Equality and needs in determining a financial settlement
Financial Settlement
‘It is important to recognise at the outset that financial settlements do not necessarily mean that each person will walk away with 50 per cent of the assets,’ says Akash Soni, a solicitor & mediator in the family team at Breakthrough Family Law. ‘The family courts will seek to find a fair division of assets, but there are a number of factors they will take into account before moving the calculation of a financial settlement away from equality.’
Going through a divorce or dissolution of a civil partnership will be a challenging time for most people, not only dealing with the emotional distress that comes with a break up, but also the financial realities of separating one household into two.
Disputes can arise where one person perceives that they have been treated unfairly. But how is fairness determined?
While most disputes are capable of resolution without the intervention of the courts, it is necessary to understand the principles the court consider to ensure you have a fair and just financial settlement. There are two overarching principles the courts look at when it comes to considering financial division, namely the equality principle and the needs principle.
What is the equality principle?
Historically, the financial division of assets was often tipped in favour of the working spouse, to the detriment of any stay-at-home spouse which was usually the woman. This position changed over 20 years ago when the court decided that there should be no bias in favour of the money-earner against the homemaker or caregiver.
Nowadays, the starting point for the court is to consider an equal division of the family assets, and only seek a move away from this if it is just and fair to do so.
When can there be a move away from equality?
Equality is not always what will produce a fair solution, which is ultimately what a court is striving for in determining how finances will be divided. This difference could be for several reasons, for example:
- One partner may have received a large inheritance. This could make it unfair for the other partner to obtain half of the inherited assets.
- One partner may have made a ‘stellar’ contribution to the family assets. This could be where one partner has gone above and beyond to enhance the family wealth. Cases of this nature tend to be less common, but each set of circumstances needs to be judged on its own merit.
- One partner has significantly greater financial needs than the other, which could be for a number of reasons. For example, if they have primary care of the children of the relationship their financial needs will be greater to house the children; or they could suffer from a disability which impacts their housing requirements or earning potential.
Any of the above factors could mean that the court awards a larger share of assets to one partner in order to recognise their extra contributions to the family wealth or to meet their greater needs.
The needs-based approach
When there is insufficient money to allow for an equal division of assets and still meet the requirements of both parties, the court will carry out an assessment of what is fair in order to meet the needs of each person.
The legislation stipulates a number of categories for the court to consider when assessing the needs of each partner, including:
- their income, earning capacity, property, and other financial resources;
- their financial needs, obligations, and responsibilities;
- how long the marriage or partnership lasted, and the age of the partners;
- their standard of living prior to separation; and
- any disability of either partner or any children.
The housing needs of any children of the family is a commonly used factor in providing one partner with a larger proportion of the assets. Shorter marriages can also result in a significant move away from equality.
Considering the needs of each person allows for fairness to be put at the forefront and attempts to ensure financial stability and independence for both partners. A clean break is the ideal solution, when the partners can move on without being financially tied to each other – save for any child maintenance obligations. It is often the case that sacrifices and a change in lifestyle will be needed for each person following separation.
How we can help
Ultimately obtaining a fair and just financial settlement involves a balance between equality and meeting the needs of the individuals involved. The judges have significant scope for discretion. Obtaining specialist advice from a lawyer practising in family law, who can be realistic as to the likely judicial approach, will be invaluable.
If you are recently separated, considering financial separation, or want to know more about your options, then please contact one of our expert family lawyers who can advise you on the best route to suit your circumstances.
For further information, please contact Akash Soni in the family law team on 01494 328848 or email mail@breakthroughfls.com. Breakthrough family law has offices in Harrow, Berkhamsted, Beaconsfield, Mayfair & Milton Keynes.
This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.