Ancillary relief and matrimonial agreements

Ancillary relief and matrimonial agreements

Contents

What is ancillary relief?

When you apply for a divorce or dissolution, some form of financial arrangement will usually be needed to settle financial and property matters and allow a 'clean break'. If you cannot reach agreement with your spouse/partner, then you can apply to have the court decide how the matrimonial assets should be divided. This process is known as 'ancillary relief'.

What is a matrimonial agreement?

Sometimes you may be able to agree matters direct with your spouse/civil partner. If this is the case, then you can instruct a solicitor to draft a matrimonial agreement for you. This is a contract between you detailing the arrangements for the financial separation of the marriage. Your spouse/civil partner will need separate legal advice and you will both have to make a full and frank disclosure of your assets and liabilities to ensure the agreement is binding. The agreement can be produced to the court at the time of your 'decree nisi' hearing and the court can make it 'a rule of court.' This means that it is approved by the court and breach of the agreement could lead to a contempt of a court order. If your decree nisi has already been issued, then you can (although there is no requirement to) apply to the court by summons to have it consider the agreement and make it a rule of court.

The same guiding principles of equality apply when entering a matrimonial agreement as in ancillary relief.

Ancillary relief or matrimonial agreement?

Ancillary relief can be costly as you normally instruct a solicitor and barrister as well as pay court fees. However, it has the advantage that the court will keep a strict timetable and your case will not be allowed to drift, waiting on cooperation from your spouse/partner. The court can make orders and directions to ensure all necessary discovery and valuations of assets are provided.

Matrimonial agreements can be quicker and cheaper than ancillary relief, but this is very much dependant on good cooperation between you and your spouse/civil partner. If one of you is unrealistic or unreasonable in what you hope to receive it may be better to issue ancillary relief proceedings. You have no way during discussions for a matrimonial agreement to force your spouse/civil partner to cooperate or to provide discovery of their assets.

Starting the process for ancillary relief

To apply for ancillary relief, you must have a divorce petition issued. Ancillary relief applications consist of a summons and affidavit which are sent together with a court fee to the court office you've issued your divorce in. Ancillary relief can be dealt with in the County Court as well as the High Court.

You submit with your application a grounding affidavit. It must set out the financial history of the marriage, and detail what assets and liabilities each party has.

There is no time limit for an ancillary relief claim. The fact that you might not have any assets or income now doesn't mean that you can't gain assets or income in the future. If that should happen, and you haven't got a matrimonial agreement or ancillary relief order, your ex-spouse or ex-partner will always be able to make a claim against you, even if you gained those assets or income long after the divorce or dissolution. However, a lengthy delay for no reason may undermine a claim, especially if there are no children and the assets are acquired post separation.

Factors the court considers

The aim of the courts is to deal with cases justly and fairly.

The court calculates the total current and future financial assets and resources available to both of you. They will include both assets obtained during the marriage or civil partnership ('matrimonial assets') and assets brought into it ('non-matrimonial assets'). Overall, the court is more inclined to take non-matrimonial assets into account to meet the financial needs of the other party than it is when deciding on how the assets should be fairly divided between them.

The court then considers the financial needs, obligations and responsibilities of each of you and whether such needs can be met by the available financial resources.

In doing this, the court considers the following factors:

  • The welfare of any children of the marriage or civil partnership
  • The financial resources that you have or are likely to have in the foreseeable future
  • The standard of living enjoyed during the marriage or civil partnership
  • Your ages and the length of your marriage or civil partnership
  • Any physical or mental disability you may have
  • The contributions you have made (or are likely to make) to the welfare of the family (including non-financial ones, such as looking after children)
  • The value of any benefit (such as a pension) that you will lose the chance to acquire
  • Your conduct, if it would be unjust to disregard it

The court then decides how the balance of available financial resources should be shared, with the basic principle being that of equality between both of you. In most cases, however, it's not realistically possible to keep two households at the same standard of living as was enjoyed during the marriage or civil partnership.

The types of orders a court can make

The court has a wide discretion in ancillary relief, and can make any of the following orders:

Maintenance pending suit

This is an interim maintenance order. This requires one of you to make regular payments to the other while their overall finances are being resolved in a formal application. This interim order takes effect from the date specified and ends on the date of the decree absolute or final order.

Maintenance payments between spouses or civil partners

This order requires one of you to make regular payments to the other either for a fixed period or on an ongoing basis. It will usually come into effect on the date of the decree absolute or final order. It will end if the receiving party remarries or enters into a new civil partnership, or when either party dies.

The person receiving the maintenance payment can apply to extend a fixed period maintenance order if they make the application before the expiry date. If there is a significant change in either of your circumstances, you can also apply to increase or reduce the maintenance amount.

