Change in Jurisdiction
The most common pitfall is where there are delays between separation and final resolution or divorce, which inadvertently allow the other spouse to raise divorce proceedings in another jurisdiction. While there are strict criteria applicable in each country, delays in finalising separations and financial settlements can lead to unnecessary court proceedings in two concurrent countries to secure and preserve the legal position and assets. This is even the case, where one spouse raises divorce proceedings in another part of the UK, despite strict rules on this, then challenging a jurisdiction on divorce is a lengthy and costly process. If unsuccessful it could lead to your case being decided in a jurisdiction which is disadvantageous to your financial situation.
Changes to the financial landscape
In Scotland, England and Wales, when parties begin negotiating a financial separation, solicitors will require them to set out the matrimonial assets. Parties usually provide financial disclosure and then consider how their assets at those values may be divided to achieve a fair settlement in all the circumstances of the case and the law.
In England, while there is no legal definition of matrimonial and non-matrimonial assets, there is now clear recognition that assets and income accrued after separation, or assets purchased using post separation income will be classed as non-matrimonial. This means that they may not be shared unless the weaker financial party can show a need for them to be shared.
In some cases, where money has been used to purchase assets after separation, but some of the money for the purchase was accumulated in the marriage, then those assets could be viewed as both matrimonial and non-matrimonial which complicates matters further.
Unfortunately, in cases where parties have had a very long separation, it may become much harder to establish which assets are "matrimonial" and which are "non-matrimonial".
Further complications arise where those assets have changed significantly in value either with the passage of time or with other factors, for example, parties' pensions may increase as they continue to contribute to them after separation. They may also start to pay out if that person reaches pension age or lump sums are taken out which reduces the value. Parties would then need to consider if contributions or drawdowns and payments have changed the value of that asset and whether it is fair to take into consideration a change in value.
In addition, it may be that assets which were available at the time of separation are then no longer available by the time the parties decide to divorce. What happens if savings which were once available have since been spent?
In Scotland, the date on which parties' separate (called the relevant date) plays a very significant role. For most people, the relevant date means the date on which you ceased to cohabit with each other. In the rare cases, where one spouse instigates a divorce before you have separated, the relevant date is the date of service of the court papers.
The relevant date is the date on which the matrimonial property is identified and valued for the purposes of financial provision on divorce. This is significant because: (a) it fixes a point in time at which assets are valued and (b) if one of you acquire an asset (or incur a debt) after the relevant date, it does not form matrimonial property. For example, if you win the lottery after the relevant date, your winnings will not be part of the “pot” to be shared with your spouse.
While there is a legal definition of matrimonial property and the relevant date in Scots law, it can still cause complications if parties do not actively resolve matters and the following issues may arise:
- Firstly, there can be disputes over what the relevant date is. The longer the passage in time, the harder it can be to prove the exact date of separation, unless there is something tangible to prove the marriage was over. Disputes over the relevant date can delay a settlement being reached and may be costly.
- Secondly, in cases where there has been a significant passage of time, it can be hard to accurately value the matrimonial property, especially if the length of time goes beyond the specified period of time that institutions are obliged to keep records for. Trying to obtain historic valuations and statements tends to be much more costly than valuing assets contemporaneously.
- Thirdly, until you are divorced in Scotland, your spouse remains entitled to make a claim on your estate on death, regardless of what your Will says. This means that in the event of a spouse's death, following separation but prior to divorce being granted, that an estranged spouse can make a claim on their spouse's estate on death against their wishes.
- Fourthly, married couples have an obligation to support one another financially. This means that on separation, one spouse can make a claim against the other for maintenance, known as “interim aliment.” Delays to dealing with financial resolution can result in one spouse paying interim aliment for much longer than they would have had they dealt with matters timeously.
Lastly, while the net matrimonial property is usually valued at the relevant date, there is an exception if a property (or share of it) is going to be transferred between spouses. In this case, the proportion of the property to be transferred is valued at the date of transfer. This is intended to account for the unfairness which would otherwise result if a property increased significantly in value between separation and date of transfer. Where a party wishes to buy their spouse out of a jointly owned property, they can often be surprised to discover that they are required to buy them out of the property at current date value, especially where the value of the property has increased greatly since the relevant date.
In light of the situations described above, the longer parties are separated, the more complex the financial landscape may become. This can lead to a much more complex case which will usually increase both parties time and legal costs to reach a settlement.
What may have once been a very simple division of assets may now become a very difficult negotiation.
Changes to parties' other circumstances
Similar to the changes to financial matters, changes in each person's life may impact things when parties want to divorce. An example of this is when one party has decided to start a new relationship.
In England, divorce proceedings and financial proceedings are separate, usually running concurrently. Parties tend to want to resolve the financial matters before the final part of the divorce is applied for. However, a divorce can be finalised without the financial matters being resolved.
In England and Wales, consideration is given to the 'needs' of the parties' which could include new relationships and families. Also, a spouse's needs can change over time, for example, at the time of separation they may have been in employment and financially independent, but subsequently, they ended their career or suffered an illness or disability which significantly impacts their financial position and employment prospects. In such cases, there is chance of a higher financial settlement.
The impact of what would happen if one party met a new spouse and went on to have a child with that person can be significant in some cases. Their financial obligation to that child will directly impact their income each month. This may reduce the support available should the married partner require any maintenance after divorce. This is also a relevant consideration in Scotland and will impact maintenance payable after divorce.
In the alternative, it is important to consider what may happen if one party begins a relationship with a new partner who has a property themselves or a high earned income. While their assets and income would not be directly available to the person's married spouse, their financial means is something that the court may consider when assessing each person's needs on divorce. For example, if one party is already living with another person, then their housing needs could be said as already being met. The court may consider an unequal division of assets where one party’s housing and income needs are less than the others.
In Scotland, on divorce there is a two-part process as to how the court determines what financial orders to make. The first part of the test is that the court will make an order if it is justified by the principles in the law. The second part of the test is that any order made by the court must be reasonable having regard to the parties' resources at the time. This essentially means that the court will not make an order for financial provision unless it can be shown that the spouse has the resources to meet the order at the time of the divorce.
Divorce and Financial Advice
If you require advice on divorce and financial separation, do not delay and contact our Family Law Team who can provide you with information on your options including advice on mediation or other forms of non-court dispute resolutions, and specific legal advice and court proceedings if required. Savita and the team have the experience to assist you, whether you have recently separated or have been in a long-term separation and now wish to consider divorcing. Our expertise covers advice on the law in Scotland, England and Wales, relating to all aspects of a relationship breakdown.
