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Archive for the ‘Financial Settlement After Divorce’ tag

Dealing With Pensions in a Divorce

Elianne Edgington, a family lawyer at Charles Lucas & Marshall, explains the choices facing divorcing couples.

Elianne Edgington

Elianne Edgington

A pension is often a significant asset in a marriage and requires proper consideration on divorce. Although a divorcing spouse’s attention is often focussed on the family home and what will happen to it, pensions can be extremely valuable and should not be forgotten.

Pensions are valued by obtaining a Cash Equivalent valuation of the benefits acquired to date. This is the figure provided to the other party and to the Court. However, in some cases a Cash Equivalent value may not be representative of the true value of the pension and further investigation is necessary.

There are three ways of dealing with pensions on divorce: pension sharing, pension attachment and offsetting.

Offsetting means to offset the value of the pension against other assets, for example the equity in the family home. It is sometimes favoured when it is important for one party to keep the home whereas the other party is more concerned that their pension is left intact.

Care needs to be taken in using this approach, because a pension is a very different asset and its Cash Equivalent value should not necessarily be compared pound for pound with the value of equity in the home or other liquid assets. If good advice is not taken, it is possible for one party or the other to be disadvantaged by this approach.

A pension attachment order means that part of a person’s pension income or lump sum is diverted to their spouse on the pension member’s retirement. However this method is now rarely used as it gives the non-pension member spouse less security of income.

Pension sharing is the most common way of dealing with a pension where it is a significant asset. It enables a percentage of the Cash Equivalent value to be transferred to the non- member spouse giving them a completely separate pension under the same scheme or transferred out to a different scheme of their choice.

Whether pension sharing is appropriate and how much of the pension should be shared will be dependent upon several factors including the age of the parties and the length of the marriage.

It can be complicated to work out what percentage of a Cash Equivalent value should be transferred to the other spouse. It may not be simply fifty percent, even after a long marriage, for several reasons:

  • the Cash Equivalent may not be representative of the true value of the pension
  • there may be several pensions which need to be compared to work out which one or more should be shared
  • it may be fairer to work out what percentage would give the parties an equal income in retirement rather than an equal capital value
  • there may be a long gap between the parties’ respective retirement dates which could have a big impact on the income received
  • it may be considered fair to take into account that a proportion of the pension was built up before the marriage or after separation.

In any of these circumstances the parties and their solicitors may decide to consult an actuary and ask for a report and calculation of the percentage transfer in order to achieve a fair outcome.It is important to remember that pensions cannot be shared without a Court order on divorce.

For further information contact Elianne Edgington on 01235 771234 or Elianne.edgington@clmlaw.co.uk

 

Written by Elianne Edgington

December 5th, 2015 at 4:56 pm

Women Get Right To Reopen Divorce Settlements

Divorcing spouses must fully disclose their assets and income or risk their financial agreement or order being set aside at a later date. 

Elianne Edgington

Elianne Edgington

This is the result of the landmark decisions of the Supreme Court in the joined cases of Sharland and Gohil delivered on 14 October 2015.

In the case of Gohil, the husband had deliberately concealed his true wealth saying that the majority of his assets were held on behalf of others. In Sharland the husband lied to the Court in evidence about his plans to float his company on the stock market and significantly undervalued his shares.

Both cases had originally been settled by agreement but the wives later made applications to set aside their financial orders when evidence of their husbands’ deceit came to light. Now both wives have been successful and new hearings will consider what financial awards should be made in all the circumstances.

The Sharland case is interesting because the wife had already received a very good award, to include 30 per cent of the net proceeds of sale of the husband’s shares, whenever that took place.

The earlier Court of Appeal decision in the same case was based on the view that even if the husband had not been fraudulent, it was unlikely that a substantially different order would have been made.

However the Supreme Court overturned that decision, ruling that ‘fraud unravels all’ and that the wives should have the benefit of a full and fair hearing.

In my view this is absolutely right. A husband or wife who is deliberately dishonest about their financial position should not be allowed to benefit from that dishonesty. These decisions now provide an opportunity to other spouses who may have agreed a settlement in the past but now suspect their husband or wife of deliberately providing misleading or incomplete information.

If you would like further information please contact Elianne Edgington on 01235 771234 or Elianne.edgington@clmlaw.co.uk

Written by Elianne Edgington

October 20th, 2015 at 3:30 pm

A warning to those who try to avoid financial responsibilities on divorce

In an unusual case a wife has been awarded 100% of the family assets, consisting of the home worth £250,000 and savings of over £300,000. Although the usual starting point for dividing assets on divorce is based on equality, this was a case where the husband, Mr Aly, had moved to Bahrain a year after the parties separated, since which time he had paid no maintenance or child support for his son and daughter. 