If there is a risk that the paying party will not keep up with the payments, they can be ordered to provide an asset (e.g. an investment account or rental property) that will either itself fund the regular payments or can be sold to provide the funds. A deed of security will set out the rights that the payee has in respect of the securing asset. If the court orders secured periodical payments, they will not necessarily end if the paying party dies.

Payment of lump sums of money

The court can grant an order for one of you to pay the other a lump sum, either for their benefit or for the benefit of any child. The lump sum could be either a single payment or done in instalments. The court will consider the available financial resources as well as the needs of each of you and any children when making their decision.

Property adjustment orders

The court could make the following orders for any property you own, or any property that either of you have a financial interest in:

  • To sell the property in order to fund the payment of a lump sum.
  • To transfer the property into one of your names, a child of the family or another person for the benefit of any child, either permanently or for a period (e.g. until the youngest child turns 18). The property will then be sold and the proceeds shared or the property will revert back.
  • To settle the property on trust for the benefit of one of you and/or any children of the family.

The court can make these orders with regard to any assets such as real property, personal property, investments, insurance policies, a business, etc.

A sale or transfer of property can have Capital Gains Tax implications so you may want to seek financial advice.

The family home

The family home is often the largest asset that the court has to consider.

If you or your spouse/civil partner own the family home, the court could order the following:

  • The outright transfer of the property into your name.
  • The transfer of the property into your name, subject to you making a specified payment to your spouse or civil partner (i.e. you 'buy' their share of the family home).
  • An order for sale of the home.

Where a court does order the sale of a property it will also usually specify how the sale will be conducted, what minimum price the property will be sold for and how the net proceeds will be divided.

If your property is subject to a mortgage, the mortgage lender will have to be advised of these orders. If they object to your spouse or civil partner being released from their obligations under the mortgage, the transfer can still proceed, but they would remain liable for the repayment of the mortgage. In this case, you might have to give your spouse or civil partner an undertaking that you will pay the mortgage instalments. Also, you might have to give them an indemnity where you will refund them any damage that they may suffer as a result of your default in paying the mortgage instalments when due. There are risks associated with this and you would be wise to seek legal advice regarding your particular circumstances.

Mesher order

Where there are children involved, the court may try to preserve the family home for the children and the parent they will live with. The court could make an order where your family home is retained in both of your names, but stays in sole possession of the parent the children will live with. This is known as a 'Mesher' order. This remains the case until the youngest child has reached a certain age, at which point the property is sold and the net proceeds are divided between you and your spouse or civil partner. You can also agree other 'trigger' events that would result in you being able to sell the property, such as if the parent remaining in the property re-marries or cohabits.

With this order, it is also necessary to determine which of you will be responsible for paying the mortgage instalments and interest, and rates, and the costs involved in the maintenance of the property until it is eventually sold.

If you do not own the family home

If you live in council or housing association property under a tenancy or in privately owned property under a private tenancy, the court may be able to order the transfer of the tenancy. This is possible where there is no provision in the tenancy agreement or in any statute that specifically prevents such a transfer. A contractual tenancy is, for the purposes of a property adjustment order, seen as 'property', just as a family home is. A sole occupation order for one party could also be ordered under the Family Homes and Domestic Violence Order 1998. An occupation order can include duties on maintenance of the home. This is a complex area, and it may be best to obtain legal assistance beforehand.

Child support maintenance

The court can make a periodical payments order for the maintenance of a child on the terms of a written agreement made between the child's parents. During the first 12 months of a child maintenance order neither party can approach the Child Maintenance Service for a calculation of child maintenance. If an increase or decrease of the child maintenance is sought during that time, an application to court will have to be made.

The court has only limited rights to make periodical payments orders for the maintenance of any children. In all other instances, you will have to either make your own arrangements, with or without the Government's free 'Direct Pay' online system

Pensions under ancillary relief

Disclosing pension rights

You need to give the court and your spouse or civil partner details of all your pension rights, including any relating to your present or previous job, and any resulting from membership of a personal pension scheme.

You can usually get details of your pension by:

  • writing to the pension provider to get the Cash Equivalent Transfer Value; or
  • submitting BR20 to the Department for Work and Pensions (DWP) to get a capital valuation of the rights to an Additional State Pension or Protected Payment portion of the State Pension. (You may also find it useful to request a forecast of the benefit to be paid by filling in form BR19.)

You need to do this even if there is no claim for a pension-related order. You can use your annual valuation provided by your pension scheme if it is no more than a year old.

If you are unsure of the details of your pension scheme you can contact The Pensions Regulator.

Pension attachment order

This earmarks a percentage of a pension and/or lump sum payment on retirement or on death of one of you. This is paid to the other when payment becomes due.

