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How to calculate a fair financial divorce settlement

How to calculate a fair financial divorce settlement

The aim of this section is to provide a guide to calculating a fair financial settlement. Although there are varies guidelines and benchmarks defined in Family Law and clarified by Case Law, it remains notoriously difficult to work out a precise settlement.

The Law

The Court has wide sweeping powers in divorce, nullity and judicial separation proceedings to make a number of financial orders in favour of either party to the proceedings and/or for the benefit of any children of the family. The range of Orders include: lump sum Orders, property adjustment Orders, pension sharing/earmarking Orders (in the case of divorce or nullity proceedings), interim and/or final periodic payments Orders, and maintenance pending suit Orders.

Section 25 of the Matrimonial Causes Act 1973

When deciding what Orders to make, the Court has a very wide discretion. By Section 25 of the Matrimonial Causes Act 1973, all the circumstances of the particular case must be taken into account and first consideration must be given to the welfare of any minor child of the family who has not attained the age of 18. Section 25 directs the Court to have regard to the following matters:

  • The income, earning capacity, property and other financial resources which each of the parties to the marriage has or is likely to have in the foreseeable future (including any benefits under a pension scheme which a party to the marriage has or is likely to have), including in the case of earning capacity, any increase in that capacity which it would in the opinion of the Court be reasonable to expect a party to the marriage to take steps to acquire;
  • The financial needs, obligations and responsibilities which each of the parties to the marriage has or is likely to have in the foreseeable future;
  • The standard of living enjoyed by the family before the breakdown of the marriage;
  • The age of each party to the marriage and the duration of the marriage;
  • Any physical or mental disability of either of the parties to the marriage;
  • The contributions which each of the parties has made or is likely in the foreseeable future to make to the welfare of the family including any contribution by looking after the home or caring for the family;
  • The conduct of each of the parties if that conduct is such that it would in the opinion of the Court be inequitable to disregard it;
  • In the case of proceedings for divorce or nullity of marriage, the value to each of the parties to the marriage of any benefit (for example a pension) which, by reason of the dissolution or annulment of the marriage, that party will lose the chance of acquiring.

Equality (White vs White)

In October 2000, the House of Lords delivered a very important judgment in a case involving “big money”, called White vs White. In that judgment, the House of Lords said that:-

  • In seeking to achieve a fair outcome, there was no place for discrimination between husband and wife and their respective roles;
  • The Court's aim should be to achieve a fair result and before making a division of assets a judge should check his tentative views against the yardstick of equality. As a general guide, equality should be departed from only if, and to the extent that, there was good reason for doing so
  • Where a wife does not work (or only works part time) and instead looks after the home and children, her contributions must be regarded as equally valid and valuable in the overall family's partnership as those of the husband who makes the main financial contributions (the same principles apply where it is the husband who looks after the home and the wife is the main breadwinner).


There have been a considerable number of decisions of the Court of Appeal since adding more guidance as to how the law should be applied and in 2006 the House of Lords delivered a further important Judgement in the cases of Miller and McFarlane. Although these cases also involved “big money” there was useful guidance for all cases:-

  • The court has to try and arrive at a fair result for the husband and wife and three principles have emerged
  • Firstly, the assets of the husband and wife should be divided primarily so as to make provision for their housing and financial needs to take into the account the various criteria.
  • In most cases once you have achieved that, that is the end of the matter as there rarely sufficient resources to provide adequately for the needs of two homes.
  • Secondly, in some cases the husband and wife may have organised their affairs so that one of them is severely disadvantaged financially and should receive some sort of compensation for that. An example of this is where you have two potentially high earning spouses and one of them gives up their career to look after a child.
  • There is then a third principle of sharing which comes from the concept of the husband and wife committing themselves to sharing their lives and when the partnership ends they are each entitled to an equal share of the assets unless there is a good reason to the contrary. However this does not necessarily dictate a mathematical equal division of the assets for often where there are children one spouse will earn substantially more than the other and that higher earning power is a substantial resource. The ultimate object is to give each of the husband and wife an equal start on the road to independent living.
  • There is a distinction between what is referred to as matrimonial property and non-matrimonial property. Matrimonial property is that acquired during the marriage (other than by inheritance or a gift) and will include assets such as the family home. The non-matrimonial property is property that the husband and wife bring with them into the marriage or acquire by inheritance or gift during the marriage.
  • In the case of a short marriage then fairness may well require that the matrimonial property should be divided equally but not the non-matrimonial property. As years go by and the marriage is longer then the distinction between matrimonial and non-matrimonial property will diminish.


