There is no legal requirement for you to instruct a lawyer to deal with your divorce and help organise your finances, but should you consult a family lawyer? Most likely, ‘yes.’
Why Public Funding Is Rare in Divorce Cases
Public funding for divorce and financial remedy proceedings is exceedingly rare; in circumstances involving domestic abuse, you may qualify for Legal Aid if you meet certain other criteria, but most divorce/finance cases will need to be privately funded and it will therefore be very tempting to do a ‘DIY divorce’.
Is DIY Divorce cost-effective?
DIY divorce is not always as cost-effective as it may seem. It is important in modest asset cases to preserve those assets as far as possible to go towards meeting each party’s needs. Realistically, a pragmatic approach needs to be taken with an element of compromise on both sides before much needed assets are frittered away in legal fees. Mr Justice Cohen stated in JM v KK [2021] that “a small money case can be infinitely more difficult than cases involving larger sums. It is impossible to find a solution that can leave both parties happy.” The Court sees marriage as a joint venture; the fact that the husband has been the main breadwinner, and the wife has been a stay-at-home parent will not, in itself, result in a settlement in the husband’s favour.
Understanding Financial Fairness in Low-Value Cases
The objective of the Court is to achieve an outcome which is as fair as possible in all the circumstances of the case but, unfortunately, in a small-money case, there is often not an outcome that is ‘fair’ and both parties will experience a certain level of financial hardship. No doubt that will leave a sour taste in the mouth of the main breadwinner, particularly in an acrimonious divorce.
The importance of Legal Advice
It is very easy to get bogged down in arguments about ‘who contributed what’ and ‘who deserves what’ but in a small-money case, it largely does not matter. It may seem paradoxical to instruct a lawyer when trying to save money but instructing a solicitor can help you focus on what is important and flag issues that you may not have considered. For example, pensions and cash are not like for like and in any event. the value of a pension is not always obvious. Your annual cash value statement is not always entirely accurate – a defined contribution pension scheme is easier to value as it’s a pot of money whereas a defined benefit scheme is based on the years you have worked and your earnings; they too are not directly comparable. Similarly, if you agree to share your pensions, it is not guaranteed that you can simply transfer part of your husband’s pension into your existing pension pot, especially if you are dealing with public sector schemes.
Whilst it is important to preserve assets, it is also important not to jump into agreeing to, say, a sale of the property and a 50/50 split, or your husband retaining his £100,000 pension and you retaining the property with £100,000 equity, believing that to be the simplest and fairest outcome, without considering the practical implications of that arrangement.
Key Questions to Consider in Low-Value Financial Remedy Cases
- Housing and children: How old are the children and with whom are they residing? Would the children’s primary carer struggle to rehouse if the family home was transferred or sold and would it be more practical to retain the family home, in joint names, until the children are 18?
- Mortgage affordability: What can we each raise by way of a mortgage? Can either of us afford to take on the existing mortgage and raise a lump sum to buy the other out? Does either of us have a poor credit history or debts which will impact on our borrowing capacities?
- State Benefits and debts: Are either of us entitled to any state benefits or would either of us be entitled to local authority housing?
- Recent lump sum payments: If either party received a lump sum payment/equity from the sale of a property, would that affect our entitlement to state benefits? Would it be a large enough deposit to put down on replacement property?
- Earning capacities: Can either of us reasonably increase our earning capacities? Is there a large disparity in our respective earning capacities? Do we have/foresee health issues that will impact on our ability to work?
- The age of the parties: Is there an age difference? How many years do we have until retirement? Will one of us be able to draw down on our pension imminently?
- Pensions: What do our respective pension pots look like? Do we both have defined contribution schemes or do we have a mix?
The Role of a Consent Order
It is important to put in place a Consent Order recording the financial agreement reached. This order is subsequently considered and (hopefully) approved by a Judge, at which point, it is legally binding. Again, it may be tempting in low-value cases to save money by simply implementing the agreement reached between yourselves without formally ‘drawing up’ the agreement. However, without a Consent Order in place, your financial remedy claims against each other are not dismissed and you are leaving yourself open to your ex-spouse returning in the future for a ‘second bite of the cherry’. Depending on the circumstances of your case, they could be entitled to further financial provision from you, even 20+ years down the line.
The risks of an informal financial agreement
Similarly, if jump into an agreement without considering the practical implications, you run the risk of being bound by an agreement that does not meet your needs and your ability to renegotiate that settlement will be almost impossible, save in exceptional circumstances such as fraud. Whilst a Judge must approve a Consent Order before you are bound by it, a Judge has reasonably limited information to hand when the application is filed by consent. A Judge is not going to necessarily know that you have a poor credit rating, or that you live with a long-term illness/condition which may impact on your ability to work in the near future, unless this is clearly spelled out.
The rise on Non-Court Dispute Resolution
Since April 2024, there has been a new-found focus on parties attempting to resolve matters via Non-Court Dispute Resolution (NCDR). In a low-value case, mediation may be a more affordable option than using a family lawyer. It may be viewed as less adversarial and may improve co-operation and communication if a neutral third party is guiding the discussions. However, your mediator will only be able to prepare a ‘memorandum of understanding’ informally recording the financial agreement reached and it will still be necessary to convert this document into a Consent Order to provide you will as much protection and certainty as possible.