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Negotiating out of Court

It is usually quicker and cheaper to negotiate a financial agreement out of Court.

If you reach an agreement you can ask the Court to approve that agreement as a Court Order - often referred to as Consent Orders or Clean Break Orders. Court Orders are usually prepared  by solicitors as they are bespoke legal documents.

There are different types of money to consider when you separate or divorce. These fall into three main categories of capital (which includes property and other savings), income and pensions.


Capital, property and savings

When getting divorced, any money that you have, including your family home, savings, policies or an interest in a business, will be divided between you. These things are often referred to as your ‘capital’.

Whilst there is no set formula regarding the division of capital, the Court will do its best to divide monies up in the fairest possible way. Any children will be prioritised ensuring they are financially provided for and have somewhere to live.

Whether you are using a solicitor, mediator or applying to the Court, they will all take into consideration:

  • The value of your family home and other properties which you own including whose name the property is in and individual contributions made towards the purchase of the property.
  • Any outstanding mortgages you may have.  
  • The value of any monies in bank accountssavings and shares.
  • Any involvement or interest in a business.
  • Any debts which you have.
  • Any pensions you have. 

Once the value of the capital is agreed upon, the capital will be divided up between you. Options include transferring or selling properties, paying lump sums or transferring or surrendering policies. 


Pensions

Pension benefits can be one of the largest matrimonial assets and although you may feel that the investments are not easily accessible and are something for the future, the value of those investments sometimes affects the amount of capital that one party receives when they divorce. There are different types of pensions and some are more valuable than others. The way in which they are valued also differs and some pensions offer more benefits than others e.g. the right to retire early.   Since April 2015 there has been more flexibility in the way in which pension investment can be accessed for over 55s. Those who once had no prospect of accessing cash when divorcing will be able to draw investment from pensions more easily and flexibly. 25% of the pension pot will remain tax free and those who want to withdraw the investment by way of cash will be able to do so as they see fit.   The starting point for valuing pensions in divorce is to obtain the cash equivalent value (CEV)..  A recent Pension Advisory Group report and case law have given judicial guidance that pensions should be divided in a way that gives equality of income in retirement.  This will often involve the instruction of an actuary by a couple divorcing.  Some couples still prefer to offset eg one keeps the house or more of it and the other keeps a pension. If you had a pension prior to marriage either wholly or in part, it is helpful to obtain a statement from the pension trustees which includes the date of commencement of the scheme to support any issues you may have with having acquired the investment prior to marriage.


Income & maintenance

 The main types of maintenance are:-

  1. Interim maintenance or maintenance pending suit: This is usually paid for a short period and is a payment to both a party to the marriage and children to meet their immediate financial needs. It should be thought of as a sticking plaster, to help one party to the marriage make sure that the bills and mortgage of a family home can be paid until other financial issues such as pensions, other capital and property are sorted out. The starting point is to make sure immediate financial needs in terms of housing and utility bills, food and petrol i.e. necessities can be paid.
  2. Spousal maintenance: This is a payment made by one party to the marriage to another that is independent of any amount to be paid by way of child maintenance. It can be made for a term e.g. until dependent children have left home, until children start education, until a wife has finished a university course or for a specific number of years. A Judge if asked to decide this issue will take into account current income and likely changes in income that are significant e.g. return to full-time work and the outgoings of both a husband and wife. Spousal maintenance can also be capitalised i.e. a lump sum paid instead of a monthly amount of income.
  3. Child maintenance: This is a payment made by one party to the marriage to another that helps towards the living costs of your children.  many parents now enter into arrangements themselves for the payment of child maintenance without making any application to the Child Maintenance Service (CMS) which replaced the CSA. You can either enter into an arrangement directly with your husband/wife as to what you feel is an appropriate amount of financial support towards the living costs of your children, or you can contact the CMS for guidance about the statutory amount that would be calculated if a formal application is made. Statutory child maintenance is calculated as a proportion of gross earnings with an allowance for the number of nights on average children stay with the parent that they don’t usually live with. If no agreement can be reached about the payment of child maintenance, a formal application to the CMS can be made, but both you and your partner will be charged to use the service i.e. the payer pays more and the payee receives less.

As a basic starting point, the statutory rates of child maintenance are:

Number of children

Gross income up to £800 per week

Gross income between

£800 - £3,000 per week

1 child

12%

9%

2 children

16%

12%

3 children

19%

15%

There are deductions from this calculation for the number of dependent children living in the home of the payer as well as an allowance for the number of nights on average the children stay with the payer.

If you are divorcing and reach an agreement about the payment of child maintenance, you can ask the Court to approve that agreement as a Consent Order made ancillary to the divorce. Child Maintenance Options is a government website which offers a calculator to help parents calculate the amount of statutory maintenance.

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