The full implications of these decisions continue to be debated by the lawyers and judges practising in the Family Division and there is considerable uncertainty as to how income should be dealt with in cases where there is both substantial capital and income but not enough capital to enable both spouses to be fully independent of each other. Each case will continue to be argued on its own facts.

The Overriding Objective

The ancillary relief rules are a procedural code with the overriding objective of enabling the Court to deal with cases justly. Dealing with a case justly includes, so far as is practicable:-

  • Ensuring that the parties are on an equal footing;
  • Saving expense;
  • Dealing with the case in ways which are proportionate:-
    • to the amount of money involved;
    • to the importance of the case;
    • to the complexity of the issues; and
    • to the financial position of each party;
  • Ensuring that it is dealt with expeditiously and fairly; and
  • Allotting to it an appropriate share of the Court’s resources, while taking into account the need to allot resources to other cases.


The Court must seek to give effect to the overriding objective when it:-

  • Exercises any power given to is by the ancillary relief rules; or
  • Interprets any rule.

The parties are required to help the Court to further the overriding objective.

The parameters

The factors that directly impact the shape of the order that a court is likely to make (if an agreement cannot be negotiated) include:

The length of the marriage

  • Co-habitation versus marriage
  • Co-habitaion before marriage

Income

  • Earning capacity
  • Ability to work / illness
  • Support whilst re-training

The needs of each party

  • What is really meant by need
  • How is need calculated?

Conduct (if serious)

  • What conduct is considered?
  • How is conduct factored in?

Assets/Liabilities

  • Matrimonial versus non-matrimonial assets
  • Former Marital Home
  • Pensions
  • Cars
  • Chattels (house contents)
  • Debts
  • Mortgage
  • Loans
  • Credit Cards
  • Growth of assets since separation
  • Disposal of assets

Contribution

  • Contribution of the homemaker vs breadwinner
  • What counts as an exceptional contribution?

Children

  • Number of children
  • Ages of children
  • Eductional plans / expectations for children
  • Residency plans for children

Lifestyle during marriage

  • House/Cars/Holidays/Private Schooling
  • Typically monthly expenditure during marriage

Compensation

  • Main carer's career sacrifice

The law is not prescriptive, it provides some guiding principals but leaves a lot of room for interpretation. This makes it very difficult for divorcing couples to get clear information on what they are entitled to.

We offer two ways for you to get an indication of what a fair settlement should be:

Free Divorce Settlement Calculator

Legal Advice on Financial Settlements

calculator.jpg This tool will provide a very rough estimate of a fair financial settlement based on a limited set of criteria. solicitor-suit.jpg For a more accurate indication of a fair settlement we offer a full consultation with a family solicitor for a fixed price.
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User reviews

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Interesting Reading...
The whole system is far too ambiguous for the vengeful party to deplete the overall assets because they simply want to drag it out and play the game. That should be heavily penalised.
I totally get the issue that there are unfair offers and people who want to deliberately cut off the other but surely there is a better, fairer more just way of ceasing the incredible costs incurred when one party simply does not want to come to the table at all and just live off their spouse indefinitely!
You pay for your legal counsel to send requests and offers and the other party simply refuses or their representation is so dire that even they fail to respond within a promised agreed timescale... Costs should be made to be accountable to those who can be clearly identified as procrastinating and dragging on the issues that could have been dealt with much sooner. only then will this stop. The only real winners are the law firms and the court systems.
C
informative but omg!
I find it very frustrating that someone can come into your life and take whats yourse just because you share DEBT (mortgage) My husband came to me with nothing but debt. From my inheritance i paid off his debt so we could start with a clean slate, i paid for us to get married, put a 10k deposit on a house, deposit on a car and did 30k worth of improvements to our home, which i had lived in for 13 years previously as a council tennant. then he gets inheritance and leaves, im left with all the debt of the mortgage and loan, overdraft and a credit card ive had to get to be able to eat, and put fuel in the car to get to work, im 2k into an overdraft in joint names, and he gives me nothing, ive gone from being boyant to sinking fast, and now he wants me to sell the house so he can have "what he is due", how can he be entitled to half of the equity, when i cant claim back what ive put in to keep him off the debt radar? in case you cant tell by reading this i am very disillusioned. i loved supported, cared for nurtured this man through a business break down a personal break down, clothed him, fed him, put a roof over his head, now he wants blood too....very hurt and the law should take things like this into consideration please.
D
Dependent Vulnerable Young People
I read this article with interest as i have been married 35 years, have always managed to work full time and still take care of our children, do all housework etc. We have a son with special needs and i have always managed to find work around him. Our lifestyle will depreciate greatly on my salary alone and i wanted to know what happens when I retire and cannot afford the outgoings on a property for the both of us. My son is in supported work for just sixteen hours a week and earns little.
it's seems that from reading this article that the Court would take lifestyle, pensions etc into consideration. It has given me some reassurance as my husband is being very intimidating in his view of the situation.
C
Complicated
Nicely explained but still too complex, all I want is a fair division of assets so that we can both get on with our lives. Unfortunately she insists on dragging things out which costs more money and leaves less in the pot at the end of the day. I can't afford solicitors any more yet she appears to be able to afford them and I am the breadwinner! Grrr....LOL
G
Non matrimonial assets
When I married my wife had been given £150,000 by her parents before our marraige. I had little money a few thousand but raised a mortgage £50k) based on my salary and paid all the bills. I paid a good deal of it off quickly.

