Financial Settlement

As family law solicitors we are often asked whether it is OK to change the locks to the family home. Sometimes we are asked this question before a husband, wife, civil partner or unmarried partner has decided to separate. On other occasions, the locks have already been changed and an ex-partner has already been excluded from what was their family home. For expert advice on family law call our team of specialist divorce lawyers or complete our online enquiry form. Separation and changing the locks Locks are a hot topic as emotions, trust, and control issues can all be engaged when the subject of locks and access to the family home is mentioned. A lot of people assume that if the locks to the family home are changed that means the excluded spouse, civil partner, or cohabitee loses their legal rights or financial claims over the property. That assumption isn’t correct. A change of locks does not confer ownership of a property on the spouse or partner who now controls access to the property. Your property rights will depend on your legal status – whether you are a spouse or civil partner or whether you were in an unmarried relationship. For spouses and civil partners, property rights stem from family law. For unmarried couples, their family home rights stem from an interpretation of property and trust law. If you cannot agree with your partner on whether a house should be sold, or transferred to you or your ex-partner, then the court can decide on the appropriate order. In urgent cases involving domestic violence or abuse, the court can make a temporary injunction order to exclude a partner from the property. The court can then decide on long-term property ownership at a later date. Changing the locks if you own the property Some people assume that if they own the family home in their sole name, they can change the locks and exclude a spouse. That is not right. A spouse has a right of occupation in a family home, whether the property is owned in joint names or not. Whether or not the locks have been changed any financial claims to the house continue until there is an agreement or a family court order. Another common assumption is that it is OK to change locks once a spouse has left the family home as once the decision to leave has been made by them then they cannot change their mind and come back. That is not correct either. In some situations, a homeowner may ask their family law solicitor about changing locks as they want to feel in control of a property. In other cases, there are genuine worries either over privacy or personal security. If it is accepted that one spouse should leave the property then it is usual to agree that, whether they retain the key or not, they will only return at an agreed time and for a reason. For example, to collect remaining items. If there are concerns about personal safety and domestic violence the court can make an injunction order setting out who can occupy a family home until a long-term decision is made on whether or not the house should be sold or transferred to one spouse or partner. [related_posts] Changing the locks when you have children Where there are children there is often an argument that a spouse or partner should retain a key so that they can come and go to see the children. Whether that works all depends on how a couple has managed their separation. In some scenarios, both adults and children are comfortable with mum or dad returning to put children to bed with a book or to babysit but, in other families, continued key access can give very mixed messages to both adults and children and cause anxiety. It is important to talk to a family law solicitor about property ownership and locks and to reach an agreement on whether locks are changed or not. You may need to discuss whether you or your ex-partner can get access to the property until the financial settlement is reached. Locks and reaching an agreement over the family home The hot topic of locks should not distract from what is often the equally emotional but trickier issue of sorting out what will happen long-term with the family home. The obtaining of estate agent appraisals and exploration of mortgage options enables a separated couple to make well-informed decisions about what they want to happen to the family home on a long-term basis. Those decisions can be made by the couple with the help of their family law solicitor or during family mediation. If an agreement cannot be reached then whether you are a spouse, civil partner, or former cohabitee, the family court can be asked to sort out who is entitled to enter the property and live in it on a short and long-term basis. What is important to realise is that changing the locks to a family home does not confer property ownership as that is all down to agreement or the court order. For expert advice on family law call our team of specialist divorce lawyers or complete our online enquiry form.

Applying for a Financial Court Order when you Have Reached a Divorce Financial Agreement If you have reached an agreement with your ex-husband or your ex-wife about how your assets will be split after your divorce you may question if you need a financial court order. A divorce solicitor will tell you that a court order is necessary and explain what could happen if you don’t obtain an order. For expert advice on divorce and family law call our team of specialist divorce lawyers or complete our online enquiry form. Why you need a financial court order If you have reached a divorce financial settlement by agreement, you still need a financial court order. There are several reasons why you need an order: It gives you financial security – if your ex-partner changes their mind and wants more than you originally agreed upon you can rely on the court order to prevent additional claims for cash. For example, your ex may say the original agreement was unfair because the value of your business has gone up more than the equity in the family home or that they need more because they did not get a share of your pension when they negotiated the financial deal You can enforce a