15th December 2014
Ancillary Relief is the old term used to describe the process of considering a financial settlement within divorce proceedings. This is now known as Financial Remedy.
When couples separate there may be assets including houses, pensions, savings, shares, businesses, trusts and incomes that need to be divided. A decision has to be reached and there is no magical mathematical formula that can be applied. Each case is different and has to be considered on its specific needs.
What factors are considered?
The first consideration when looking at a financial settlement is the welfare of any children of the family under the age of 18. The following factors will also be looked at:
- 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 it would be, in the opinion of the Court, reasonable for a person to take steps to acquire.The financial needs, obligations and responsibilities which each spouse has or is likely to have in the foreseeable future.
- The standard of living enjoyed by the family.
- The ages of each spouse and the duration of the marriage.
- Any physical or mental disability of each party.
- Contributions which each party has made or is likely to make in the foreseeable future for the family, including any contribution by looking after the home or caring for the family.
- The conduct of each party, only if that conduct is such that it would be inequitable to disregard.
- The value to each party of any benefit which one party because of the divorce will lose the chance of acquiring (usually in relation to pensions).
For many years it has been established through practice and case law that the starting point when considering a financial settlement should be equality. It is not always appropriate for equality to be applied and deviations sometimes occur especially when there are young children involved.
What type of orders can be made?
Financial settlements can contain many different orders and provisions for example:
- Lump sum order – where one party makes a payment to the other
- Property transfer order – where one party transfers a property into their sole name. This can sometimes be done in return for a lump sum i.e. husband pays to the wife an amount of money to represent her interest in the property and in return the Wife signs all her interest in the property to the husband. If the property is subject to a mortgage, the mortgage company must agree to the transfer or the person keeping the property must obtain a new mortgage in their sole name.
- Spousal maintenance – this is where one party pays a lump sum to the other each month to meet their financial needs.
- Pension sharing orders – this is where differences in pension provisions can be looked at and an order made to share the bigger pension to equalise both parties provision. It is also possible to offset an interest in a pension, where there are other assets available for example one party gets a larger share of the equity in the home or savings and the other party keeps the pension in tact.
- Mesher Order – where one party stays in the matrimonial home and the other party’s interest is postponed until a certain event in the future such as the youngest child of the family reaches the age of 18.
It is always important when a financial settlement is achieved for the terms to be embodied into a Consent Order or Court Order. This is legally binding and ensures that both parties comply with whatever has been agreed or ordered by the court.
How can I achieve a settlement?
There are many ways a financial settlement can be achieved. The starting point is always that there needs to be a full and frank exchange of financial disclosure. Only through this process, can the assets of the marriage be properly calculated and traced in order to be considered for division. How you achieve financial disclosure depends very much on the circumstance of each case and the approach that suits the people involved. The main ways are;-
1. Directly between separating couples.
It is becoming more common for people to work through their financial information directly and then seek advice when they reach the stage of needing an order. Most solicitors will prepare a Consent Order on the basis of instructions provided by their client even if they have not seen financial disclosure, however the client will normally have to sign a disclaimer confirming that the solicitor has not seen disclosure and cannot advise about the suitability of the settlement.
2. Via solicitors
Solicitors can obtain the financial information and arrange for it to be exchanged with the other party simultaneously. Once this has happened, negotiations can take place with a view to achieving a settlement. This ensures that both parties are legally represented and advised about the suitability of a settlement. An order can then be prepared, once an agreement is reached.
3. Via Mediation
Couples can attend mediation to look at financial settlements. The first step is to obtain the disclosure and exchange it within a mediation meeting, any missing information can be obtained and then the terms of a settlement can be discussed and agreed. Once agreed, a solicitor will still need to be instructed so that the Consent Order can be prepared to make the agreement legally binding. Solicitors can also advise a party whilst the mediation process is ongoing. This helps to make sure that the discussions conducted in mediation are fair and reasonable to the case.
4. Via a Court application for a financial order
If a situation is complex or the other means of resolving the issues have failed, an application to court can be made. This sets in place a formal timetable including the provision of financial information by a Form called a Form E.
A First Directions Appointment will take place, which is largely procedural and the Judge will provide directions to move the case forward, for example a direction for a house valuation, business valuation or pension valuation.
A Financial Dispute Resolution will then take place when all the information is available. The purpose of this appointment is for the judge to become involved and work with the parties to see if an agreement can be reached. If no agreement can be reached, the case will be listed for a Final Hearing. The Judge who dealt with the F.D.R. will not be able to hear the Final Hearing. This ensures that cases are not pre-determined before a Final Hearing starts.
At a Final hearing the Judge will hear evidence and will make an Order.
This area of law is complex and variable. Our experts have many years of experience negotiating settlements in a wide variety of situations. For more information an appointment can be made for you to meet one of our team and discuss your circumstances. We offer an initial consultation for a fixed price of £150 inclusive of VAT.
Emma Hubbard is a solicitor specialising in Family Law. She is based at our Sheffield office. Emma can be contacted on 07889648497 or firstname.lastname@example.org. For our other regional offices please contact 0845 894 1622.
Cartwright King has 14 offices nationwide including London, Luton, Birmingham, Bedford, Derby, Leeds, Leicester, Milton Keynes, Newcastle Gateshead, Northampton, Nottingham, Reading, Sheffield and Wellingborough.