The Law Commission’s review of financial remedy law – how will it affect you?

In spring 2023 the Law Commission announced a review into how finances are dealt with after divorce and civil partnership dissolution. What does this mean for you? In this blog we’ll dive into what the review will entail, and why, as well as the implications for you and your divorce.

What is the Law Commission review all about?

If you’re not in a high conflict marriage, I advise clients to to agree their financial settlements without court intervention if possible. Mediation is often the quickest, simplest and cheapest way to reach a settlement, which is then signed off in court. Or you can negotiate via solicitors to achieve the same outcome.

But, sometimes, that just doesn’t work. Maybe your soon-to-be-ex won’t play ball. Maybe you suspect they are hiding assets (secret bank accounts, business interests or material assets). Perhaps you have tried to reach an agreement and can’t. In any of those scenarios, you can apply for a judge to assess your case and make a court order.

The piece of legislation judges use to determine financial settlements is called ‘The Matrimonial Causes Act, 1973’. And, as you can see from its name, that law is now 50 years old. A lot has changed in fifty years. Family life and relationship dynamics are very different to those typical 50 years ago. Just as ‘no fault’ divorce has recently come into law, it may be time to change how settlements are awarded.

At the moment judges make financial orders after taking into account the factors within Section 25 of the Act (I’ll talk about those in more detail later). There is wide scope for interpretation of the factors, which gives judges a lot of discretion in determining the financial order. In any given case, two judges may come to very different decisions. Neither of which would be ‘wrong’, as they could both be justified by different interpretations of the Section 25 (s25) factors. So the review will look at whether there is scope to provide more definitive guidance, giving separating couples a clearer sense of what a court is likely to rule in their particular case.

The review will also take into account a number of related issues, such as spousal maintenance and pension arrangements.

So, that’s what’s up for investigation. Now, let’s look into how it might affect you.

Will the review affect you?

The short answer to this, if you are reading in 2023, or even 2024, is no. Any legal changes won’t affect you at all. The scoping paper, which is just the start of the process, is tabled for publication in September 2024. The wheels of change turn slowly in government!

But it’s still worth knowing about. One of the big changes that’s likely to be up for debate is the latitude given to judges in applying the s25 factors. As a reminder, here they are. I’ve highlighted the key phrases that get to the heart of each of them:

• the income, earning capacity, property and other financial resource which each of the parties to the marriage has, or is likely to have in the foreseeable future. This includes 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
• the standard of living enjoyed by the family before the breakdown of the marriage
• the age of each party to the marriage and the duration of the marriage
• any physical or mental disability of either of the parties to the marriage
• the contributions which each of the parties has made or is likely in the foreseeable future to make to the welfare of the family, including any contribution by looking after the home or caring for the family
• the conduct of each of the parties, whatever the nature of the conduct and whether it occurred during the marriage or after the separation of the parties or (as the case may be), dissolution or annulment of the marriage, if that conduct is such that it would in the opinion of the court be inequitable to disregard it
• in the case of proceedings for divorce or nullity of marriage, the value to each of the parties to the marriage of any benefit (for example, a pension) which, by reason of the dissolution or annulment of the marriage, that party will lose the chance of acquiring
• in cases where there are young children, the Court’s first concern will always be the welfare of those young children and how their needs will be met.

50/50 split is always the starting assumption, but when you layer these factors on top, the picture can look very different from one scenario to the next. A settlement after a five year marriage where both parties work and there are no children or other care needs may be very different to a settlement after a twenty year marriage where one spouse has no external income but is primary caregiver to three children, for example.

The factors are all open to a wide variety of interpretation. Application of these factors over the years has been developed through case law, so in general, should follow similar principles. However there is no reliable predictability for how an individual judge will apply these factors to any specific case. Which means entering a court room can feel like you are putting yourself at the mercy of a single judge’s perspective.

If I’m not going to be affected, what does this have to do with me?

Your divorce settlement may be done and dusted by the time the review gets going, let alone publishes its findings. However, it’s a timely reminder to get on top of your finances! Whether you’re hoping to reach an agreement between yourselves, via mediators, solicitors, or judge’s order, you will need to know what you’re dealing with.