court order – you may think that your ex-spouse won't breach your agreement but, for example, if you agreed that the family home would be sold, they may be reluctant to sell the property if it means they have to downsize. A court order can include the mechanics for the sale and if a spouse is resistant to a sale the court can order that a judge has the authority to sign the transfer documents. You may think it unlikely that you will need to enforce an order but situations change, such as your ex-spouse or you meeting a new partner, and that altering the dynamics Pensions – if your financial agreement includes pension sharing the pension administrator is not allowed to implement your agreement until they have a financial court order, pension sharing annex, and the final order of divorce   Third parties – you may need a financial court order where third parties are involved. For example, if one of you is at potential risk of bankruptcy with the involvement of a trustee in bankruptcy. For example, if a mortgage company will only transfer the mortgage into your ex-spouse’s sole name if the transfer is made under a court order or if there is a spousal maintenance order so your ex-spouse can persuade the mortgage company that they have enough income to be able to take the mortgage over on their own Clean break – some financial agreements include a clean break to stop any future financial claims by you or your ex-spouse. If you have negotiated a clean break, it is important to have the security of a binding financial court order that endorses and confirms the clean break [related_posts] Applying for a financial court order If you have reached a financial agreement through direct discussion, solicitor negotiations, or family mediation there is normally no need to go to a court hearing to get your financial court order. Your divorce solicitor can send the paperwork to the court for approval and, in the vast majority of cases, a judge will agree to make the financial court order with no alterations to the draft order or only minor ‘drafting tweaks’. Broken down into stages, to obtain a financial court order you have to: Check there is an agreement that is capable of being made into a financial court order – if you negotiated your agreement direct then your divorce solicitor can check your agreement for you Check if the court can make a financial court order – the court can only make a financial court order once you have obtained a conditional order of divorce. If you got divorced some time ago and have a decree nisi of divorce the court can still make a financial court order Check if any relevant third parties are OK with the agreement. For example, the mortgage company if a house and mortgage are going to be transferred into one spouse’s name or a pension administrator if a pension sharing order is being requested Draw up the draft financial court order and exchange it with your ex-spouse’s solicitor and make any changes needed Swap statements of financial information summarising your assets and income. These statements are filed in court with your draft financial court order. The court will not approve a financial court order unless these statements are prepared and filed Send the draft financial court order to any relevant third parties. For example, to a pension administrator for their approval of the wording of the pension sharing order Ask the court to approve the financial court order by sending the court the required paperwork and court fee. In the vast majority of cases, the judge will make the financial court order requested if the order has been properly prepared and the statement of financial information explains why the court order has been agreed upon Answer any questions the court may have on the proposed financial court order Once the sealed financial court order is received from the court send it to any relevant third parties. For example, the pension administrator, financial advisor, or property solicitor if the financial court order includes pension sharing, investment transfers, or the transfer of property Finalise the divorce proceedings as without the final order of divorce the financial court order cannot be enforced Diary up. If the financial court order includes spousal maintenance your divorce solicitor should check and diary up review dates for increases in line with retail price index rises or end dates and make sure everything in the court order has been sorted out, such as the implementation of a pension sharing order, the taking out of life insurance or changes to a pension nomination That list may look exhausting but the job of a divorce solicitor is to convert agreements into financial court orders. At Evolve Family Law we recognise that if you have reached a financial agreement, you do not want to hang around whilst divorce solicitors get out their fountain pens to prepare financial court paperwork and then post it back and forth between spouses and solicitors. Evolve uses technology to standardise and speed up the process of drafting family court orders, and as importantly, to make the obtaining of a financial court order more cost-effective and value for money for you. It is the combination of experience and technology that means Evolve Family Law can offer transparent pricing and fixed fees for financial court orders. We are proud to say that we are one of the first law firms in the country to publish our fees online in a handy user-friendly guide without hidden extras as the quoted fees include VAT. Some financial court orders are more complicated than others, especially where there are businesses or trusts involved, and in other situations, you may not be able to reach a financial agreement and so need advice on the financial court process. Whatever the situation you find yourself in, Evolve Family Law can help with friendly approachable expert assistance combined with transparent costs. The first step is to contact us to discuss how our divorce solicitors can help you. For expert advice on divorce and family law call our team of specialist divorce lawyers or complete our online enquiry form.

