Treatment of Family Loans in Divorce and Financial Settlement Proceedings
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.
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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.
Robin Charrot
Apr 14, 2022
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8 minute read
Why Do I Need a Financial Court Order?
Many people question why they need a financial court order. That’s because they assume that if they get divorced then their decree absolute of divorce finalises everything and there’s no need to get a financial court order as once you are divorced it is an automatic end to any financial ties with your former husband, wife or civil partner. Manchester divorce solicitors say that isn’t right and that a financial court order is essential to give you financial security and peace of mind. In this blog we answer your questions about financial court orders and why you need one after a separation or divorce or dissolution of your civil partnership.Manchester divorce and financial settlement solicitors
Cheshire and Manchester based Evolve Family Law solicitors are specialist divorce and financial settlement solicitors able to answer all your family law questions including financial issues arising after your separation or divorce. If you need advice on obtaining a financial court order or any other aspect of family law call Evolve Family Law on 0345 222 8 222 or complete our online enquiry form to set up an appointment in Holmes Chapel, Cheshire or Whitefield, North Manchester or to arrange a video conference, Skype or telephone appointment.Jump to:
Does a divorce end financial ties between husband and wife?
How can I stop financial ties with my ex-husband or wife?
Will a prenuptial agreement stop financial ties if there is no court order?
Will the death of a former husband or wife end the financial ties?
Does a separation agreement stop financial ties between a husband and wife?
Does a financial court order stop financial ties between an ex-husband and wife?
Have I got a clean break financial court order?
Does a divorce end financial ties between husband and wife?
A divorce doesn’t end the financial ties between a husband and wife or between civil partners. The divorce or dissolution ends the legal relationship of marriage or civil partnership. However, there can be ongoing financial ties or the potential for one spouse or civil partner to start financial proceedings to make financial claims months or even years after the divorce or dissolution proceedings have been finalised through the pronouncement of your decree absolute.How can I stop financial ties with my ex-husband or wife?
To stop financial ties with an ex-husband or wife you first of all need to look at what existing financial ties you have, such as:
Is the family home still owned jointly? Is there a mortgage on the property? Could one spouse buy the other out and get the spouse released from the joint mortgage liability so that they can use their share of the equity and a mortgage to buy a new property?
Are you waiting for the sale of a family home and still contributing towards the outgoings on the property until sale?
Are you receiving or paying spousal maintenance?
Do you own a family business and does your spouse or civil partner have a financial interest in the business or are they employed by the business?
Are you retired and receiving some of your husband or wife's pension each month to support yourself?
There are many other examples of financial ties between a husband and wife or between civil partners. You may not appreciate the extent of your existing financial ties or the potential financial claims. That is why it is best to take legal advice, preferably before you separate but, if not, as soon as you are able to do so after you or your partner has taken the decision to go your separate ways.Will a prenuptial agreement stop financial ties if there is no court order?
If you signed a prenuptial agreement or a postnuptial agreement it is important to let your divorce solicitor know because the agreement may limit financial ties between you and your husband, wife or civil partner. In the UK a prenuptial agreement or postnuptial agreement isn’t legally binding so it is best to take legal advice on your separation or divorce as you will still need a financial court order. That is the case whether or not you are both content with the financial terms set out in the prenuptial agreement or postnuptial agreement.Will the death of a former husband or wife end the financial ties?
If your former husband, wife or civil partner passes away you may think that is the end to any financial ties but a surviving spouse or civil partner or a dependent former spouse or civil partner can bring a financial claim against the deceased spouse or civil partner’s estate if they can say that the Will or intestacy rules did not leave them with reasonable financial provision. That is why , if you are separating or divorcing, you not only need a financial court order to stop or limit any financial claims but you also need to review the provisions in your Will and take advice on how to avoid a claim against your estate.Does a separation agreement stop financial ties between a husband and wife?
If you separate and decide that you don’t want to get divorced you may decide to sign a separation agreement to record how your financial affairs will be regulated. The separation agreement could provide for ongoing financial ties, for example, the payment of spousal maintenance or an agreement that the family home will stay in joint names and won't be sold until your youngest child is eighteen. Alternatively, the separation agreement could say that you both agree that there are no more financial ties between you and neither of you will make any future financial claims against the other.
Like a prenuptial agreement, a separation agreement isn’t a legally binding document and one of you could try to start a financial claim, despite the contents of the agreement or could ask for more provision than that detailed in the agreement. Depending on the circumstances in which the separation agreement was drawn up, the contents of the separation agreement may be heavily influential if one of you were to start financial court proceedings. However, divorce solicitors always recommend that the contents of a separation agreement are converted into a binding financial court order as soon as you are able to do this because a clean break financial court order will give you both financial security and peace of mind.Does a financial court order stop financial ties between an ex-husband and wife?