Elianne Edgington

Elianne Edgington

A judge found that there was no real prospect of the husband paying maintenance in the future, he had effectively “washed his hands” of his family in the UK and started a new family in Bahrain. He was out of reach of both the Child Support Agency and the British Courts meaning that any order for maintenance would be difficult to enforce. With this in mind, the judge decided that the only way to ensure that the children were properly provided for was to award the wife 100% of the assets. The decision was made in July 2014 and has now been confirmed by the Court of Appeal. Mrs Aly had previously secured a freezing order over the husband’s assets so that they could not be dissipated before the hearing.  

The case should serve as a warning to those who try to avoid their responsibilities that the Courts may find other ways to achieve a fair outcome. 

In another recent decision, Charles Williams-Wynn, a wealthy aristocrat who will in due course inherit part of a £2 million estate and was receiving a proportion of his family’s income, was jailed for 28 days for refusing to pay child support and building up arrears of £4800. 

A further two cases in which husbands Mr Sharland and Mr Gohil were found to have deliberately concealed their true wealth in divorce proceedings, has recently been heard by the Supreme Court. The wives argued that husbands who lied about the value of their assets in such proceedings should be subject to greater penalties for fraud and that their settlements should be renegotiated as a result. A decision in these cases is still awaited but could have significant consequences for husbands or wives who try to hide their true financial position.  

Surely it is correct that spouses who lie to the other party and to the court should not be allowed to keep the settlement that was awarded as a result of such deceit. 

However, it remains the case that spouses should not go “digging” for a truth they believe has been hidden. In yet another recent decision the Court of Appeal upheld a decision of a judge not to look at evidence that had been obtained by a wealthy banker, Mr Arbili, who had illegally hacked into his wife’s emails, in an attempt to prove that she was wealthier than she had claimed. This leaves spouses who suspect dishonesty in a tricky position.

For more information or to arrange an appointment, please contact Elianne Edgington (elianne.edgington@clmlaw.co.uk) in the Wantage office (01235 771234).

 

Written by Elianne Edgington

July 17th, 2015 at 2:18 pm

Don’t Help Yourself

Suzy Hamshaw - Divorce Specialist, Family Law Expert and Financial Claims on Divorce

Suzy Hamshaw

Suzy Hamshaw, a family law specialist with solicitors, Charles Lucas & Marshall says divorcing spouses need to think twice about accessing confidential financial information – even if they are sure partner is not being totally honest.

Reaching a financial settlement is one of the most challenging aspects of a divorce. The first step is financial disclosure. Each party has a duty to provide ‘full, frank and clear disclosure’ of all their ‘financial and other relevant circumstances’ so that they each have sufficient knowledge to make an informed decision.

Sadly the breakdown of a relationship is often accompanied by a breakdown in trust which leads to a concern that their spouse will conceal or move assets to prevent them being shared.

Until a few years ago, the accepted response was for a spouse to take steps themselves to ascertain the assets of their spouse – an exercise termed ‘self-help’. This might involve helping themselves to their spouse’s documents. Generally speaking, provided the spouse obtained the documents without the use of force, disclosed them, returned them and kept only copies then normally they would be admissible as evidence.

Sadly following the decision in the case of Imerman in 2010 things are very different now and self-help has effectively been outlawed. The court decided that the right of confidentiality exists between spouses to the same extent as it does between any people and they are not entitled to access their spouse’s confidential documents. If they do they will probably be stopped from using that material as evidence and might also have to pay damages.

The decision has not found favour and has been branded a ‘cheat’s charter’ by removing a useful tool in ensuring financial disclosure. The only way now to obtain documentation legally is through the court but this is expensive – meaning for the vast majority of spouses this remedy is not easily available.

There is no definitive list of what is confidential and there are grey areas. Bank statements kept secretly or password protected computers, to which the other spouse does not have routine access, will be confidential. A bank statement left lying around in the home, joint accounts, or information on a family computer to which both spouses have free access may lose their confidential character.

The general guidance is be aware of the duty of confidence; being married does not give automatic entitlement to see information belonging to the other. Don’t access your spouse’s computer without their permission. Finally, do not attempt to hand the information over to your solicitor. We are not allowed to read it, and if we do, we may not be able to act for you anymore.

Any spouse considering taking a look through the other’s confidential information should think very carefully about the consequences of taking that action. If you have real concerns about assets or information being hidden, speak to a lawyer about the options you have for making applications to court to preserve assets or information.

