyers are

trained to work together towards a solution rather than solely representing their own clients and

again the process can bring in other professional advisors to facilitate the meetings in relation to

financial matters or child welfare.

If the collaboration process does not yield a resolution, the case will still then need to be heard in

court, however, each party must enlist new legal representation and the discussions held in the

collaborative process cannot be referred to in the court hearing without the consent of both sides.

This exercise in drawing a line and making a clear distinction between the collaboration process and

the courts ensures that the discussions in the former can be as open as possible.

Again collaboration should prove cheaper than the court route as it is often limited to around 3 to 6

meetings with court hearings only occurring if the process fails. Successful collaboration can

therefore negate the expense of extended litigation and correspondence by post etc.

Funding Issues

As mentioned above, following a collaboration or mediation route can prove significantly cheaper

than taking financial disputes to the courts. This is becoming particularly salient as the government

looks to reducing the funds available to prospective divorcees through legal aid and because of the

fact that fewer law firms are now prepared to take on legal aid cases due to their added bureaucracy

(legal aid applications etc). The rationale behind government cuts to legal aid are that more couples

should be encouraged to pursue mediation and this is being backed by a significant increase inmediation funding.

http://www.google.com/url?q=http%3A%2F%2Fen.wikipedia.org%2Fwiki%2FLegal_aid&sa=D&sntz=1&usg=AFQjCNFTKWmX_q1269jnArc5KxIHWYQW9Ahttp://www.google.com/url?q=http%3A%2F%2Fen.wikipedia.org%2Fwiki%2FHearing_%2528law%2529&sa=D&sntz=1&usg=AFQjCNGPXZTGALFkcq1suEsfnHzWtLhCBghttp://www.google.com/url?q=http%3A%2F%2Fen.wikipedia.org%2Fwiki%2FContract&sa=D&sntz=1&usg=AFQjCNEpfpYjbXPRrNVZaC3AvOYKHvigUw


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For those who do find themselves in court and cant access legal aid there are ways of accessing

funds which involve the lending of money, via a solicitor, from a bank or a litigation investor. In

addition, employing a solicitor on a fixed fee rather than an hourly rate can not only control but

significantly reduce costs. However, the most effective way of ensuring that the funds needed for the

future of the individual and their children are left intact is to make use of either mediation orcollaboration.

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PART 3 - The Finances

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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 partys 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 havebeen 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 childs 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

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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 wealthand 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

childrens futures.

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PART 4 - Child Maintenance=====================================================================

Having looked at the issues surrounding the division and distribution of wealth during a divorce, the

other financial issue that needs to be resolved, often concurrently during a divorce but also following

any separation, is that of child maintenance.

As a rule of thumb the parent with whom the child does not spend the bulk of their time will be

obliged to pay some level of maintenance to the childs main carer to help cover the childs costs ofliving. Usually, therefore, the payment will be made the childs the other (resident) parent but it can

sometimes involve payments to grandparents or guardians instead where they have taken on the

responsibility of being principle carers. The goal of child maintenance is that the principle carer

does not have to carry the sole financial burden of the childs living costs and that that burden is

shared equally by both parents regardless of who the child actually lives with for most of their time.

It is always advised (except where they may cause a threat to each others welfare if in contact) that

parents try to reach an agreement as to the levels and structure of payments between them. This

cooperation, as with mediation and collaboration processes in divorce disputes, will be more likely

to lead to a resolution in which each party has had a good say is therefore happier. The approach can

ensure that practical nuances are included in the agreement which benefit all those involved as wellas help to foster a sense of collaboration in the relationship between the estranged parents, to the

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long term benefit of the child. However, it is worth remembering that such agreements are not legally

binding and will run purely on good will. As a consequence, parents can have the flexibility to

respond to changes in circumstances straight away but there is nothing to prevent the agreement

breaking down in the event of a dispute.

Where parents need assistance, the governments Child Support Agency can be called upon to varyingdegrees. The CSA can act in a simple advisory capacity with its most basic service being a simple

calculator that parents can use to determine how much the non-resident parent should pay. For

parents that cannot reach an agreement at all the CSA can be called upon to arrange and timetable

the repayments, in addition to calculating the amounts to be repaid. Whats more, if there are issues

which prevent the parents from being in contact with one another, the CSA can act as a go between to

collect the payments on behalf of the resident parent. They can even be used to track down the

non-resident parent when their location or contact details arent known. Any agreements or

arrangements made through the CSA (not including the calculator service) will be legally binding so

this route is preferable for parents who need that reassurance.

The CSA will look at a number of variables to determine the level of maintenance that should bepayable, including how much time the second parent spends with the child, the income of both

parents and their situations in regard to state benefits, as well as the number of other children who

live with the child in question.

There are some circumstances, however, where the CSA cannot be used to enforce a resolution and

the only option is to go to court. Scenarios that fall outside of the CSAs remit and come under court

jurisdiction include those where the children involved are the non-resident parents step children,

the second parent lives overseas, the second parent is a high earner and the carer feels that the

child is entitled to more of their wealth than the CSA can award, there are education fees to be

covered or the child is disabled and so has further needs.

As with the other financial disputes that arise during a divorce, the most effective way to keep costs

down, and to ensure that relationships are left as healthy as they can be is to seek personal

agreements through methods such as mediation. After all, the less money and emotion that is spent

on resolving these disputes, the more that is left to invest in the childs future, whether it be money

in childrens saving accounts or a set of more contented parents.

http://www.google.com/url?q=http%3A%2F%2Fwww.jumpsavings.com%2F&sa=D&sntz=1&usg=AFQjCNHnqua0w0nqsKgsMAJ8TYMmQDL_bQhttps://www.google.com/url?q=https%3A%2F%2Fwww.gov.uk%2Fchild-support-agency&sa=D&sntz=1&usg=AFQjCNFYus53fwyLJrVYRo4lvVVSRpVsTghttp://www.google.com/url?q=http%3A%2F%2Fen.wikipedia.org%2Fwiki%2FChild_Support_Agency&sa=D&sntz=1&usg=AFQjCNGdFvYt1wxFL53PIt_0y-j-6q7URg

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