A financial court order will either stop or regulate financial ties between an ex-husband and wife or between civil partners.
A financial court order that says that there are no existing financial ties between an ex-husband and wife and that neither one of you can bring any further financial proceedings against the other or their estate is called a clean break financial court order. This type of court order can either be made by agreement and approved by a family judge or made after a contested court hearing and a ruling by a family law judge.
In many family scenarios you may not be able to achieve a clean break immediately, for example, because you are waiting for the sale of a family home or the sale or transfer of shares in a family business or the implementation of a pension sharing order. However, the court can make what is known as a deferred clean break financial court order. That means once assets have been sold and other aspects of the court order complied with there is a clean break and spouses or civil partners can't bring any further financial claims.
In some family situations it isn’t possible to end financial ties either immediately or in the long term. For example, in order to maintain a home for the children the family home may have to remain in joint names as you can't sell the property and the spouse looking after the children in the home can't get the mortgage company to transfer the existing mortgage into his or her name. You may only be able to sever financial ties when the family home is sold. Alternatively, if a former spouse or civil partner needs ongoing spousal maintenance for life you won't be able to stop income financial ties until the spouse or civil partner who is receiving the spousal maintenance remarries.
As it isn’t always financially possible to achieve a complete financial clean break and the end of financial ties between a husband and wife you should try to achieve as much financial security as you can by:
A capital clean break – this stops claims for more cash or for the transfer of assets but leaves open ongoing claims for spousal maintenance
A deferred income clean break – this gives an immediate capital clean break so a spouse can't ask for more cash such as money from the family home or for a bigger percentage of a pension but keeps open the income the financial ties until, for example, spousal maintenance payments stop. The court order could say that the spousal maintenance payments should stop after three years of maintenance payments with the clean break coming in automatically after three years because the court ruled that the spouse receiving the spousal maintenance should not be able to apply to extend the time spousal maintenance is paid for.
Have I got a clean break financial court order?
Divorce solicitors find that one of the most common reasons that people don’t understand their financial court order is that they don’t know if they have got an end to financial ties or not. A good divorce solicitor will spend the time with you so that you understand:
The range of capital and income court orders that a family court can make either with the agreement of a husband and wife or after a contested court hearing
The different types of clean break and end of financial ties that can be achieved
Why a clean break may be very important in your particular financial and personal circumstances. For example, if you are a family business owner and you think that your business will significantly increase in value, you are the beneficiary of a discretionary trust, you anticipate receiving a substantial inheritance from a member of your family or you believe that your ex-husband or wife will squander their financial settlement and want to be able to ask for more from you
The prospects of you achieving an immediate capital or income clean break financial court order if the judge had to make a ruling on whether to make a clean break financial court order. This information then enables you to try and negotiate and clean break with your former spouse and invite the court to make an agreed financial court order
The risks associated with a clean break order. For example, if there is a contested court hearing your spouse after a long marriage may be likely to receive spousal maintenance for life. You could agree to give them a one-off cash lump sum instead of ongoing spousal maintenance to achieve your capital and income clean break. The risk to the payer is that spousal maintenance would not have to be paid if your former spouse remarried, predeceased you or if you lost your employment or business. The risk to the former spouse receiving the one off cash sum is that if the paying spouse’s income increased or business becomes more profitable they could have asked for an increase in the amount of spousal maintenance or for a bigger capitalised spousal maintenance figure. There isn’t often a right or wrong answer on whether or not to agree to a clean break as only you knows how valuable a clean break is in terms of having financial security. However, the important thing is that you are able to make an informed decision on what is best for you and your family.
Manchester divorce and financial settlement solicitors
Cheshire and Manchester based Evolve Family Law solicitors specialise in resolving financial issues after a separation or divorce. For answers to your family law questions and advice on financial court orders or any other aspect of family law call Evolve Family Law on 0345 222 8 222 or complete our online enquiry form to set up an appointment, a video conference call or telephone appointment.Latest From Our Financial Orders Blog:
Robin Charrot
May 06, 2020
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11 minute read
Can I Ask the Court to Change my Financial Court Order Because of Covid-19?
Whilst we are all living in unprecedented times and there are no certainties about when we will come out of the government imposed Covid-19 lockdown and know the full economic impact of coronavirus, questions are already being asked about whether the family court can be asked to change a financial court order because of the effect of Covid-19. In this blog we look at if you can ask a court to change your financial court order because of coronavirus.Online family law financial settlement solicitors
Cheshire and Manchester based Evolve Family Law solicitors are working online to advise existing and new family law clients on all coronavirus related family law questions including financial issues arising from Covid 19. If you need advice on your financial court order or any other aspect of family law call Evolve Family Law on 0345 222 8 222 or complete our online enquiry form to set up a video conference or telephone appointment.Jump to:
Can a financial court order be changed?
