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2022 was an interesting year. As interesting as a year containing political and economic instability can be, with a side order of the threat of world war thrown in for good measure. But where have the events of 2022 left us as a country?
We are now in the aftermath of the political instability we went through following the whirlwind appointment and resignation of former PM Liz Truss. We are now in the era of Rishi Sunak and only time will tell how successful his tenure will be.
We are in a period of economic instability. Interest rates are through the roof, there is a cost of living crisis meaning that people are struggling to feed themselves and their children. And the cost of consumables, food and power are all astronomical.
With all of that being said and with residents of the UK finding themselves in an increasingly more hopeless situation financially, many of us will look forward to retreating to our homes at the end of the day as our cocoon of safety where we can block out the news of the ever-increasing disasters that are going on in the world. But not everybody is that lucky. Some families are going through their own internal crisis at home, as well as having to endure what the rest of us are enduring and they cannot enjoy the haven of home due to arguments, bad feeling and, in the worst cases, domestic abuse.
So, what happens to separating couples in these uncertain times?
A divorce will be divorce regardless, but the associated issue regarding division of family assets (called financial remedies) will need to be dealt with slightly differently than in other years.
For example, if negotiations are taking a particularly long time to come to fruition, it will be necessary to revalue large assets such as the family home, stocks, shares, pensions etc. The housing market in particular has been rendered unstable by recent events and valuations may fluctuate much more now than in the past.
Another thing to consider is the impact of the increase in interest rates on facilities such as mortgages. Whereas a year or so ago, a negotiating couple may have been able to come to a relatively quick conclusion because one party could buy the other out or they could sell their property quickly and each purchase another property with an affordable mortgage, the landscape these days is often very different. As a result, parties may find themselves in rented accommodation, sub-standard purchased accommodation or even, if they are relatively amicable, may decide to park their divorce and remain under the same roof until the economic landscape shows some sign of recovery. The latter option is of course not for everybody, but it is a very real one which a minority of couples have decided to take, particularly where children are involved and the sale of the family home could result in substandard accommodation for both parties.
Interest rates are also something to consider when contemplating the value of marital assets. For example, parties may benefit quite nicely from interest rates on their savings and investments so this situation may be favourable to them. Additionally, parties may benefit from this increase in respect of their pensions if their pension pots are higher risk for example.
In respect of pensions, the valuations, or even pension actuary reports, may need to be revised if negotiations are protracted because it is essential that the parties are negotiating based on the most accurate figures available and pensions are one of the assets that are more likely to vary in value. If the parties are negotiating a settlement with involves an offset of cash or property against a pension share, one of them is likely to lose out financially if the pension valuation is out of date.
In terms of interest rates, families who have debts are likely to be detrimentally affected. Debts such as credit cards and outstanding mortgages could be more expensive than they were before the hike in interest rates.
So how else can this economic situation affect settlements?
The general rule is that agreements already approved by the court cannot be changed unless there is an actual error in the order that needs to be corrected. However, the court is willing in a very restricted number of cases to consider specific circumstances if enforcing the terms of agreement will lead to very real hardship, and if the circumstances the parties find themselves in was not at all foreseen when the settlement was reached.
If the terms of agreement include spousal maintenance, there is always the option for a party to apply to the court to vary the order if the paying party can no longer afford to make the payments and it will lead to unfairness to expect them to do so. The same applies to payment of some types of lump sums.
We always advise our clients that all financial disclosure be regularly updated throughout the negotiation process, to ensure that the terms of the final agreement are fair to both parties. This advice applies whether the parties are negotiating directly between themselves, at mediation, through solicitors, or during court proceedings.
For further information and advice on this issue, and other family law issues, please contact us for a free initial consultation on 01992 306 616 or 0207 956 2740 or email us.Back to Law Articles