Making Sense of Divorce Finances..
Updated: May 23, 2020
Making sense of how the courts look at dividing assets when a couple divorce. It does not matter whether the couple are single sex or opposite sex, so long as they are legally married and divorcing or legally separating.
What the courts and lawyers look at, in making a decision, are the factors set out in s 25 of the Matrimonial Causes Act 1973, yes 1973, I agree about time it was updated.
If a case goes to court, the judge will try to do what is fair for everybody after the divorce. The judge will decide what money the family has, and how best to meet the financial needs of the husband, wife and any children from that money.
A judge can change who owns the family’s property. The change can be from the husband to the wife or from the wife to the husband. If there are debts, the judge cannot change those debts, but the judge will decide how best to deal with them, when deciding how to deal with the distribution of other assets
What is Fair
What is financially fair may be very different from one family to the next. It depends on the circumstances of the individual family.
I am going to provide an example ( 5 more examples can be found in my financial bundle which will soon be available). The example below and in the bundle give an idea of what things may be important and the orders a judge may make in different situations.
This may help you think about how to deal with your own situation. When looking at the 6 examples, your situation may fall into one of the examples or fall between two examples.
Let's have a look at a made up example of the sort of case that comes before the court. Remember this is not a real case. It shows how a judge might decide how to share out the couple's income and assets after divorce. I am providing an example of a male couple who are dissolving a civil partnership, this could be a married couple, the judge would make the decision in the same way.
James and Sebastian
Facts of the Case
James and Sebastian are in their early thirties and have been in a civil partnership for six years. There are no children of the relationship. They live in a flat that they bought together for £100,000 a year before they entered their civil partnership with a £80,000 interest only mortgage. The deposit of £20,000 came from James's savings of £5,000 and a £15,000 loan from Sebastian's father.
They have decided to end their civil partnership. Their flat is now worth £125,000. They each work full time. James works as theatre nurse and earns £27,900 a year. Sebastian works in IT for a small start up company (and was given a 15% shareholding in the company) and is paid a salary of £22,000 but can receive a discretionary bonus, which last year was £8,000.
James has a credit card debt of £3,000, resulting from a holiday that he and Sebastian took last summer to try and ‘mend’ their partnership.
Sebastian has been repaying his father the money he and James borrowed to use towards the deposit and still owes him £5,500. James has savings of £900 and Sebastian has £3,750 left over from last year’s bonus. James has his NHS pension which has a cash equivalent value of £28,000. Sebastian has no pension provision.
The possible outcome
James and Sebastian will need to sell their flat. Once the mortgage has been paid off and the costs of the sale have been paid, there will be about £41,250 left. James’ credit card debt should be paid off since it was taken out for their joint benefit, for him and Sebastian to have their holiday. Sebastian's father should also be repaid as the loan was made for both of them and has been repaid regularly throughout the partnership.
That will leave them with £32,750 which they can share equally. This can be used for a deposit if either wants to buy or put in the bank should either decide to rent. Neither James nor Sebastian will need to pay maintenance to the other. James’ monthly take home pay is more than Ash’s, but Ash can get a bonus, as he did last year.
This case brings up an often disputed issue of where a parent financially helps out a couple to buy a property. The question is whether this needs to be paid back to the parent. If, as in the case of James and Sebastian, it was a loan, which is clearly evidenced by Sebastian making repayments, it needs to be repaid. Often cases are not so clearly evidenced, with no loan agreement or repayments, it can be one person's word against the other.
I'll let you consider what you would do: what would you decide if you were the judge and Sebastian was saying the money from his parents was a loan and James was saying it was a gift. Sebastian had not made any repayments of the loan, because he says he could not afford and there was nothing in writing to say either way. What would you decide on the facts? Leave me a comment below
I'll share my answer in my bundle which I will be releasing soon, that includes 6 made up examples of cases that consistently go before the court with additional considerations and the questions you need to ask yourself.
Or book an initial consultation to chat about your case now, when you do that, make sure you provide the facts of your case like above, to get the most out of your consultation.