As divorce lawyers we are asked, often at the first meeting with a separating husband or wife, whether a husband or wife will get the house in the divorce financial settlement. It is a perfectly reasonable question to ask your family law solicitor when embarking on no-fault divorce proceedings. For expert advice on divorce and family law call our team of specialist divorce lawyers or complete our online enquiry form. Divorce financial settlements and the family home It can be frustrating for both the family lawyer and a separating husband or wife if a divorce solicitor can’t answer the question ‘’who gets the house?’’ at a first meeting. Sadly, solicitors have a bit of a bad reputation for not answering a question with a straightforward reply but that’s not because they don’t want to answer but often down to needing more information before being able to give an informed legal opinion. What information is needed to decide who gets the house in a divorce? A lot of the information needed to help guide you on who is likely to get the house in a divorce financial settlement is pretty basic but not everyone knows all the answers at a first meeting with their divorce solicitor. The necessary information is: How much is the house worth – this can be your estimate rather than a valuation Is there a mortgage? If so, how much is outstanding on the mortgage and how much does the mortgage cost each month? Are the payments due to go up? Is there an endowment policy linked to the mortgage? If so, how much are the monthly payments and what is the surrender value of the policy? Are there any other loans or debts secured against the house? Did any family members lend or give you money to help buy the house or to fund home improvements? Was the house owned by you or your spouse before you started living together or before you got married? Do you have a prenuptial agreement or postnup (after marriage) agreement in place that says how your property will be split if you get divorced? What other property, savings, pensions, and investments do you and your husband or wife or civil partner own, and what do you both earn? Do you have children? This is relevant as having children affects the size of your housing requirements and you may also feel constrained in your choice of relocation by school catchment areas or shared parenting arrangements How much do you both need to spend to buy new houses? The answer may depend on whether you or your husband or wife will be looking after the children full-time or if one of you plans to move out of the area [related_posts] Don’t worry if you don’t have the information to help decide who should get the house in the divorce The main thing to remember is that you are not alone. Lots of people are in the same position and don’t know the value of investments or what sort of mortgage they have or the amount outstanding on loans. This can be the case whether or not you own property and investments with your spouse or if the family home and all the investments are held in your spouse’s name. If you can’t get the information then your divorce solicitor can help. If you are worried that your husband or wife hasn’t given you all the information and paperwork or if you are concerned that they have hidden investments or not told you about extra bank accounts then your family law solicitor can carry out investigations to make sure there is full financial disclosure. Talk to a divorce solicitor about who gets the house in a divorce If you are thinking about splitting up it is never too early to talk to a family law solicitor to explore your options. Seeing a divorce solicitor isn’t just about sorting out who gets the house.  You will also need to talk about other financial matters, such as spousal maintenance, get advice on childcare arrangements or, if you are planning on getting divorced, get help with the no-fault divorce proceedings. Getting specialist legal help at an early stage in your separation can pay dividends as it can reduce conflict by helping you both understand your legal options and save money by reducing potential areas of conflict. Seeing a family law solicitor for an initial consultation and review may not be as expensive as you might fear and in the long term could save you a lot of stress and fear of the unknown legal territory. At Evolve Family Law we believe in providing trusted advice for a transparent fee. Knowing how worrying it can be to meet a divorce solicitor for the first time we offer a fixed fee comprehensive initial review of your situation. At that meeting, we can explore your circumstances and what information is needed to help you come to informed decisions on what will work for you. Sometimes people automatically think they want to keep the house but, after they have had time to reflect, they realise they either want a fresh start or want to release cash. What is right for you and your family is different from what is right for the next couple. That is why bespoke early advice is needed so you don’t get railroaded into quick decisions about your long-term family future. Who does get the house when you divorce? Often the answer to who gets the family home lies in what other assets there are and choices and priorities. If you want the house, it may mean that you don’t get a share of your spouse’s pension. That is why it is so important to know how much everything is worth before deciding who gets the house. Often, a husband or wife will say that their spouse has said they can have the house. That sounds great, maybe even generous, but when you explore the fact that your spouse’s pension is worth 5 times the equity in the family home, or that you won’t be able to afford to stay in the house because of the mortgage payments or household bills, then getting the house doesn’t seem such a great deal. As frustrating as it may sound sometimes it pays to reflect and take your time to decide on who gets the house. That way, if you do end up with the family home, you can be sure that it is a fair divorce financial settlement. For expert advice on divorce and family law call our team of specialist divorce lawyers or complete our online enquiry form.