Covid-19 and changing financial court orders
What is a Barder event?
Is Covid-19 a Barder event?
Can a financial court order be changed?
Many people think that once a financial court order has been made then ‘’that’s it’’ but some aspects of a financial court order can be changed by making a variation application. Examples of when you can apply to vary a financial court order include:
Applying to stop spousal maintenance payments
Applying to reduce or increase the amount of spousal maintenance payments
Applying to extend the length of time that spousal maintenance payments are paid for
Applying to discharge or vary a child support maintence requirement contained in a financial court order such as a child support court order for step-children, a top up child support order or a child support order for a disabled child
Applying to end or vary a school fees order so that you are no longer required to pay school fees or the order is changed to vary the percentage amount of the school fees you are required to pay under the school fees order
Asking the court to capitalise the spousal maintenance payments in the financial court order so instead of ongoing monthly spousal maintenance payment a lump sum is paid as a one off payment
Applying to the court to change the mechanics for the sale of the family home if the financial court order included an order that the family home should be sold. Whilst the court won't normally change how much you should receive from the sale proceeds, the court can give directions about the sale price of the family home or say whether an offer should be accepted or say whether the choice of estate agent should be changed or to order that a family law judge can sign the legal paperwork to sell the family home if one owner refuses to do so.
These are the types of clauses contained in a financial court order that can usually be changed either by agreement with your ex-husband or ex-wife or through making an application to vary specific clauses in the financial court order.Covid-19 and changing financial court orders
Given the financial and economic impact of Covid-19 some people want to make more drastic changes to their financial court order and want to know if they can apply to change:
An order to transfer the family home into the sole name of their ex-husband or ex-wife as their ex-spouse can no longer secure a mortgage to take over the mortgage liability so they want the family home sold instead
An order that the amount of a lump sum payment is reduced to reflect the reduction in the value of the overall family assets because of the drop in the value of investments or in the value of a family business
An order that on the sale of the family home the ex-husband or ex-wife will get a fixed amount from the equity in the family home and their ex-spouse will get the balance of the equity
An order that one ex-spouse retains cash assets and the other retains more illiquid assets (such as a share portfolio or shares in a family business) that are now either difficult to sell or would have to be sold at a significant undervalue to the value given to the asset at the time that the financial court order was made.
There are many other examples of situations where one spouse now thinks that the financial court order, either made by agreement with their ex-spouse or after a contested court hearing, is now very unfair and prejudicial to them.
Court rules say that although you can apply to vary or change some parts of a financial court order (like the payment of spousal maintenance or the mechanics of the sale of the family home) you can't apply to the court to change the capital elements of the financial court order (such as the amount of a lump sum payment or whether assets should be split differently to that ordered by the court) unless you:
Appeal against the financial court order – you can only do this if you can say that the family judge either got the facts or the law wrong. There are time limits in which to appeal against a financial court order
Apply to change the financial court order because of a Barder event (including the capital elements of the financial court order).
What is a Barder event?
A ‘’Barder event’’ is when an unforeseen event invalidates the fundamental assumption on which a financial court order was based. You may therefore think that the family court will treat Covid 19 as a Barder event as none of us, politicians included, realised the significance of the flu like virus in Wuhan when news of the illness was first confirmed by the Chinese authorities on the 31 December 2019.
However for something to be deemed a ‘’Barder event’’ the family court has previously decided that:
The event must have occurred after the making of the financial court order
The event must invalidate the basis, or the fundamental assumption, on which the financial court order was made
The event must have occurred within a short time of the making of the financial court order
The application to change the financial court order has to be made reasonably promptly
Permission to pursue a Barder case won't prejudice a third party who has bought or acquired an asset that is now the subject of the Barder court application.
The key to making a Barder application is to do it quickly. If you leave things to ‘’see how coronavirus pans out’’ then you may leave it too late to apply to court to change the capital elements of your financial court order. As timing of the Barder application is crucial it is best to take expert family law advice as quickly as possible.Is Covid-19 a Barder event?
What amounts to a Barder event is determined by a judge using guidance issued in earlier court of appeal decisions.
