What happens in divorce cases where there are modest assets?

Most divorces reported in the media are of those which have high net worth that eclipses the typical family’s resources. Whilst these cases, usually those of celebrity status, such as recently the demise of Sophie Turner and Joe Jonas’ marriage are interesting, they rarely reflect the situation of most divorces for the average person. The sad reality is that for most divorcing couples there are not enough assets in the pot to go around.

Modest Families

For a family living modestly often time and money is tight. You are able to pool your resources together. When a marriage breaks down and couples adapt to living independently of one another, adjustments have to be made to support two households, without there being an increase of finances available. There are often insufficient assets available to rehouse both parties.

The Courts consider a range of factors including the resources available and the financial needs of both parties together with the duration of the marriage, the age of the parties and the standard of living enjoyed during the course of the marriage.  The Courts have an obligation to reach a fair outcome which will often mean that the matrimonial home will have to be sold with the equity divided between the parties and if in unequal shares this needs to be justified. Whilst there is a need for both parties to rehouse, there is no obligation on the Court to consider that both parties need to purchase another property and it is quite often that there are not enough assets for both parties to purchase a subsequent property.  The Court will seek as far as possible to stretch the limited assets available to meet both parties needs, however, often parties may need to consider other options such as renting which neither party may find satisfactory.

Modest divorces are rarely reported because parties do not have the assets to fund litigation. It is because the cases which are commonly reported come from the High Court which typically involve vast assets dealing with a greater number of financial issues leading to substantial legal costs. In reality most cases which solicitors deal with on a day to day basis and what Judges decide on within the family court are very relatable to the ordinary couple. In 2021 the Judiciary estimated that 83% of all financial remedy cases involved net assets of less than £1million and 41% of all cases involved net assets of less than £250,000. Cases which involve limited assets focus on meeting the needs of the parties and any children with issues such as pre-marital contributions becoming less relevant. Those cases are often more difficult because there are insufficient assets to be shared and finding a solution in which both parties are happy is near impossible.

What is important in these types of cases?

It is important that full financial disclosure is undertaken to ascertain what assets are available.  Quite often there can be a lack of understanding of the finances available.  It is important that there is full transparency including details of the values of pensions.  Pensions are often for many spouses not at the forefront of their mind because those assets are not readily available for many years, however, they can be very valuable and should not be disregarded. 

It is also important to obtain legal advice.  Many people can be deterred by the fear of legal costs.  Reaching a settlement does not need to be expensive and there are options available to help fund legal proceedings. As solicitors we try to help you reach agreements outside of Court so that costs are not increased. Other methods of reaching agreements, including utilising mediation to try and reach an agreement whilst receiving legal advice in the background to ascertain whether the agreement is in the realms of a fair settlement can help to keep costs to a minimum. Whilst no one wishes to spend money on solicitor’s costs, reaching an agreement without seeking legal advice can have a long-term effect and you could be worse off in the future if you do not know what your rights are and accept an unfavourable settlement because you did not know what you were entitled to.

Whilst the starting point is usually one of equality this does not necessarily mean there should be a 50/50 division as the Courts will consider a range of factors including the needs of the parties.

If there are children of the marriage the Courts will consider how the children can be rehoused whether this is by selling the matrimonial home to divide the equity or by on party retaining the matrimonial home with the children until such time as the matrimonial home can be sold often when the youngest finishes secondary education and attains the age of 18. 

Particular attention will be given to mortgage capacities and future earning capacities.  If a spouse is not working, they may be expected to find employment.

There may also need to be consideration given to how any orders made may impact means-tested benefits. For example, making an order for spousal maintenance from a party who earns a modest salary may not have any real benefit as it will reduce the income of the spouse paying maintenance whilst reducing the benefits received by the receiving spouse without any real gain to either party.

What happens if there are no assets?

In cases where the matrimonial home was rented it is still important to obtain financial disclosure as there may be assets which you are not aware of, such as pensions which you may be entitled to. This is particularly important for those who may have childcare responsibilities and have therefore not been able to work full-time.  The spouse who can work full-time will often have had more opportunity to increase their pension pot as opposed to the spouse who was not working fulltime.  There may also need to be consideration if there are disparities in incomes. 

Even where there are no assets or very limited assets, it is important to obtain a financial remedy order, even if this is just for a clean break as this will dismiss any future claims which a party can make against the other in the future.  Although there may be no assets currently, in the future you may inherit or purchase a property and you would want to make sure that you are protected so that your ex-spouse cannot make a claim against these in the future.

How can Pinney Talfourd can help

Our team of specialist divorce solicitors offer free half-hour appointments for general legal advice to clients who have just separated and need advice of their options moving forward.