Concerns about the impact of living with a new partner and how it will impact your divorce financial settlement are not unusual. As divorce solicitors, we help answer your questions on how your planned cohabitation with a new partner or your ex-spouse’s decision to spend a large proportion of their week with their new partner will affect the divorce financial settlement. For expert advice on divorce and family law call our team of specialist divorce lawyers or complete our online enquiry form. Does forming a new relationship affect the divorce financial settlement? Forming a new relationship may affect your divorce financial settlement. It isn’t possible for divorce solicitors to give a definitive answer without more information about your personal and financial circumstances and those of your ex-spouse. Although it is commonly assumed that the presence of a ‘’third party’’ will make a massive difference to a financial settlement that isn’t necessarily correct. That’s why it is best to speak to a divorce solicitor about your situation, and that of your ex-spouse, and to make sure that you don’t let the presence of a new partner adversely affect your judgment. If you do then it can be harder to set your feelings and emotions aside to focus on reaching a reasonable split of the family assets. It is especially hard to come to terms with an ex-spouse meeting a new partner when the ex-partner has hidden the new relationship from you and you have found out about the new boyfriend or girlfriend through the backdoor. For example, from children, family friends, or, as is often the case, from posts and pictures on social media or from disclosure and questions within financial settlement court proceedings. Is your ex-spouse cohabiting with a new partner? If there is a new partner on the scene the first question, from a family law solicitors’ point of view, is whether the spouse is living with his or her new partner or if they are at an early stage of a new relationship and not cohabiting. Sometimes there are disputes about whether a couple are living together or not because: Of the financial consequences of cohabiting and The ex-spouse and their new partner are not living together on a full-time basis as they each keep a separate home base although they spend a lot of their week together and present as a couple Working out if an ex-spouse is cohabiting with a new partner is important because if cohabitation can be established: Your ex-spouse may find it a lot more difficult to ask for spousal maintenance for themselves If there is already a financial court order in place you may be able to apply back to the family court to stop the spousal maintenance or to reduce the amount you pay If you are negotiating a divorce financial settlement, or you are involved in court proceedings, your ex-spouse may find it harder to argue that they need the same amount of money to rehouse themselves [related_posts] Proving that your ex-spouse is cohabiting with a new partner It is not uncommon for there to be a dispute about whether an ex-spouse and their new partner are living together as a cohabiting couple. Whether you are negotiating a divorce financial settlement by agreement or involved in divorce financial settlement court proceedings you and your ex-spouse are both under an obligation to provide full and frank financial disclosure. This includes disclosing your relationship status and the impact of your relationship on your housing and outgoings. For example, if you are living with a new partner are they sharing the rent and other outgoings? For example, if you plan to buy a new house with your partner does their savings and earnings capacity affect your ability to secure a bigger mortgage? Financial disclosure and new relationships The requirement to provide information about new relationships is contained in the court document (called a Form E) that needs to be completed by both a husband and wife in divorce financial settlement proceedings. Most family law solicitors also ask you to complete a Form E if you are negotiating a divorce financial settlement. In addition to disclosing the existence of a new partner that you are living with (or plan to do so), you also need to provide details about the new partner’s financial circumstances. This requirement can be a cause for concern especially if a new relationship is in its early stages or a new partner is unwilling to provide information that may be used against them or may result in them being drawn further into acrimonious divorce financial settlement proceedings. Non-disclosure of relevant personal matters or financial non-disclosure could be a basis for setting aside a financial agreement or a financial court order. If the non-disclosure is discovered during negotiations then trust can be lost making it harder to reach a divorce financial settlement. If the non-disclosure is revealed through questions asked during financial court proceedings the judge could draw adverse inferences against the person who hasn’t provided full and frank disclosure. The relevance of a new relationship to a divorce financial settlement There is often an argument that two homes are being maintained by the spouse and the new partner. It is then a case of establishing if, despite the two physical homes, the couple is in reality cohabiting because of the amount of time spent together and the financial links between the two of them. In some situations, it can be in the financial interests of a spouse to say that they do have a new partner they are living with and have taken on financial responsibility for. That is because that may mean they have larger outgoings and therefore an argument to say that they can’t afford to pay as much spousal maintenance each month or they need to spend more on rehousing. It is important to take objective family law legal advice on the relevance of an ex-spouse forming a new relationship when sorting out the financial division of property and assets. That’s because a lot of emotional and financial time and energy can be spent on exploring whether a separated spouse is in a new relationship and then whether, in reality, they are cohabiting together. The job of a family finance solicitor is to quickly assess whether a new relationship will have an impact on the financial settlement or the financial court proceedings. Although a new partner can be a hot topic it can either be a red herring or one of the key factors in your negotiations or in the family court deciding how money and assets are divided. The relevance of a new partner all depends on individual family financial and personal circumstances. For expert advice on divorce and family law call our team of specialist divorce lawyers or complete our online enquiry form.