In 2008, the court of appeal decided that the global financial crisis and stock market crash was not an unforeseen event because markets fall and rise. Other court cases have said that natural market fluctuations aren’t a Barder event. However, many would argue that a global pandemic, wiping billions off the value of the stock market, was neither natural nor foreseeable back in early December 2019. Whether the impact of Covid 19 on the value of a family business or on an investment portfolio is treated as a Barder event on is yet to be tested but much may depend on the particular personal and financial circumstances of your case and that is why it is best to get expert legal advice.Online family law and maintenance solicitors
Cheshire and Manchester based Evolve Family Law solicitors are here to answer all your family law questions whether it is a coronavirus related family law question, child contact, help with leaving an abusive relationship or financial issues arising from coronavirus. If you need advice on aspect of family law call us on 0345 222 8 222 or complete our online enquiry form to set up a video conference or telephone appointment.Latest From Our Divorce Blog:
Louise Halford
Apr 09, 2020
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7 minute read
How Are Lawyers Able to Find Hidden Assets During a Divorce?
We all know that it goes on; the press is always full of stories about international or multi-millionaire families involved in divorce and financial settlement cases where there are accusations that a husband or wife has hidden assets.
It is not surprising that there are allegations of hidden assets in divorce proceedings when, after all, divorce proceedings are often started because of a lack of trust in a relationship. The fact that a spouse has had an affair can make a husband or wife to lose emotional and financial faith in a spouse. When a separation is imminent or divorce proceedings are started, past actions and financial behaviours can take on a new significance.
You do not need to have the assets of a multimillionaire to worry about a spouse hiding assets in divorce and financial proceedings. The hiding of money or property in divorce and financial cases of more modest means is just as worrying and may even have a more profound effect on the financial settlement.
Examples of hiding assets in divorce
The best Cheshire divorce solicitors will tell you that there are numerous ways in which assets can be hidden during a divorce, and there are warning signs, including:
A spouse being secretive about money and not telling you about how many bank and savings accounts they hold;
If a spouse is self-employed or is in business and starts to use cash in all transactions whilst telling you that the business is doing badly;
If a spouse has boasted of their ability to hide things from you or has previously told you that he or she hid assets from their former spouse during earlier divorce and financial proceedings ;
You think that your spouse has transferred money or property to a relative to hide the assets from the divorce and financial proceedings.
Hiding assets – the cost of recovery
There are many different and clever ways that a determined and devious spouse can hide money and property in divorce and financial settlement proceedings. However, most Cheshire divorce solicitors are equally determined to trace hidden assets to ensure that everything is ‘’in the pot’’ and can be taken into account in the divorce financial settlement.
When a divorce solicitor is looking for hidden assets, they need to:
Work as a team with their client – after all a spouse knows her husband or wife best and will potentially have lots of invaluable information , even if they do not always appreciate just how important their information is to the solicitor;
Look at the cost benefit ratio- there is no point in running up a big solicitor’s bill or instructing a forensic accountant to pour over company accounts unless the extra work and costs is likely to produce more by way of financial settlement than the extra costs incurred. That is because you cannot guarantee that a court will order a spouse to pay your costs in tracing assets. It is a pointless victory if the bigger financial settlement is swallowed up by extra legal costs.
Look at the bigger picture and use their expertise to assess a case before embarking on tracing hidden assets. For example if a husband and wife have been married for twelve months the likely size of the financial settlement , based on the length of the marriage, may not be effected by whether the solicitor can discover hidden assets. That is because the short length of the marriage may be of overwhelming importance to the size of financial settlement, rather than the extent of the family assets.
Financial disclosure and hiding assets
In financial court proceedings, a husband and wife are obliged to provide ’’full and frank’’ financial disclosure to their spouse. That does not always happen. Additional enquiries, such as questionnaires and single joint expert and shadow expert reports can be commissioned to trace assets. Sometimes a solicitor can spot that a spouse is trying to hide money, property or income through:
Transferring money out of a bank account as cash and saying that the cash has been spent but really opening a secret bank account with the cash;
Producing incomplete internet transaction histories for bank accounts to try to avoid revealing entries;
Saying that money taken out of a savings account was to repay family debt but the debt was artificial, with the plan being for the ‘’debt’’ to be repaid after the financial proceedings are finalised;
Pretending that they do not own a new property. A simple search of the Land Registry can reveal the truth about property ownership;
Not disclosing the existence of family trusts or inheritances.
These are just the tip of the iceberg when it comes to hiding assets in divorce proceedings.
The best thing that you can do if you suspect that your spouse is hiding or has hidden assets is to take legal advice from a specialist and experienced Cheshire divorce solicitor such as Evolve Family Law. We will be able to help you weigh up the pros, cons, and costs of tracing the hidden assets.
