The process of sorting out finances on divorce is full of pitfalls for the unwary.
The problem is that you only get one go at it. Once the process is completed, you have to live with the outcome, possibly for the rest of your life.
The best way to avoid costly errors is of course to be forewarned. So here are some of the most common financial mistakes made on divorce.
Failure to take proper account of pensions
We start with one of the most frequently made mistakes, and potentially one of the most costly. Very often one party to a divorce will be unaware of the true value of the other party’s pension provision.
It is absolutely essential that they find out the true value, and have that properly taken into account in the settlement. A particular mistake is to equate the given value of a pension with the value of other assets. It is not necessarily the case that the two values are comparable.
Thus, for example, taking other assets of apparent equal value in lieu of a pension claim can leave you worse off than you would be if you had a share of the pension.
Believing conduct makes a difference
It is a common misconception that if one party behaves badly, for example commits adultery, then they will be entitled to less from the divorce settlement.
It is true that conduct can affect a divorce settlement, but only in really extreme cases. In the vast majority of cases it has no bearing whatsoever on the divorce settlement, and trying to claim that it does will achieve nothing other than significantly adding to the costs.
Failing to properly calculate your needs
A crucial element in any deciding a divorce settlement is the financial needs of the parties. It is therefore essential that you properly calculate your future needs. Underestimating can leave you short, and overestimating can result in the case taking longer than it should.
And needs do not just mean how much you will need to live on. There are other types of financial need, in particular in relation to housing and pension provision.
Assets are not always divided equally
It is a common misconception that assets are always divided equally in a divorce settlement.
It is true that the courts follow a ‘sharing principle’ that says that each party is entitled to an equal share of the assets of the partnership, unless there is a good reason to the contrary.
But those words “unless there is a good reason to the contrary” are important. Quite often there is a good reason for one party to receive more than the other. You should not therefore automatically assume that you are only entitled to half.
Not getting an agreement put into an order
A mistake that can easily be made by those who don’t have a lawyer is to reach an agreed settlement and then not have it put into a (consent) court order.
It is essential that agreed settlements are put into a consent order. Only then can you be sure that the agreement is final and enforceable.
Falling into the remarriage trap
This is a particularly nasty mistake to make, and one that could easily catch out an unrepresented litigant. It can also catch out someone who is represented, if they fail to tell their lawyer that they intend to remarry.
The trap simply says that no one who has remarried may apply to the court for financial remedies in relation to an earlier marriage. Obviously, this could have disastrous consequences, meaning that the person who remarries may lose out on their financial entitlement from the first marriage.
Happily, the trap is quite easy to avoid, so long as you are aware of it. To avoid falling into it you simply need to make the application to the court before remarrying.
Simply agreeing a settlement before remarrying will not protect you, if you have not made an application. If a settlement is agreed you must make sure that it is made into a consent order, as mentioned above, before remarrying.
Failing to make a proper effort to settle
A contested financial remedies application on divorce is likely to be lengthy, stressful and expensive. And at the end of it the chances are that the order the court decides is not what either party wanted.
It is far better to settle the case by agreement, and therefore every reasonable effort should be made to do so.
And if one party tries to settle and the other does not then the one who does not could be penalised by the court, by being ordered to contribute towards the other’s costs.
Failing to take expert advice
Last, but certainly not least, is the failure to take expert advice.
Legal advice can obviously seem expensive, but it’s not nearly as costly as it can be to proceed without taking advice. Even if the case appears to be straightforward it is all too easy to make mistakes, as the above indicates.
And it is not just about legal advice. Other types of advice, in particular financial advice, may be required. An expert family lawyer will tell you when this is the case, and can direct you to an expert.
How can Prince Family Law Help?
We recognise that each case is individual and has its own complicating features. We give clear advise as to potential settlements and seek to ensure that a fair outcome is achieved that meets your needs and most importantly the needs of your children.
We offer a free 30 minute consultation for anyone wishing to seek our services.
Contact us today on 01143 216 308