The ONS figures reveal that the average age at marriage for men is around 38 years and 35 years for women. These statistics continue the rise in the average age of marriage since the 1970s. Marriage in the under the 20s has fallen whilst marriage for the over 65s has risen sharply. With those figures, it isn’t surprising that family lawyers are increasingly finding that arguments in divorce financial settlements centre on whether a husband or wife should keep their property owned before marriage in the divorce financial settlement or if the assets should be shared. In this article, family law solicitor, Robin Charrot, discusses how the divorce court treats pre-marriage assets. For expert divorce and family lawyers call our team of specialist divorce lawyers or complete our online enquiry form. What is a pre-marriage asset? A pre-marriage asset is anything owned by a husband or wife before their marriage. Whilst a couple could have bought an asset together, disputes in divorce financial settlement proceedings focus on assets bought by a husband or wife in their sole name before the date of their marriage. A pre-marriage asset can be anything of value as family solicitors warn that it is not worth arguing over the relevance of pre-marriage owned assets if their value will be outweighed by the additional costs of a longer financial settlement court hearing or the investigative costs of tracing and valuing the asset. Typically, pre-marriage asset disputes relate to: Property – this could be a property bought by one party to the marriage that has become the family home or a buy-to-let property or second home Family business – if a husband or wife set up a family business or inherited shares in the business before their marriage Investments- this could be a share portfolio, cash savings, or cryptocurrency Pension – the pension could be a final salary scheme pension that was started pre-marriage with a current or former employer, a private pension scheme, or a business-related pension scheme [related_posts] Do pre-marriage assets need to be disclosed in divorce financial settlement negotiations or court proceedings? Pre-marriage assets need to be disclosed in divorce financial settlement negotiations and court proceedings. That’s the case whether you are engaged in: Direct discussions Family solicitor negotiations Family mediation Family arbitration Divorce financial settlement court proceedings with an agreed financial consent order or where a financial court order is made after a contested hearing The law says you need to provide full and frank financial disclosure of all your assets. If an asset was bought before your marriage, you should disclose it but you can argue that the value of the asset should be ignored when negotiating a divorce financial settlement or in contested financial court proceedings. If you do not disclose the existence of a pre-marriage-owned asset and the court finds out about the asset the court can draw inferences about the honesty of the spouse who concealed the property. If the existence of the pre-marriage asset comes to light after a financial court order is made then your ex-husband or ex-wife could ask the court to reopen a financial court order made without disclosure of the asset, involving additional time and expense. Do pre-marriage assets need to be valued in divorce financial settlement proceedings? The court decides if assets need to be valued in divorce financial settlement court proceedings and will normally order a valuation by a jointly appointed independent expert. The fact that the court has ordered the valuation of a pre-marriage-owned asset doesn’t mean the court will decide that the value of the asset is taken into account when making a financial court order. The court often says it needs to know the total value of all assets owned before it can decide if pre-marriage assets are relevant or should be shared as part of the divorce financial settlement. Are pre-marriage assets ignored if you sign a prenuptial agreement? Divorce lawyers advise that the best way to protect pre-marriage-owned assets is to sign a prenuptial agreement to ringfence the assets. If you didn’t sign a prenup, then signing a postnuptial agreement is another option. Prenuptial agreements can either be comprehensive in scope or the agreement can say that a particular asset should be ignored (or ring-fenced) in a divorce financial settlement. Whether the pre-marriage asset will be ignored depends on the circumstances in which the prenuptial agreement was signed and other factors. For example, was financial disclosure provided as part of the prenuptial agreement discussions, were you coerced into signing the agreement, did you both take independent legal advice, and was the agreement signed at least 28 days before the marriage? If you meet all the tests for a prenuptial agreement to be found to be binding on both spouses, the pre-marriage asset can still be taken into account if a fair divorce financial settlement cannot be made without recourse to the property because the reasonable needs of the husband and wife can't be met without taking into account the value of the disputed asset. Take the case of a 40-year-old man who owned property before his marriage. The property became the family home when he married and he subsequently had 3 children with his wife. The couple doesn’t have any other significant assets and if the value of the family home isn’t taken into account in the divorce financial settlement the wife will end up with very little and will be unable to rehouse herself and the children. The outcome might be very different in a short marriage without children and where the wife had a good income and mortgage capacity. How does the court decide if pre-marriage-owned assets should be kept by the asset owner? In divorce financial settlement proceedings, the court makes a financial court order after assessing a range of statutory factors (referred to by family law solicitors as the ‘’section 25 factors’’) and exercising discretion. The court will ask itself a series of questions: Is the asset a pre-marriage asset- there may be a dispute over the date of purchase or, if the couple were cohabiting at the time of purchase, it could be argued that the cohabitation (assuming the relationship moved seamlessly into marriage) means the asset wasn’t acquired ‘’pre-marriage’’ Is there a prenuptial agreement and does the agreement meet all the relevant tests, such as the agreement was freely entered into, without coercion? What are the reasonable needs of any children and the husband and wife? What factors are relevant to the pre-marriage assets? For example, the length of the marriage or the fact that the pre-marriage asset was used as the family home for years may make it less likely that the asset owner can argue that the value of their pre-marriage asset should be ignored What are the family assets and can a fair and reasonable financial settlement be ordered without recourse to the pre-marriage-owned asset? A family solicitor will ask the same sorts of questions to help you and your spouse reach a divorce financial settlement involving pre-marriage-owned assets to try to avoid a contested divorce financial settlement hearing. For expert advice on divorce and family law call our team of specialist divorce lawyers or complete our online enquiry form.