What do I mean by that? I mean, you’ll need to have a clear idea of what your finances are, and what they need to be going forward. Here are three steps to take right now:

1. Do a financial audit

Ask yourself these questions:

• Do I know the value of major assets I/we own, such as our home?
• Do I know the value of any debts, such as a mortgage?
• How much are my annual living costs?

Remember if this applies to assets and debts you hold individually and those you hold jointly. This isn’t an exercise in guessing, or in coming up with ballpark figures. It’s an exercise in sitting down, opening bank balances and doing some research.

It’s also an exercise in paying close attention to the behaviour of your soon-to-be-ex. If you have wealth in your marriage, do you know if all their cards are on the table? Are they likely to be hiding assets? This process requires full disclosure, and you can work with your legal team, and, if needed, asset tracers, to get transparency if you suspect foul play.

2. Consider your future

Your settlement isn’t just a snapshot of what you need now, it’s also about what your needs are likely to be in the future. These days, it’s unlikely a judge will award significant spousal maintenance in the long term, unless there’s a reason you can’t work. So you will need to consider what you can do to achieve financial independence. If you have paused your career to care for children, or look after the household it is reasonable to seek a grace period where you retrain, or develop your skills. But you will need to consider what you can do to earn money in the future.

It may be that you aren’t able to work, for example if you are disabled or have children with additional needs. If this is the case it may well be that your financial needs will increase in future years. Start to think about that now, and do your research into potential costs so you can make an informed case.

3. Get organised

If your soon-to-be-ex was the one who dealt with all things financial it’s daunting to have to get to grips with money now. But, honestly, there’s no way around it. This isn’t something you can avoid and hope it all goes away. There won’t be a point in your life where money won’t be needed!

Here are two pieces of good news:

1. Nothing is as scary as the fear of that thing. Putting off opening your bank statement or starting a spreadsheet feels 100 times worse than actually doing it, even if money is tight or terrifying
2. You can do this. You are smart and capable enough to handle it. Whatever stories you have in your head telling you otherwise.

Here’s what you need to do, now. Create a home for your money admin. Both a folder online, and a space in your home. If that’s as much as you can do, great. You’ve made a start. Put everything financial in it and make yourself a cup of tea.

If you’re the sort of person who loves creating order, get some folders in place: solicitors, savings, current account, car details etc. Create a system that’s simple enough to make your life easier, not one that gives you a headache to maintain. Then put all your paperwork in the appropriate folder. Both digitally and on paper.

Next, create a time in your week that you set aside for finances. A power hour, or if that feels too much, two lots of 30 minutes. The absolute joy of doing this is that it gives your brain permission to stop worrying about finances for the rest of the time. Obviously, depending on your situation you’ll have to set up your time accordingly – if there are urgent things that come in they’ll need handling. But I promise you will feel so much better for having dedicated time and a dedicated space for your money paperwork.

It’s better together

When you’re absolutely terrified about what the future holds, or feel clueless about finances, divorce becomes a scary and lonely place. Your friends in their happy marriages, or even their stuck-in-a-rut-but-staying-there marriages don’t really get it, for all the sympathy they give. The happily singles don’t get it. Your boss is kind but expects you to just carry on.

How would it feel to be part of a group where there are no stupid questions about divorce (and there are both experts to answer them, and peers who are in a similar place)?

How would it feel to be part of a group where you can let it all out: the rage at your soon-to-be-ex, the frustration at your bestie who is trying but just doesn’t get it, the confusion at the latest solicitor’s letter?

How would it feel to be seen, heard, understood and helped?

This isn’t a mythical fairytale place – it’s absolutely real, it’s where I am each and every week, answering questions and supporting my members. And I have a team around me to support you too, and step-by-step guides to divorce finances and everything else.

So wherever you are in your divorce journey, you’re home. Exhale. It’s going to be ok. In fact, it’s going to be more than ok. We’ll do it together.

Come and join us in The Absolute Academy. You absolutely will not regret it.

 

About Emma

Emma Heptonstall, the Divorce Alchemist is the author of the Amazon best-selling book How to be a Lady Who Leaves, the Ultimate Guide to Getting Divorce Ready. A former lawyer, Emma is a family mediator and founder of Get Divorce Ready the online self-study and group programmes. Emma has been featured on BBC Radio, The Telegraph, the iPaper and in Marie Claire Magazine. Emma is also the host of  The Six Minute Divorce Podcast. To find out more visit www.emmaheptonstall.com