Assessing financial needs in the majority of cases
We recently reviewed how the court makes an assessment of the reasonable requirements of a 'dependent' party, regarding the post-divorce financial arrangements in a case where there is a great deal of money.
The context of every case has to be examined, along with the lifestyle lived by the parties – for example, it may be that there is such an abundance of money, it can be claimed there is a 'need' for £1 million each year for clothing!
The starting point
The law provides a number of factors which must be considered in dealing with financial arrangements post-divorce.
First, consideration must be given to the welfare of any children. Section 25 of the Matrimonial Causes Act then outlines the following further considerations:
- the present and likely future financial position of each party
- the financial needs, obligations and responsibilities of each party
- the standard of living of the parties during the marriage
- the age of each party and the length of the marriage
- any medical condition suffered by either party
- the conduct of each party if it would be inequitable to disregard it
- any benefit which either party will lose because of the divorce e.g. rights in a pension.
In the absence of an agreement between the parties, the court does not give overriding priority to any one of these considerations but undertakes a balancing exercise, setting one against the others if necessary.
Having said that, the higher courts, when interpreting the statute, has regularly ruled that it would be logically improper and in practice impossible to deal with the other factors before first taking account of the “needs” of each spouse.
In making an assessment of “needs”, the court will meld those other factors into the equation. Hence, in a case where there is a great deal of money, the “needs” of a dependent spouse can be more ambitiously projected than in a case where the total of what is available is modest.
What are “needs”?
The Family Justice Council, a body comprising senior judges, practitioners and academics, has recently issued a Guidance paper on this very subject. This paper discussed how “needs” should be established and gives guidance based on decided cases. The most important points can be summarised as follows:
- In most cases, the main need is for income and housing.
- When looking ahead, future needs include an income for retirement.
- The level and the duration of payments must be assessed if need is established
- Need will be measured by assessing available financial resources.
- The needs of children will predominate but the court will always endeavor to ensure that, in considering accommodation, the children can spend time with each party after the separation
- The standard of living during the relationship will affect the degree of need
- Both parties must produce detailed budgets setting out their expected financial requirements and resources.
- If there are needs which must be met, the fact that this can only be done by using funds acquired by the other party before the relationship will be ignored
- The impact on the non-residential party of a continuing obligation under a mortgage will always be taken into account
For how long should the needs of one party be met by the other?
- The court must have regard to the legal requirement that the parties must become financially independent of each other if possible
- The ending of payments to meet needs in order to achieve independence between the parties should never be imposed at the expense of fairness
- The ending of payments to meet needs should be justified only in the light of facts rather than speculation
- Where an obligation to pay maintenance is imposed, the court must consider whether to make that for a specific period at the end of which it will end or if it can then be extended
- It is justifiable for the court to impose an arrangement under which maintenance payments increase or decrease automatically in anticipation of future changes
The financial arrangements can be straightforward in some cases, in many it will not be.
Our practice is to advise clients to explore ways in which a solution can be agreed before a case goes to court. In doing so, our practitioners will, where relevant, take account of the factors mentioned above, as well as the many other factors which have to be considered when arriving at the elusive solution which is fair to both parties.