For information about financial settlement options or for representation in financial court proceedings please call us on +44 (0) 1477 464020 or contact Robin Charrot
Robin Charrot
Nov 18, 2019
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5 minute read
Are School Fees Covered By Child Support?
Many parents think that school fees are covered by child support. That is a reasonable assumption as, after all, if your child attends a private school then the school fees are part of the financial support that they need.
The types of family maintenance payments
Child support and family maintenance can be rather confusing as a parent can receive any of the following:
Child support through an assessment by the child maintenance service;
Child support through a top up child support court order – this order can only be applied for if the child maintenance service has carried out a maximum child maintenance service assessment;
Child support through a family court order to cover any additional costs a child with a disability may incur;
Payment of school fees through a court school fees order;
Maintenance paid to a parent, referred to as spousal maintenance ;
Maintenance payable to help support a child and a parent and therefore a combination of child support and spousal maintenance. Global maintenance is paid through a court order.
Are school fees covered by child support?
School fee payments are not included in any child support payments that are determined by the child maintenance service. If the court makes a child maintenance order the school fees will not be included in the maintenance amount.
When the child maintenance service calculates child maintenance , they use a strict mathematical formula. This formula does not consider the costs incurred in caring for the child, or school fees, but focuses on the income of the parent liable to pay child support.
If a child attends a fee paying school or a parent wants to enrol a child at a private school then either the school fees are paid:
On a voluntary basis by the separated parent ; or
An application is made to court for a school fees order.
Will a school fees order cover the full amount of the school fees?
The school fees order will not necessarily cover the full amount of the school fees. A parent could be ordered to pay all of the fees or to contribute towards the school fees.
The court will decide how much a parent should pay toward school fees based on both parent’s respective incomes and reasonable outgoings. The court will look at the affordability of school fees, taking into account the child support and any spousal maintenance payments that are payable as well as the payer’s other financial commitments, such as their mortgage payments.
What happens if a parent says they cannot afford to educate a child privately?
Prior to a separation or divorce, a child’s parents could have decided that it would be best for their child to be educated privately. Sometimes a parent will decide that they can no longer agree to their child going to a fee-paying school when the child reaches primary or secondary school age. Alternatively, a parent may say that the child should be withdrawn from their current private school and enrolled in state education.
If the parents of a child cannot agree on whether their child should go to a private school or be state educated either parent can apply to court for a specific issue order.
A specific issue order will state what school the child should attend. If the objection to private education is purely based on the affordability of the school fees then an application for a school fees order may be more appropriate.
Can the court change a school fees order?
If the court makes a school fees order either parent can apply back to the court to vary the order, for example:
A parent ordered to pay all the school fees may say that he or she should only pay 50% of the fees now that the other parent has had a pay rise and is on a similar salary;
A parent ordered to pay all the school fees could apply to the court to terminate or stop the school fees order because of his or her suffering a reduction in income or an increase in their reasonable outgoings making the continued payment of school fees unaffordable.
The interplay between the child maintenance service, the court and child support, spousal maintenance and school fees orders can be tricky for parents to grapple with. It is always important that the topic of private education is raised early so that parental decisions can be taken jointly, or if parents cannot reach agreement, there is time to ask the court to make a specific issue order or school fees order before the start of the school term.
For advice and information about applying for a specific issue order, a school fees order or on any other aspect of children law please call me on +44 (0) 1477 464020 or email me at louise@evolvefamilylaw.co.uk
Louise Halford
Aug 02, 2019
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5 minute read
How do you value company shares to reach a fair financial settlement?
How do you value company shares to reach a financial settlement? Manchester divorce solicitors have to answer this question when looking at divorce and the family business and negotiating financial settlements.
If a husband and wife cannot agree on the value of company shares, the husband or wife can start financial court proceedings. In the financial court case, a judge can order the valuation of shares by an independent forensic accountant. Ultimately, it is for the family judge to decide on what is a fair value of any company shares and to make a financial court order.
A fair financial settlement
The family court objective is to reach a fair financial settlement.
What amounts to a ‘’fair financial settlement’’ is subjective. A husband's opinion on a fair financial settlement may vary wildly to that of his estranged wife.
When deciding how to split family assets the court applies statutory factors, such as the length of the marriage and the husband and wife's ages, to reach what the court considers a fair result.
Although the court looks at statutory criteria when making a financial court order, the judge can exercise discretion. That discretion partially explains the number of appeals against financial court orders. The other reason spouses are often disgruntled with a financial court order is that they do not perceive the financial settlement to be fair as fairness is ‘’in the eye of the holder’’.
How can Evolve Family Law Solicitors help?
