Consider these things to ensure a fair split of asset values when divorcing during the pandemic.
When lockdown was announced in March, many couples were forced to spend far more time with each other than normal. Along with school closures and the pressures of working from home, even some of the strongest partnerships have felt the strain.
There will be couples who were considering divorce pre-lockdown, those who were starting to go through the process and some who have decided during or post-lockdown that their relationship has come to an end.
It is difficult enough negotiating a divorce at any time, but the current economic situation has meant asset values fluctuate, making the task of a fair split even harder.
Make a list of assets
The first step is to make a list of your assets and needs. Make sure to include projected budgets for the future that include extra costs for children or other dependents. Having all this information prepared can help when coming to a financial agreement. Costs such as moving, purchasing new homes, protecting the assets you will acquire or obtain all need to be considered.
It is the court’s duty to consider all circumstances of the divorce, taking into account a variety of factors such as income, financial resources, needs, standard of living, age, disability and dependents.
The starting point of these procedures usually focuses on the assets accrued during the marriage, and these will be divided to ensure a fair and reasonable outcome in the circumstances. Other factors will ensure that each party receives fair compensation that plays to their needs.
It is undeniable that splitting assets fairly in the current climate can become complicated, as the court will have to look at the couple’s current finances. Couples may find their investments, pensions and properties have decreased in value, meaning they may not receive as much as they first thought.
Courts will often divide assets up using percentages rather than pound value to ensure a fair split. If there is an asset that cannot be easily valued or divided, such as a business that may not survive the current crisis, couples are advised to consult with their lawyer to discuss methods of valuing that asset after the divorce.
Pension pots are often overlooked when filing for divorce, as the focus lies on other assets such as the marital home. Now more than ever, couples looking to divorce should make sure they consider pensions, as they are usually the first are second most valuable asset and can help ensure a fair split. If a divorce settlement does not take pensions into account, it can leave one party worse off.
Courts deal with pension arrangements in three ways to ensure a fair division is made. One party could receive a percentage share of the former partner’s pension pot, often referred to as ‘pension sharing’. Another option is ‘pension offsetting’, which is where the value of a pension can be offset against other assets.
A ‘pension attachment’ order could also be enforced, ensuring one person’s pension can be paid to the other. Pension sharing is often the most favoured way in dividing funds as it can achieve a clean break. When dividing pension assets, care must be taken to ensure that the annual or lifetime allowances are not breached, as this can result in extra tax bills.
Financial agreements reached prior pandemic
The coronavirus pandemic may also be considered as a ‘Barder event’. This describes an event that is unforeseen or unforeseeable, which fundamentally undermines the financial order that has been made. The effect of coronavirus on the economy, housing market and businesses could undermine many financial orders made in the months leading up to the outbreak.
We are yet to see how the courts will deal with these cases and it is likely that judges will be reluctant to revisit agreements unless there are unusual circumstances.
It is also worth taking into consideration that from a Public Policy point of view, the court is unlikely to treat the pandemic as a ‘Barder event’ because if they allowed one, it would open the flood gates and could overwhelm the courts.
However, it is worth discussing this with a Family Lawyer because in your case it might be that this is something that would be considered.
Consider whether now is the right time
With the economic impact of the pandemic, many people may find themselves at a disadvantage. For some, the financial downturn could be considered an advantage when it comes to securing a favourable financial settlement.
Although the timing may benefit you, it may have an adverse effect on your partner, and they could object to a final financial settlement being reached until the economic climate has settled slightly.
In addition, the uncertainty caused by the pandemic may mean the court is more likely to exercise extreme caution when making final orders and may even wait to divide marital assets until things have settled and assets are no longer fluctuating.
When filing for divorce during the coronavirus pandemic, couples should take into consideration the current financial uncertainty and decide whether this is the right time for them to commence divorce proceedings.
No matter what decision you decide to take with your divorce or separation during this time, it is always best to seek advice from a reputable family and divorce lawyer. They will be able to advise further on what is best to do in your current circumstances, as well as provide you with the most up to date information regarding the Covid-19 pandemic.
Lucinda Holliday is head of family & divorce at Blaser Mills Law.