Sarah Crilly, Associate Solicitor in the Family law team at Ward Hadaway, looks at the latest thinking on the issue of how much money divorcing couples need.
Depending on the length of the marriage, the starting point for the division of assets on divorce is equality.
Although this may provide a fair outcome in what are known as the “big money” cases, where the equal division of assets will provide each party with finances beyond their needs, what happens where the equal division of assets provides for an unfair result? What if one spouse is to look after the children while the other spends £3,000 a month on handbags? Are these both classified as financial needs?
There are two types of needs which may persuade the court to depart from the provision of equality: income needs and capital needs.
What constitutes a need in family cases, amongst other factors, will depend on the available income of the parties, the length of the marriage, the age of the parties and the lifestyle prior to the marriage. As a result, spending £3,000 on handbags could very much be a need depending on the circumstances of the case as a whole.
In June 2016, guidance was published by the Family Justice Council on the definition of ‘financial needs’. The aim of this was to promote a consistent definition in the courts and also assist the growing number of people in the family courts who are appearing without legal representation. The guidance addresses the fact that the needs of both parties must be considered and must be fair to both parties.
One of the most important statements of the guidance is that a “party may be expected to suffer some reduction in their standard of living having regard to the overall objective of a transition to independence.” It is hoped that this will prevent the court from accepting over-estimated claims of future financial needs on the basis that future dependence between the parties is undesirable.
Financial orders such as maintenance, which seek to provide one party with a dependence on the other, either for life or until remarriage, are also viewed unfavourably under the guidelines because they ignore the aim of self-sufficiency and independence for both parties. It is important to note that this particular analysis is not relevant to the provision of child maintenance as this is dealt with through separate provisions.
The guidance also states that “where resources are modest, the children’s need for a home with their primary carer may predominate.” In practice, this will affect families where a 50/50 split of the assets and income will not work due to one parent taking on the role of the primary caregiver. In these situations, the court will recognise the ability of the breadwinner to offset any disparity in a divorce settlement with future earnings potential. The aim is to ensure that financially dependent children are cared for by the primary caregiver in the short-term with the least disruption to the independent lives of either party.
Whether the guidance provided by the Family Justice Council will succeed in its efforts to clarify the definition of ‘financial needs’ is not yet known.
It is however thought that the depth and detail of the guidance will surely help direct the courts to a fairer settlement by encouraging judges to consider a wider range of factors than they have done previously.