For expert legal advice on divorce and financial settlements involving family companies call me +44 (0) 1477 464020 or contact me by email at robin@evolvefamilylaw.co.uk
Valuing company shares to get a fair financial settlement
The fairness of the financial settlement depends on assets, such as property or company shares, being valued correctly.
To add to the complexity of valuing company shares, frequently Manchester divorce solicitors need to ask experts to value the company shares at different dates.
For example, a forensic accountant may be asked to value company shares at:
The date of separation; and
The date of cohabitation or marriage; and
The date the company shares were transferred of gifted to a husband or wife.
The Martin case and valuing company shares
The Martin case shows just how complicated it can be to value shares in a non-listed company.
Last year a judge had to decide how to split the Martin family fortune of roughly 182 million. Mr Justice Mostyn decided Mrs Martin should get about £73 million of the family assets. That is about forty percent of the family assets.
After a long marriage, Manchester divorce solicitors start from the premise that family assets should be divided equally on divorce. Equality can be departed from if there are good reasons to do so.
Mrs Martin therefore thought that the financial court order was unfair and that she should get more. Mr Martin was also of the view that the financial settlement was unfair.
Accordingly, Mrs Martin appealed to the court of appeal and Mr Martin cross-appealed.
The facts of the Martin case
Mr and Mrs Martin had been married for 29 years and had two adult children. This was a long marriage.
At the time of their marriage, Mr Martin owned shares in the family company and Mrs Martin was a shop floor employee. There was no prenuptial agreements in place. If there had been a prenuptial agreement this could have potentially avoided the contested court proceedings or narrowed the issues.
Valuing a company in divorce and financial settlement proceedings
The appeal centred on the valuation of the shares in the company, Dextra Group PLC, at the time that Mr and Mrs Martin began to cohabit.
At the time the couple began to live together the company was not listed. An expert was instructed to prepare a report on the value of the shares.
Mrs Martin valued the shares at 1.6 million at the date of cohabitation. The judge decided the shares were worth 44 million.
The valuation of the company shares at the date of cohabitation was key to deciding if Mrs Martin’s 73 million was a fair financial settlement. That is because Mr Martin said the value of the company shares he owned at the date of cohabitation should be ‘’ring-fenced’’ and not shared with Mrs Martin.
The Martin court of appeal decision
The court of appeal decided to refuse Mrs Martin’s request for more than 73 million of assets.
The court of appeal concluded that the first judge had reached a fair decision. Their view was that a judge is entitled to take a view on the value of the assets and wealth that a husband or wife brings into a marriage.
In other words, the court of appeal rejected the idea that judges should just focus on the accountant’s figure for the value of the company shares at the time of cohabitation.
The court said that a financial settlement '’ involves a holistic, necessarily retrospective, appraisal of all the facts and then the application of a subjective conception of fairness, overlaid by a legal analysis.’'
The court of appeal has reconfirmed to divorce solicitors that the financial settlement fairness test is subjective.
That subjective approach makes it all the more important for spouses to take early specialist legal advice from divorce solicitors who are experienced in divorces involving family businesses and in assessing what a court is likely to determine as a fair financial settlement .
How can Evolve Family Law Solicitors help?
For expert legal advice on divorce and financial settlements, contact me on +44 (0) 1477 464020 or email me at robin@evolvefamilylaw.co.uk
Robin Charrot
Jun 13, 2019
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5 minute read
Divorce and Family Money Held in Trust
Sometimes it takes a member of the aristocracy to highlight the complexities of financial claims on divorce and family money held in trust. Henry Wodehouse , the third son of the Earl of Kimberley , whose claim to fame was that he was the most married UK peer having tied the knot 6 times before his death , has hit the headlines as a result of his own divorce . Why is that newsworthy? Henry Wodehouse’s divorce has hit the headlines because the financial battle between him and his estranged wife centred on money held in trust, set up under the terms of his late father’s Will.
The case of Henry and Ellen Wodehouse was the subject of media reporting after it was said that Mrs Wodehouse was reduced to living on her brother’s boat after losing a Court of Appeal case that centred on whether she should get a £90,000 payment.
Mr and Mrs Wodehouse married in 1992 and separated in 2011. During the marriage Mr Wodehouse had his share of financial difficulties, being made bankrupt in 1990 and 2010. Mrs Wodehouse had health problems making working difficult. The couple went to court to sort out how their property and money should be split. It was ascertained that whilst they owned a family home there was no money in it as there was more debt secured against the house than equity in it. Where did that leave Mrs Wodehouse? The first judge said she should get a lump sum payment and a share of her husband's pension. Mr Wodehouse appealed to the Court of Appeal saying that he had no money to pay the lump sum and that the court could not expect the trust fund to pay the amount of £90,000 to Mrs Wodehouse. His barrister argued that the trust fund was a discretionary fund, Mr Wodehouse had no entitlement to the trust money and the trust had not been a party to the original financial court proceedings.