When it comes to divorce you don’t immediately think of tax. After all it is reasonable to assume that separation and divorce should be one aspect of your life that is tax free. However, our Manchester divorce solicitors will tell you that divorce isn’t tax free. In this blog we look at divorce and tax. Taxing divorce When it comes to separation and divorce there are obvious and hidden tax consequences. For example: Child support – the parent that pays child support for the children will pay the child support out of their net income and the parent who receives the child support won't pay income tax on the child support. It is important to factor in the net effect of child support payments when looking at issues such as mortgage capacity and affordability of mortgage payments or the likelihood of the court ordering spousal maintenance in addition to child support Spousal maintenance – if the court orders that spousal maintenance is payable then the spouse paying the spousal maintenance will pay it out of their net income and the spouse receiving the money won't pay income tax on the spousal maintenance. If the receiving spouse did then it would be double taxation Pensions - if a couple agree to the making of a pension sharing order then it is important to look at the tax consequences of taking the cash out of the pension fund, if that is the plan. If the tax effects of withdrawing the money from the pension aren’t considered then one or both spouses may end up with a far smaller financial settlement than envisaged or paying too much tax than they would have done if they had taken expert financial and pension advice The family home – if the family home is going to be sold then it is important to factor in stamp duty costs on rehousing when looking at the housing needs of the husband and wife. If the family home is going to be retained in both spouses names until a future date then capital gains tax may be payable by one spouse when the property is eventually sold, for example, when the youngest child is age 18 The sale or transfer of assets – if assets such as shares in a family business or an investment portfolio are sold or transferred then capital gains tax may be payable. There is the potential to avoid payment of capital gains tax if the transfer of assets takes place in the tax year of separation. That is why it is best to take early specialist legal and financial advice if you are a business owner getting divorced or you have other assets that may be liable to capital gains tax on sale or transfer, such as a buy to let property portfolio International tax- if a couple own property abroad, such as a second home, then there may be significant tax issues in the overseas country if the property is sold or transferred Tax issues on divorce – if a spouse makes allegations in financial court proceedings that their husband or wife has not declared income for tax purposes (and there is evidence to support this) or evidence of other tax irregularities (such as a sham trust) a family judge can order disclosure of the judgement to HMRC. [related_posts] Divorce, tax and HMRC It is accurate to say that some divorce and financial court proceedings can open up ‘’a can of worms’’ for a husband or wife when it comes to their tax affairs.   In a recent court case a judge said that the £12 million divorce financial court proceedings could potentially end up in a HMRC investigation, subject to the findings at the final hearing of the financial settlement case.   The case concerns a shipping business and a family home worth an estimated £4.5 million. The couple enjoyed a luxurious standard of living during their marriage but when the relationship broke down there was an acrimonious separation that led to financial court proceedings initiated by the wife.   A court of appeal judge, Lord Justice Males,  warned that should the wife establish her case against the husband then both could both be implicated in a 'criminal conspiracy...to evade tax properly due' on their earnings. The judge’s comments were made when the court heard an appeal to reinstate a freezing order injunction to prevent the husband from disposing of assets that the wife says are family assets and the husband says aren’t beneficially owned by him. The husband disputes ownership or any wrongdoing asserting that the multi-million shipping fleet were legitimately and properly transferred and thus there was no tax evasion and the ships or their value can't form part of the financial settlement.   The court of appeal judge was clear that he made no findings but was equally transparent in saying that if a court at the final hearing of the financial settlement case concluded that the ships were not genuinely transferred to a third party this could potentially result in investigations by tax authorities.   Divorce, tax and legal advice When it comes to divorce and tax, specialist Whitefield divorce solicitors work with expert accountants and financial advisors so that a divorcing husband and wife know where they stand both legally and financially and can make informed financial settlement decisions, understanding the tax implications of their divorce and financial settlement. Our Manchester Divorce Solicitors Whitefield, North Manchester and Holmes Chapel, Cheshire Evolve Family Law divorce experts cover all aspects of family law, divorce and financial settlements. To speak to a specialist Whitefield divorce solicitor call us or complete our online enquiry form. Appointments are available face to face, via video conferencing, Skype or by telephone appointment.

Do you suspect your ex is hiding assets from you in your divorce proceedings? If your ex is hiding assets there is a real risk you won't achieve a fair financial settlement. If you suspect your ex is hiding assets there is also a strong possibility that you won't be able to reach an agreed financial settlement because of your suspicions. That’s why if you think your ex is hiding assets in divorce proceedings it is best to get expert family law advice on your options. For expert Divorce and Financial Settlement advice call our team of specialist divorce lawyers or complete our online enquiry form. Is my ex hiding assets in divorce proceedings? Divorce solicitors will tell you that a husband and wife are under a duty to provide full and frank financial disclosure of their assets when negotiating a financial settlement. That’s the case whether you are negotiating through: Direct discussions Solicitor negotiations Family mediation Family arbitration Financial Court proceedings If things are amicable, or your finances are straight forward, you may not want to see reams of paperwork going back years but every family situation is different. You probably know if your ex has hidden stuff from you throughout your marriage or you may suspect that they started to do so when they met someone else or when the marriage got into difficulties and the relationship started to drift apart. If your ex is very keen to reach a financial settlement without providing any paperwork and wants to get an agreed clean break Financial Court Order as soon as possible