For further information contact Suzy Hamshaw on 01635 521212 or suzy.hamshaw@clmlaw.co.uk

 

Written by Suzy Hamshaw

December 9th, 2014 at 11:50 am

Company Assets in a Divorce

Expect Fewer ‘Hiding Places’ – Wealth Protection in Company Structures

Will Not Be Safe in a Divorce

Suzy Hamshaw, a family lawyer with Charles Lucas & Marshall, believes courts will look more closely at how company assets are held in a divorce and in particular whether they are being held on trust for a spouse.

Suzy Hamshaw - Divorce Specialist, Family Law Expert and Financial Claims on Divorce

Suzy Hamshaw

The Supreme Court has unanimously allowed an appeal by an oil tycoon’s former wife – reversing the decision of the Court of Appeal. The case addressed whether the court could treat properties belonging to a limited company as if they were assets belonging to the husband where he was the sole shareholder of the company.

In the original proceedings the High Court found that the husband had sole control of the companies and could deal with the assets as he wished and so they should be treated as belonging to him. The Court of Appeal reversed this decision, applying company law that a company and its shareholders are separate legal entities and that the assets of a company belong to it and not to its shareholders.

The Supreme Court reversed this decision but applied different principles to the High Court. In deciding the case, the court used trust law rather than company law to declare that the properties were on the particular circumstances of the case, not owned by the company but held on trust for the husband and therefore formed part of his assets on the divorce.

In doing so the Supreme Court upheld the company law principle that the corporate veil can only be pierced in very limited circumstances and that assets held by a company are not owned by the shareholders unless it can be shown there had been a fraudulent or dishonest use of the company to avoid an existing obligation.

This was an important decision both for family lawyers and company lawyers. The court was clear that the relaxed approach of family courts to ownership of assets cannot continue and that the strict interpretation of the law of property applied across all legal divisions.

However, it also sent a clear signal that the court will look closely at assets in the ownership of a company and how they came to be and that attempts to hide assets from the divorce courts by transferring assets into a company will not necessarily succeed.

This should pose no problems for properly run companies and the court has reaffirmed the law on the piercing of the corporate veil which will only happen in very rare circumstances. However, directors may wish to take this opportunity to examine their company’s asset portfolio to determine in what capacity the company assets are being held.

For further information contact Suzy Hamshaw on 01635 521212 or suzy.hamshaw@clmlaw.co.uk

Written by Suzy Hamshaw

December 9th, 2013 at 11:57 am

The Treatment of Inherited Wealth on Divorce

The recent case of Y v Y [2012] EWHC 2063 is a useful reminder of how the courts treat inherited assets upon a divorce.

The extent to which the courts take inherited assets into account will depend on the circumstances of the case; such as the length of the marriage, the parties’ financial resources, their needs and how the assets have been dealt with during the marriage.

Inherited assets are often treated as non-matrimonial property, however, if they contain a property used as the family home or the assets were intermingled or used by the family then the court are likely to deem these assets to be matrimonial property.

The court’s approach as set out in the case of White v White in 2000 made it clear that whilst there might be a distinction between matrimonial property and non-matrimonial property this will carry little weight, if any, in a case where the parties’ financial needs cannot be met without recourse to this property.

Whilst inheritance will be considered a contribution towards the marriage and credit given for this ultimately this factor will be trumped on the basis of need. If the couple requires the inheritance to meet their needs then the significance given to the inherited asset would diminish.

In Y v Y this showed even where there were significant assets the court still needed to divide some of the inherited assets to meet the parties needs.

The facts of the case were unusual. The husband inherited and managed the family estate comprising a country mansion with staff cottages surrounded by over 1600 acres of gardens and farmland; further residential properties; a farm with farmhouse; commercial properties; an Equestrian Centre and a pub! The estate was valued at nearly £36 million gross and nearly £23 million net.

The parties were married for 26 years and the wife sought a significant portion of the estate to meet her reasonable long-term needs. The court awarded her 32.5% of all assets to meet her needs reflecting the lifestyle they had lived. However, she did not receive an equal share which she would have received if the bulk of the assets had not been inherited.

It may be possible for inheritances received by a party before or during the marriage to be ring fenced, or at least partly protected, by entering into either a pre-nuptial or a post-nuptial agreement. Such agreements will often be respected as fair and can be a valuable insurance policy for the future.

For expert and specialist advice please contact Suzy Hamshaw on 01635 521212 or suzy.hamshaw@clmlaw.co.uk

 

Written by Suzy Hamshaw

December 9th, 2012 at 7:45 am