The Court of Appeal, whilst expressing sympathy for Mrs Wodehouse’s financial predicament quashed the lump sum payment but it did maintain the pension sharing order that provides for Mrs Wodehouse to receive half of her former husband's police pension. The income from the pension is modest and will not go anywhere towards discharging the reported family debt.
Divorce and Family Money in Trust
It is often assumed that divorce and family money in trust is the preserve of the ultra-wealthy but that isn’t always the case as was established by the court proceedings concerning Henry and Ellen Wodehouse. It is reported that the money placed in trust by the late Earl amounted to about £600,000 but the trust fund was a discretionary trust with 15 potential beneficiaries including Mr Wodehouse’s stepmother.
Trusts are also often thought of as ‘’old money’’ but in Mr Wodehouse’s case the money had been placed in trust by his late father, rather than generations earlier.
When a family court considers divorce and trusts the court’s first consideration is whether the trust is a nuptial trust or a non-nuptial trust. If the court finds that the trust is a nuptial trust the court has wide powers and can change who benefits from the money in the trust. If the trust fund is found to be a non-nuptial trust then the family court powers are far more limited. Normally the court would focus on awarding the spouse who was not a beneficiary of the trust fund all or a greater share of the family assets , on the basis that the spouse who was a discretionary beneficiary of the trust fund would likely receive either capital or income distributions from the trust fund.
Sadly that solution didn’t work for Mrs Wodehouse as, other than her husband's very modest pension, there were no other assets as all the equity in the family home had been eaten up by secured debt, leaving the trust fund as the only asset of substance until the Court of Appeal ruled that the particular trust was of a type that could not be ordered to pay Mrs Wodehouse a lump sum payment or be ordered to pay the amount to Mr Wodehouse to then hand over to his ex-wife.
How can Evolve Family Law Manchester Divorce Solicitors Help?
The Wodehouse case is a cautionary tale but it should not deter spouses from making financial claims involving trusts. Equally the case highlights the importance of estate planning. Had the money not been placed in trust by Henry Wodehouse’s late father it is debatable as to whether the money would still have been available for Mr and Mrs Wodehouse to litigate over given the creditor’s claims but, through use of estate planning, money has been preserved.
For advice and information about trusts and financial claims on divorce or any other aspect of family law please call me on +44 (0) 1477 464020 or by email at robin@evolvefamilylaw.co.uk
Appointments available in Manchester and Cheshire.
Contact us for a consultation
Robin Charrot
Dec 20, 2018
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5 minute read
How To Get An Online Financial Court Order?
Evolve divorce solicitors are delighted to announce that Evolve divorce solicitors have been asked to join a pilot scheme arranged by the Court service to lodge agreed Financial Court Orders online.
All the divorce solicitors at Evolve Family Law think that it is great news that Evolve Family Law has been asked to participate in the Court led projects to file divorce petitions and now Financial Court Orders online. Why? Well online filing of Financial Court Order applications and all the supporting paperwork is a massive step forward for client service, something that the divorce solicitors at Evolve Family Law strive to improve by using the latest digital technology in a client friendly way to progress divorce documents as quickly and as efficiently as possible. That means that if a client is very techy, Evolve Family Law can contact them with secure online email and with paperwork for online approval. If clients aren’t technologically minded, our divorce solicitors are equally happy to meet clients and pick up the phone and chat. The inclusion of Evolve Family Law in the Court digital project is good news for all our divorce clients.
Prior to being invited to join the Court’s latest online project Evolve divorce solicitors had to send Financial Court Orders to the Court by post. Assuming the post arrived at the correct Court department the Financial Court Order paperwork would then be sent to a judge to look at. Some weeks later, subject to the vagaries of the postal service, a reply might be received at Evolve divorce solicitors; either asking for additional documents, seeking further explanation or clarification of the husband's and wife's financial or personal circumstances or asking for the Financial Court Order to be drawn up and then sent back in the post to the Court for sealing and return to Evolve Family Law solicitors. At times the process of getting the Court to approve a financial document agreed upon by a husband and wife was painfully slow
Why Does a Delay in Getting Your Financial Court Order matter?