this may raise a red flag for you or your divorce solicitor as you need some minimum paperwork to check things out. If you feel that you are being pressurised into accepting no or very limited financial disclosure documents, and into accepting your ex’s word for everything, talk to a financial settlement solicitor before agreeing to a division of assets. That’s because whilst your ex might be totally honest and just wanting to ‘cut to the chase’ and get an agreement, you are entitled to see supporting paperwork. It’s important to do so as any financial settlement you reach by agreement can't easily and quickly be unravelled if it turns out that you were right to have your suspicions about your ex hiding assets from you. [related_posts] Why is my ex hiding assets? There are many reasons why an ex may try to hide assets. Divorce solicitors come across these common excuses: It is inherited money It is savings from my income The new house is owned by my new partner so it isn’t really my asset even though the deposit came from me There is no need to get a business or pension or other asset valued as you can take my word for the value Money was owed to a family member and was not transferred to them to hide assets Cash that was put into additional bank accounts was forgotten Property owned abroad or owned before marriage doesn’t count towards the financial settlement so wasn’t disclosed as it isn’t relevant ( in the ex’s opinion) These are all excuses and should not be used as a reason to not provide full and frank financial disclosure. Sometimes an ex will try to hide money that might not be relevant to the financial settlement but you will both spend time and money arguing over the financial disclosure. However, if the asset had been disclosed at the outset your financial settlement solicitor could have advised you about its overall relevance to the financial settlement. For example, a pension accrued before a short marriage with a cash equivalent transfer value of £10,000 may not be of significance and your ex is wasting their time and money by trying to hide an asset that may be of limited relevance because of the duration of your marriage or your ages. However, by failing to disclose the pension, you and the Court may be far more sceptical about how honest their other financial disclosure is, such as, the extent of your ex’s declared self-employed income or the reason they have transferred money to a sibling or new partner. What can you do about an ex hiding assets? If you are separated or getting divorced and you believe your ex is hiding assets you may need urgent financial settlement and injunction representation. That’s because if your ex is hiding assets with the intention of reducing your financial settlement you may need an injunction order to stop them. Examples of when you may require a financial injunction include: Your ex is transferring money or property to a third party Your ex is putting their pension in payment and taking the maximum tax free cash sum to put the money out of your reach Your ex is syphoning money out of the family business by paying a family member for false invoices with a view to making sure the family business has a lower value placed on it as profits will be down Your ex is buying property overseas or transferring assets abroad Your ex is moving money out of joint bank accounts and putting it into cryptocurrency An injunction is a temporary measure to stop your ex from hiding or disposing of assets. It is best to consider a section 37 injunction application rather than assume that in financial settlement Court proceedings a new partner, parent or sibling can be joined into the financial application to try to unravel the transfer of assets. Whilst that is possible it is normally best to stop the transfer taking place in the first place by securing a freezing injunction. If you have not already done so, a divorce solicitor will also advise you to start financial Court proceedings for a Financial  Court Order. Within the financial settlement application, the Court can make financial disclosure orders that your ex will need to comply with. If your ex does not comply with the financial disclosure orders then you can ask the Court to enforce the disclosure orders against your ex or ask the Court to draw inferences. For example, if the Court ordered disclosure of historical bank statements to reveal what happened to the £100,000 after the sale of a buy to let property and your ex flouts the disclosure order you can ask the Court to draw inferences as to why and ask the Court to add back in the £100,000 so you get a greater share of the other family assets. Financial proceedings and ex hiding assets If you have started financial proceedings and you are not satisfied with your ex’s Form E financial disclosure then a specialist family solicitor can review the financial disclosure with you and draw up a list of additional questions and request for extra non-standard paperwork . For example, if your ex is the director and shareholder in a family business and you suspect they have been syphoning money off to their new partner by creative accounting or use of the director loan account, you can ask for a forensic accountant to value the business and look at your accounting concerns as well as asking for an order that your ex disclose statements for their DLA. Alternatively, you can ask the Court to make financial disclosure orders to help you investigate if: Your ex is self-employed and the family lifestyle does not match their declared earnings Your ex has withdrawn significant sums from a business or personal account and that is not their usual pattern of spending Your ex previously mentioned an asset that they said would be a rainy day asset or pension but there is no mention of the asset in their financial disclosure There are lots of ways a tenacious divorce solicitor can ‘get to the bottom’ of financial disclosure, with the assistance of your background information and knowledge of your ex, combined with seeking the right injunction, financial disclosure orders and valuations. For expert Divorce and Financial Settlement advice call our team of specialist divorce lawyers or complete our online enquiry form

