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Financial Provision in Divorce
When parties to a marriage decide to end their relationship, it is important to remember that simply obtaining a Decree Absolute will not address the financial considerations that invariably arise on the breakdown of a marriage. In dealing with the financial issues that arise on divorce, there are guidelines that are applied by the Courts. This article aims to summarise the main principles relevant to financial division on divorce.
Decisions of the English Courts are based primarily on statutory guidelines but also on the common law, that is decisions handed down in previously decided cases. The most relevant statutory guidelines are known as the “Section 25 Criteria” and are set out in Section 25 of the Matrimonial Causes Act 1973 (“Section 25”).
Summary of the Section 25 Guidelines
1. Circumstances of the Case
Each individual case will depend on it own facts but the starting point will always be the statutory criteria laid out in s.25. A duty is imposed on the Courts to have regard to all the circumstances of the case whether past, present or future.
2. The Welfare of the Children
The first consideration of the Court will be the welfare on any minor children of the family under the age of 18 including stepchildren.
3. No one factor to be more important that the others.
No one factor should outweigh the importance of the others when considering the division of matrimonial assets. However, it will be often be the case that one factor (for example the respective earning capacities of the parties) will occupy more of the Court’s time and be more important that other factors in that particular case.
4. Financial Resources
When deciding on financial matters the court must have regard to the income, earning capacity, property and other financial resources that each of the parties has or is likely to have in the foreseeable future, including any increase in earning capacity which the Court could reasonably expect a party to the marriage to take steps to acquire.
4(a) Income and Earning Capacity
The court will look not only at what the parties earn currently but also at what they could reasonably expect to earn in the future. The Court will draw negative inferences if a party chooses no to work when he or she could do so.
4(b) Earning Potential
This should be distinguished from earning capacity. Earning potential is any increase in earning capacity which a party would reasonably expect to achieve given their circumstances.
This will include land, any beneficial interest held under trust, money, partnership assets, business stock, jewellery, other personal possessions, shares in private or public companies and pensions.
The Court will consider any income or property that a party currently has or is likely to have in the foreseeable future e.g. inheritance prospects.
5. Financial Needs, Obligations and Responsibilities
The Court must also have regard to the financial needs, obligations and responsibilities which each of the parties of the marriage has or is likely to have in the foreseeable future.
6. Standard of Living during the Marriage
The Court must also have regard to the standard of living enjoyed by the family prior to the breakdown of the marriage.
7. Age of Parties
The age of the parties is most relevant to the question of their earning capacity. Where the needs of young children are involved, a young wife will normally be presumed to have an earning potential. The considerations will, however, be different for a woman aged over 50 who has not worked for many years.
8. Duration of the Marriage
With a short marriage contributions are likely to be more relevant. However, the duration of any marriage and in particular short marriages will not be considered on its own: other relevant factors will include contributions (or lack thereof), children and the respective earning potential of each party. It will often be important to consider the effect of the marriage on the parties and also, in some circumstances to ask what the parties have lost in financial terms as a result of the marriage. This may be particularly relevant where on party has for instance given up a lucrative career following marriage in order to care for the parties’ children.
A further important factor that may now be considered in relation to the length of the marriage will be any period of cohabitation prior to actual marriage.
The Court have regard to any physical and mental disability of either of the parties to the marriage. There is a clear overlap here to potential or real earning capacity but it should be noted that disability is unlikely to be regarded as a factor in itself.
10. Contributions of the Parties
In every marriage there will be financial contributions, non-financial contributions and possible future contributions to be considered. Financial contributions will include the earnings of both parties throughout the marriage, capital provided by them, income from investments and any inheritance from which the family has benefited. Non-financial contributions (such as caring for the children of the family and maintaining the marital home) will be given the same weight and importance as financial contributions. Therefore the Court will not discriminate where one party of the marriage has continued to work and the other has stayed at home to care for the children.
Future contributions will be relevant in a situation where on party is caring for the children when the other works. The longer the dependency of the children, the greater the significance of this factor.
11. Conduct of the Parties
This is only taken into account in exceptional circumstances.
12. Value of any benefit lost of either party as a result of the divorce
An example of such benefits would be any pension entitlement which may be lost as a result of a divorce.
When considering the s.25 Guidelines, it is important to remember that every case turns on its own facts and that all of the above guidelines and considerations must be taken in account. It should also be noted that the Court retains a wide discretion when making decisions in relation to financial remedy proceedings.