When Is The Best Time To Deal With A Financial Settlement?
‘When Is The Best Time To Deal With A Financial Settlement?’ Family Law Solicitor, Jessica Barnett, discusses this along with some frequently asked questions in her latest blog…
I’ve Recently Separated From My Spouse – What Do I Do Now?
Usually, the three main issues that need to be dealt with after you have separated are:
1. The divorce itself (which will end the marriage)
2. The financial settlement
3. The arrangements for children of the family (if any)
These can all be dealt with at the same time or can be dealt with at different times.
Sometimes it is beneficial to apply for a divorce straightaway to ensure that, when you do reach a financial settlement, the terms can be recorded in a legally binding way.
A Court order will ensure that neither of you can change your mind about the settlement. It is also needed if part of the agreement includes a pension order.
When Is It Best To Deal With The Financial Matters?
The financial settlement deals with how the assets and liabilities that you have are going to be divided between you. The main asset is usually the home that you have lived in together. There may be other properties, savings, investments, debts and pensions. The couple will also have different sources of income and obligations.
To be able to look at how the financial resources and obligations should be divided, it is necessary to find out how much they are worth – lawyers and the Family Court call this financial disclosure.
Then, in most cases, it’s often sensible to deal with the financial settlement as early as possible. The value of assets can change and if in one party’s sole name, can even disappear.
Lots can change and there is a lot to be taken into account, for example:
• If you have investments that you continue to pay into, those may increase in value and you may not wish your former spouse to benefit from that.
• It can be very difficult to work out how much should be taken into account, for example, what was the value at the time you separated and how much has that part of the investment increased by?
• You may have bought another property to live in whilst your spouse remained living in the matrimonial home. Your spouse may want to claim a share in that property so you will need to prove where the deposit came from or your spouse may need to prove that the deposit came from joint or matrimonial money. This can be difficult to do, particularly if it has been a long time since you separated.
• The person who has remained living in the former matrimonial home may have carried out improvements and increased its value. The matrimonial home is always taken to be a matrimonial asset, whether in joint names or just one party’s name, so the money you spend on improvements could increase the amount of money that the other will receive on the settlement.
• Bank statements can give a lot of information about what has happened with assets. However, banks usually only keep statements for six years. So if you have been separated for longer than that and haven’t kept all your statements then it will be difficult to prove how much was in the account at the time you separated and what has happened to that money.
• You may have most of the matrimonial debt in your name, perhaps on credit cards. But what if you decide to take out a loan to amalgamate the debt or keep adding to the credit card for your personal use. How do you prove then how much was matrimonial debt?
As you can see, there can be a lot of pitfalls in delaying dealing with the financial settlement too long.
Is There Ever Any Benefit In Delaying Dealing With The Financial Settlement?
Sometimes, tactics can mean that a delay in dealing with a settlement is beneficial. These are often clear.
Your spouse may own a successful business and you are aware that there is a takeover likely to happen which would make your spouse very rich or a business deal which will significantly increase the value of their shares. You may be aware that values of other assets belonging to your spouse are likely to increase in the near future. These may be reasons to wait to deal with the settlement.
What If We’ve Agreed That I Should Stay In The Family Home Until The Children Are Grown Up?
This doesn’t mean that you can’t deal with the settlement. An agreement can still be reached to decide how the finances will be divided when the children are adults and maybe some of them can be divided now.
An order can be put in place (if a divorce has been applied for) which sets out what will happen to the family home at that time, and how much each of you will receive.
If you have recently separated and are unsure when to deal with the finances, please feel free to contact me on 01332 364436 or via email at j.barnett@timms-law.com.
December 2023