Getting divorced and reaching a financial settlement can be hard, even where there are only two of you involved in reaching a financial settlement and securing a Financial Court Order. It can be even harder when family members have given or loaned money, with disputes over whether the money was a gift or a loan and how the loan should be treated in the divorce and financial settlement proceedings. For expert Divorce and Financial Settlement advice call our team of specialist divorce lawyers or complete our online enquiry form. The recent financial settlement Court case of P v Q (Financial Remedies) [2022] EWFC B9 (10 February 2022) has confirmed how the Courts should treat family loans in a divorce. The case emphasises the importance of extended family members taking legal advice if they intend the transfer of money to be a loan or want a gift to be ring-fenced in the case of separation or divorce. Family loans in financial settlement proceedings If a member of the extended family gives money to a husband or wife during their relationship then undoubtedly at the time of the gift or loan the money is very welcome. When a couple split up, family loans can complicate things where there is a dispute about: Whether the money was a gift or loan. Whether the gift was to the husband or wife or to the couple jointly. If the money was a loan, the repayment terms. If the money was a loan, whether the debt should be included as a debt in the asset schedule. If the money has been repaid to the extended family member because of the divorce, whether the money transferred to the relative should be added back into the asset schedule. Whether the extended family member should intervene in the financial settlement Court proceedings. Things can get very acrimonious when family money is in issue, with one party saying the money was a gift and the other a loan. Expert divorce and financial settlement solicitors say it is best to: Get help from an experienced divorce and financial settlement solicitor. They will give you an unbiased view on whether the family Court will say the money is a gift or a loan. Whilst you may not like their opinion about the treatment of the family money, you don’t want to waste time or money on an argument that you are not likely to win. Look at the cost of arguing whether the family money was a gift or loan as you don’t want to spend more in legal costs arguing the point if the costs will be more than the amount to be gained in your likely financial settlement. [related_posts] The case of P v Q (Financial Remedies) [2022] EWFC B9 The case of P v Q involved an international family based in the UK and Germany. The wife was German, living in England. The husband was English, living in Germany with the couple’s two children. The case had many unusual points, including the value and liquidity of company shares, particularly as the case was heard at a time when Russian forces were massing at the Ukraine border and there were expectations of share price volatility because the shares were held in an energy company. Divorce and financial settlement proceedings were started in the UK. The wife said the husband had given his mother £150,000 to reduce the amount the wife would receive as a financial settlement. The husband said he had given his mother the £150,000 to repay a loan and that the money should not be added back into the asset schedule. The judge acknowledged he had to consider the factors set out in Section 25 and Section 25A Matrimonial Causes Act 1973 together with any relevant case law when deciding how to split the assets and how to treat the family loan money. Section 25 Matrimonial Causes Act 1973 broadly says it is the duty of the Court when making a Financial Court Order to have regard to all the circumstances of the case, first consideration being given to the welfare while a minor of any child of the family who has not attained the age of eighteen. Amongst other things, and of particular relevance to family money and loans, the Court should have particular regard to: The income, earning capacity, property and other financial resources which each of the parties to the marriage has or is likely to have in the foreseeable future, including in the case of earning capacity any increase in that capacity which it would in the opinion of the Court be reasonable to expect a party to the marriage to take steps to acquire. The financial needs, obligations and responsibilities which each of the parties to the marriage has or is likely to have in the foreseeable future. In the case of P and Q , the husband’s mother gave each of her three children the sum of £150,000 to help them with housing. No loan documentation was drawn up. There was no evidence that the husband's mother had gifted the money as part of an estate planning strategy. No demand was ever made for repayment of the £150,000 and there was no discussion about the circumstances when repayment was required. In evidence the mother said she hoped the family would repay the money to her if she was in need. The husband repaid the £150,000 to his mother without his mother asking for the money. The wife argued the transfer was a device to remove £150,000 from the asset schedule so she lost out, using the sharing principle of a 50:50 split, of £75,000. The judge had to consider if the £150,000 (and other family monies) were gifts or loans. The judge held that for money to amount to a gift there must be an intention to give away – with no expectation of repayment. Accordingly, the £150,000 was a loan. The arguments didn’t stop there as the judge, using case law, then had to go on to consider the nature of the hard or soft loan to determine if the £150,000 should be added back into the asset schedule. When looking at the treatment of loans in financial settlement proceedings, the judge said the family Court needs to consider: If a judge concludes there is a contractually binding obligation by a party to the marriage towards a third party, the Court should then consider whether the obligation is a hard obligation debt or a soft debt. There is no set test to decide if a loan amounts to a hard or soft debt. A common feature of family loan analysis in financial settlement proceedings is to consider if the obligation to repay will be enforced. Factors pointing to a hard loan include that the terms of the obligation feel like a normal commercial arrangement, there is a written loan agreement and a written demand for payment, a threat of litigation or intervention in the financial settlement proceedings, there hasn’t been a delay in enforcing the debt and the amount of money owed is such that it would be less likely for a creditor to waive the obligation to pay. Factors pointing to a soft loan include that the debt is owed to a friend or family member who remains on good terms, the loan is informal without a commercial arrangement feel to the loan, there has been no written demand for payment despite the loan repayment date having passed, there has been a delay in enforcing repayment, and the amount of the money is such that it would be more likely for the creditor to be likely to waive the obligation to repay. Using these principles and looking at the facts of the husband's loan from his mother, the judge concluded the loan fell into the ‘soft’ category of loan. For the financial settlement, that meant the loan monies were added back into the asset schedule, thus increasing the amount to be shared between the husband and wife by £150,000. Divorce and private client considerations when making or receiving family loans If you are thinking about making a gift or loan to a family member, it is sensible to take private client advice to try to ensure your gift is either tax efficient for inheritance tax purposes or ring fenced and protected in case of divorce through the use of a loan document, preferably combined with a prenuptial agreement or postnuptial agreement. For expert Divorce and Financial Settlement advice call our team of specialist divorce lawyers or complete our online enquiry form.