covid divorce 1

Divorce in a time of Covid-19

If you’re thinking about divorce, are in the middle of divorce proceedings or dissolving a civil partnership, you might be wondering how the Covid-19 upheaval affects your situation. Here, our head of family law David Anstee highlights some important matters to consider before moving forward.

We are seeing an increase in enquiries from prospective clients wondering whether now is a good time to secure a favourable financial settlement while the value of their assets is depressed.

It’s challenging to fund two homes on limited resources and against a background of job insecurity, so there is an argument for waiting for calmer waters. However, if there is the remotest chance of domestic violence or other forms of emotional abuse, I would urge you to seek urgent help on what interim arrangements will ensure everyone stays safe.

If financial matters will determine what you do next, here are some things to think about:

Even after the lockdown is over, you will need to think carefully about the cost of rented accommodation or a second purchase. As long as domestic abuse is not an issue and the family can do so safely, it is possible to live apart under the same roof, although clear ground rules need to be established and the situation needs to be communicated sensitively to any children involved.

If you think it would help to have a written agreement, you can do this yourselves or via a mediator, with the help a solicitor or Relate.

If you are in the process of divorcing or talking about a financial settlement
Financial negotiations always start with a look at what is in the marital ‘pot’. You may well have shared financial information (typically by exchanging Form Es accompanied by corroborating bank statements, portfolio summaries, tax returns and so on) and perhaps have agreed a joint net asset figure on which a settlement could be based.

If you haven’t reached a binding substantive agreement, it might be an idea to cease further negotiations and maintain your status quo, or agree an interim holding arrangement. This could be done informally, or, documented in a deed of separation or interim financial order if you have started financial remedy proceedings with the court.

Alternatively, it might be possible to agree certain aspects, such as dividing the capital but leaving the income/maintenance related aspects open. Much depends on the nature of the capital assets.

Many couples have a number of pension assets between them. It is important to understand the different types of scheme – ‘defined benefit’ or ‘money purchase’, for example – and how their value might be affected by stock market fluctuations.

As the value of the underlying benefits and the reliability of the income stream may differ considerably, it is vital to get advice from a qualified finance professional.

Pension sharing orders, which determine how pension assets are divided between the parties, have to be expressed as a percentage of the fund being divided rather than a monetary figure. This means the amount paid to the recipient’s pension fund can differ quite significantly in value to what was originally intended.

If you are close to retirement age and were planning to draw down on the pension part of your settlement in the near future, hoping the proposed share would produce a certain level of income, you may need to review the position and consider a ‘nominal’ maintenance order as a hedge against a shortfall.  

Bonuses and deferred consideration
Based on our location, it’s not uncommon for us to look after the interests of professionals who work in the City. These professionals often have several components in their remuneration package. In addition to base salary, there’s typically a performance-related bonus comprising both cash and stock.

In the current climate, stock-linked bonuses could well fall short of what was anticipated, so care must be taken when structuring the settlement.

Where maintenance is being paid, either to a spouse or a child, there is always the safety net of being able to apply to the court for a variation, if there’s a material change of circumstance.

A sustained and material reduction in the payer’s income would be grounds to revisit the level of maintenance being paid. However, these variation applications can be costly and we would suggest a better approach is to structure the settlement so the payer does not rely too heavily on the discretionary or stock-linked element of their remuneration.

My divorce settlement no longer seems fair
Generally, the capital components of a divorce settlement can’t be varied, except in exceptional circumstances. So it’s a good idea to spread the risk in terms of the component parts of any settlement. The income (maintenance) components can be varied if there’s a change of circumstance, and this flexibility should ensure fairness between the parties where there has to be an ongoing financial commitment.

Maintenance commitments
If the assumptions on which a maintenance order was based change materially, the court will always consider a variation. To keep a grip on costs, it’s worth talking to the other party to see if you can agree a compromise, with a written record of what you have agreed. If this isn’t possible, consider mediation. If agreeing a compromise isn’t feasible, it’s important to take advice and not just reduce the maintenance in breach of a court order.

Any ongoing maintenance order can be varied if there’s a change of circumstances. Before looking to a former spouse for more support, you will be expected to take all reasonable steps to mitigate your position, including taking advantage of the Government’s coronavirus schemes. The availability of other resources will also have a bearing. Wherever possible, have a dialogue to see whether a temporary increase might be possible. If in doubt, take advice.

With coronavirus affecting every aspect of life, separated parents face an additional problem: what happens to child contact arrangements during the lockdown? Every case is different, so there is no substitute for specific advice from a specialist family lawyer.

Please be aware this article is for guidance only and some aspects of the law may have changed since it was written. For the latest position and/or to book a consultation with David Anstee, contact us on 0208 979 1131

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