Pension sharing order

This order would be more commonly used than pension attachment orders. This requires a percentage of the current value of one party's pension fund or the sharable portion of the State Pension (see discussion below) to be credited to the other party. In effect, one of you receives a pension fund in their own right, which is carved out of the other's existing pension fund.

If you reached State Pension age before 6 April 2016, your State Pension is made up of:

  • Basic State Pension
  • Additional State Pension
  • Graduated State Pension (also known as Shared Additional State Pension). This is dependent on you having an old state pension scheme credit as this would be a life-long entitlement.

In the above circumstances, the Additional State Pension and, if it exists, the Shared Additional State Pension are shareable, while the Basic State Pension is not. This is true no matter the date of issuing the divorce petition.

If you reach State Pension age after 6 April 2016, your State Pension will be a single Flat Rate State Pension (FRSP) and, if you're entitled to it, a Protected Payment element. The Protected Payment element exists if you are entitled on 6 April 2016 to an amount of Additional State Pension (based on your pre-6 April 2016 contributions) that is higher than the FRSP amount. The Protected Payment element is known as the 'excess amount' and it is this excess amount that is shareable on divorce.

The share order will specify the 'shared weekly amount', although the Department of Work and Pensions will provide a Capitalised amount to help the court. The shared weekly amount represents a percentage of the excess amount. The Protected Payment is increased each year by price inflation but it can't increase by National Insurance (NI) contributions. The FRSP is limited for 2016/17 to a maximum amount of £155.65 per week, but to qualify for that maximum, 35 years of NI contributions are required. There is also a minimum number of years contributing to NI required to qualify getting any portion of the FRSP. Any contribution to NI for less than the minimum number of years would result in no FRSP. The FRSP is not shareable on divorce.

However, even where the transferor reaches State Pension age after 6 April, the full Additional State Pension will remain shareable if the divorce or dissolution proceedings were issued before 6 April 2016, irrespective of the date the pension sharing order will take effect. If, however, the divorce or dissolution proceedings were issued after 6 April 2016, the sharing arrangements as set out here with regard to the shared weekly amount of State Pension will apply, which means the Protected Payment element, if it exists, will be shareable.

Points to keep in mind

Some points to keep in mind when deciding to seek one of the above pension-related orders:

  • You will not be allowed to apply for a pension attachment or pension compensation attachment order after you re-marry or enter into a new civil partnership. You can seek a pension sharing or pension compensation sharing order.
  • Where you do get a pension attachment order, any resultant periodical payments will end on the date of your remarriage or new civil partnership registration. However, any resultant deferred lump sum will still need to be paid.
  • A pension attachment order is not available in relation to an Additional State Pension or the Protected Payments portion of the State Pension, but a pension sharing order may be available.
  • No orders are available in relation to a Basic State Pension.

If you are reading this section in relation to getting a judicial separation or separation, you cannot apply for a pension sharing order.

Ancillary relief – The court process

After you have started the process by submitting your application to the court by way of summons and affidavit, the court office will then contact you to advise you of the first review hearing.

First review hearing

All first review hearings are conducted by the Master (High Court Matrimonial) or if you proceeded in the County Court, by the County Court Judge. The review normally takes around 20 minutes. The purpose is to timetable the case and ensure that directions are made in relation to any issues, including the instruction of experts. The Judge or Master will also direct a replying affidavit be filed by the respondent party in response to the grounding affidavit lodged by the other party.

Following the first review hearing

21 days before the 'financial dispute resolution hearing', or FDR the following needs to be sent to with the court:

  • Statement of core issues – this should detail all agreed issues between you and your spouse/civil partner and issues still in dispute
  • Estimate of legal costs
  • Paginated bundle of discovery (i.e. a lever arch file containing all the documentary evidence with the pages numbered)
  • Any expert reports and valuations

If any financial services enquiries are required by either of you, the court will expect that you approach at least two financial institutions and that you disclose to your spouse/civil partner the nature of your enquiry and the response you received.

It may be necessary for one or two reviews between the first review hearing and the financial dispute resolution hearing. This could be needed in complex cases for further direction from the court, or if one of you isn't complying with previous court direction.

Financial dispute resolution (FDR)

The two parties, together with their solicitors and barristers, must attend the FDR.

This review normally lasts approximately 30 minutes. It is conducted by a High Court Master (who will not hear the case if the matter is contested) or a County Court Judge if in the County Court. The purpose is to see if the case can resolve. The aim is to define the issues, save costs and reach a settlement if possible.

If no settlement is reached, the matter is referred for a final hearing and the court will give directions as to the next steps.

Final hearing

Prior to any final hearing you will again be encouraged to resolve the issues. If no resolution can be found, then the judge will hear the case and make what orders they deem appropriate. If you are not satisfied with the orders made, then you should seek immediate legal advice to discuss if there is any basis for an appeal.