We have used some additional 'family money' to buy our current house. I put a huge amount of work into design and getting planning permission, managing builders etc, I also put a small amount of my own money in. I think my wife was given a further £250k after our marraige. She expects to inherit another £1m in the next few years. She is also director of a family company which controls about £4m in investments.

I have continued to pay all of the bills. We now stand at around £1m with no mortgage. Our marriage has lasted 10 years. We have 2 children.

The "what goes in is what comes out rule" is hopelessly muddled after this longish period of marriage. We are asset rich and can easily afford to split assetts and buy us each a house.

What view is the Court likley to take?
P
great help
This is all very encouraging. Hubby left me and 11 year old son and has moved in with his boss from work (new job he started 4 months earlier) Says he can't keep paying his half of mortgage. He earns good salary I work part time to look after son and earn not much. Says I will have to sell house and I think he thinks it'll be a 50/50 split! Son also at private school which just before he walked out we remortgaged house to limit.Would love to get a solicitor as I believe I should get more than him but hear it's so expensive and best to negotiate yourselves? Don't think that will work!!
P
Whats Fairness or Justice got to do with it??!!!
My situation is that he walked out on his job without any consultation with me, didnt work a notice period just came back one day to say he is no longer working(argument at work). I was left to become the breadwinner overnight, which I did for 6years, working overtime and weekends to pay for school fees, mortgage, bills, holidays etc. Since separation I have continued to pay all the school fees for both children and all day to day costs from my income, he contributes very little. He now wants 50% of all assets which I am happy to give him if he re-imburses me for 50% of the school fees for the last 3years. He has refused this and doesnt want to pay his 50% of past expenses but still wants 50% of assets. He claims he has a low salary(lied on E form) and so he may well get the courts on his side if it is based on income. I've been honest on all documentation and it appears I may suffer for it!!!! Its certainly not fair or just!
B
Good summary but doesn't really help me
My situation is that I am both the breadwinner and the homemaker. He pretty much had a free life whilst I looked after the needs of his children and mine and was the main breadwinner, though we both work.
I took his children in and treated them as my own when their mother deserted them and moved to Spain three years ago. I remained the breadwinner but changed jobs and slowed down my career to care for them.
I paid pretty much all the bills (yes I know I was a mug), did nearly all the housework and I was the one to take time off when the kids were sick.
So 50:50 doesn't really seem fair. Unfortunately he has lower earnings and now responsible for his own rent means a drop in lifestyle for him and his children - however he should have thought of them before he decided to cheat.
M
Re-assured slightly
Thanks for review. Just in middle of complictaed settlement and very nervous about it (it taken 8 months so far) and just about to begin court proceedings as nothing has been agreed and disclosure not made by him. Just want to ensure 3 children and myself o.k. Work part time, but used to work and earn good wage pripr to children.
S
Comprehensive and reassuring
(Updated: July 09, 2009)
Thank you this is a very comprehensive detail of what the courts take into consideration when looking at possible outcomes.
The reassurances given are quite good, things such as the main carer, homemaker/housekeeper being taken into account; and the compensation factor for their loss of career status due to a previously agreed need for that party to be the main carer. It is nice to know that these things are not overlooked.
Also the earning capacity and need to develop a career or employment status being taken into consideration is very fair.
Anyone who has property prior to getting married will be glad to read that that is also considered.
Anyone who has left already and is co-habiting with a new partner, has their housing needs met; this is also a key factor of divorce, especially if the remaining party has nowhere else to live, or no means of obtaining such.

So many of the things that are taken for granted during a marriage can become worrying issues on divorce. Especially when one party is threatening an unfair outcome, reassurances are desperately needed.
Y
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