Divorce in the downturn: where to get advice

Divorce is usually upsetting, sometimes traumatic and generally leaves everyone worse off financially.  To make matters worse, the fall in house prices, and in some cases negative equity, has made it even more difficult for warring couples to go their separate ways.  There is seldom enough money to provide two new homes and the recession is taking its toll in terms of lower property values and unemployment to make a difficult situation even more stressful.

And it is showing up in the official statistics. The number of divorces in England and Wales fell by 5% in 2008 to 121,779, the lowest since 1975.

The recession bites

‘Middle England can’t stay in the spare room forever,’ says Nigel Shepherd, a member of Resolution and a family law partner at solicitors Mills & Reeve. And with the recession showing no signs of ending any time soon, some couples will just have to go ahead and make the break.    Dependent partners, usually the wife and mother, are well aware that if they get paid out when property prices are relatively low, share portfolios and pension funds have dropped dramatically and a partner faces a drop in income, unemployment or a collapse in business, they will get less in cash terms than if they can afford to wait. 

‘If you are the person who is looking to be paid out, you are not going to do well at the bottom of the market,’ says Shepherd.  ‘Some people are settling for an agreed share of the assets rather than going for a full pay out now.  Liquidity is a problem too as one partner can’t borrow to pay the other.’  Curiously Shepherd says there has been no rush by wealthy husbands to disentangle themselves while asset values are low.  ‘But we have seen quite a few property developer divorces.  Although property values have dived, they are paying much less in interest on the mortgage and are much better off in terms of disposable income,’ he explains.

Whether you are the husband or wife, Shepherd advises divorcing couples to get good legal advice, ‘from a Resolution member in your area, preferably one recommended by another professional like your accountant,’ he says.  Resolution is an association of specialist family lawyers.  He recommends getting all the paperwork together before you go to see a solicitor and points out that there is a wealth of advice available on the internet, for example, on the Resolution website or at www.divorce.co.uk and many others.

Clean Break

Suzanne Kingston, divorce and family law partner at solicitors Dawsons, has seen a change of attitude amongst divorcing partners.  ‘The main differences are that the lower economic party is less inclined to agree to a clean break out of fear as to what income can be drawn from the capitalised sum they would otherwise receive.’  With interest rates at an all time low and huge uncertainty in the equity and bond markets, it is difficult to get a decent income from investments.   ‘The higher economic party, usually the husband, is keen to try to capitalise on lower expectations of their salary and lower valuations of their business assets,’ Kingston points out.

She says asset valuations are a key issue, both in terms of property and businesses.  ‘There is more sharing of the risk-laden assets whereas before it was often the case that the husbands would take on the illiquid more risky assets as they were prepared to take the gamble in the good times that these would continue to be successful.’ 

‘They are less inclined to take such a gamble now particularly as the courts have shown they are unwilling to appeal decisions due to changes in circumstances as a result of the global crises.’  She quotes two key cases in 2009 - Myerson v Myerson and Horne v Horne - where the husbands’ appeals for a reduction in a divorce settlement because of the credit crunch and falling asset values were rejected by the courts. 

Like Shepherd, Kingston advises, ‘it is helpful to collate as much relevant information as possible in the early stages.  This will assist your lawyers in being able to give you specific advice as to the likely outcome in your case.’  However, she warns that you need to be careful when doing so.  ‘Potentially serious consequences may follow if any information is wrongfully removed. It is important that you get advice before taking these steps so that you ensure that you do this correctly and do not fall foul of the courts later down the line.’

Shepherd advises that if a clean break is possible, this is usually the best solution and makes the point that divorce settlements in England and Wales are more generous to the dependent partner than anywhere else in the world.  ‘I am dealing with a man who is paying his former wife £13,000 a month net in maintenance,’ says Shepherd and advises if you are the partner who is likely to be paying out, and have the option of another jurisdiction, it might be cheaper to pursue the matter abroad.

Where to get advice

‘Getting a divorce can be a stressful enough process without also waiting to reach a financial settlement for a prolonged period of time,’ commented Karen Barrett, chief executive of Unbiased.co.uk.