From the point of view of the divorce solicitors at Evolve Family Law it is a question of pride in our professionalism and client service. We all want clients to feel that they have had an efficient but personal service and when things go astray in the post or there are delays in receiving letters we believe it reflects badly on us. From a client’s point of view the delay in getting a Financial Court Order matters because:
Until the Financial Court Order is approved by the Court and sealed by a Court official you can't apply to the Court to enforce all or part of the Financial Court Order if it isn’t complied with;
If the Financial Court Order contains a pension sharing order the sealed Financial Court Order has to be sent to the pension administrator to implement the order before the pension can be shared;
If the financial agreement included an agreement to sell or transfer property to a spouse it may be the case that the property sale or transfer can't go ahead until the Financial Court Order is received;
Sometimes a husband or wife will refuse to apply for the Decree Absolute of divorce until the Financial Court Order has been sealed by the Court.
So although the delay in getting a Financial Court Order can be a bit frustrating to some clients to other divorce clients the wait to send and receive the Financial Court Order through the post can cost them money as well as adding to the stress of the divorce proceedings.
Online Financial Court Orders
In the 21st century, online production of Financial Court Orders must be a good thing for both divorce solicitors and clients. Evolve Family Law welcomes the opportunity to take part in the Court pilot project for the filing of online Financial Court Orders. We hope that the pilot project will establish that use of technology, combined with a personal legal service from caring and committed divorce solicitors, is the right way forward for divorcees.
How much does a Financial Court Order cost?
If you have reached a financial agreement with your husband or wife over how you want to split your assets and you want the security of a Financial Court Order then the cost of obtaining a straightforward Financial Court Order is £866. There are no hidden extras – that amount includes VAT and the Court fee. If your finances are more complex and you need your Financial Court Order to cover pension sharing and / or spousal maintenance then the fixed costs are higher or, if you can't reach a financial agreement with your husband or wife Evolve divorce solicitors can give you a bespoke quote for representation in Court proceedings.
Contact our team today for more information
Robin Charrot
Oct 22, 2018
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5 minute read
How much does a divorce cost?
You’d be right to think that this simple question deserves a straightforward reply but very few law firms publish price information on their websites. Evolve Family Law is one of the first law firms to publish fixed family law fees so clients have an idea of costs before calling or emailing us.
The cost of divorce proceedings
If you want to start divorce proceedings and your husband or wife agrees to the divorce, then the costs will be £1,222. There are no hidden extras – that includes the VAT and the Court fees (payable to the government) of £550.
If you think your divorce might be a bit complicated, for example because:
You don’t know where your husband or wife is living;
Your spouse lives abroad;
It is possible that either you or your spouse could issue divorce proceedings in more than one country;
Your spouse won't agree to a divorce or won't complete the forms.
Give us a call and we can talk through your options and the costs based on our hourly rates. Again, unlike most other law firms in the North West, we are not shy about publishing hourly rates in our pricing guide.
The cost of getting an agreed Financial Court Order
If you have already reached a financial agreement either direct with your spouse or through mediation you will need the protection of a Financial Court Order. Evolve Family Law can prepare an Order for from £866 .That’s the price inclusive of VAT and Court fees for a straight forward Financial Court Order.
Our pricing guide details the range of fixed fees for financial orders, as the amount of work required, and therefore the fixed fee, depends on the complexity of the finances and pensions.
Transparency and fees
When Evolve Family Law was set up in 2015 Louise Halford and I didn’t want to create ‘’just another law firm’’. Both of us have many years of family law experience in working at top city centre law firms and knew that we wanted Evolve Family Law to be different. Our vision was to put clients (and not the fees) at the heart of what we do by being trusted legal advisors, charging a fair and transparent level of fees.
What does that the pricing guide mean for you?
It means you get bespoke advice tailored to your personal situation at a cost that you can understand. What do I mean by that? To give examples:
I met someone who was thinking about starting divorce proceedings. I talked to him and realised that he didn’t actually want a divorce and there was no legal or financial reason to push ahead with one. Better for the client to wait until he was ready, whether that is in a few weeks, or a couple of years’ time. That is fine by me and he knows that I will help when he is ready to get divorced;
One lady was clear she wanted a divorce. She knew from the outset that her divorce would cost her £1,222. That meant she could budget for the costs, without worrying about how much her legal costs might add up to;
I met a client who was worried about her children and money. I established that she or her husband could start divorce proceedings in more than one country and the choice of country in which the divorce proceedings were started could have a big impact on the financial settlement. For her it was important to start the Court proceedings quickly to protect her financial position.
Every divorce is different but our fixed fees and pricing guide are published to give you an idea of the costs involved so that you can contact us with confidence.
If you are contemplating a separation or a divorce and want to discuss your options and costs then please give me a call on +44 (0) 1477 464020 or email me at robin@evolvefamilylaw.co.uk
Robin Charrot
May 23, 2018
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4 minute read
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