It is always advisable to enter into a Consent Order recording a financial agreement in the event of a divorce, even if the separation is amicable, in order for the agreement to be legally binding.
Online divorce applications
Since 4 October 2021 the Family Court will no longer accept applications for a divorce made on paper and all applications will need to be made via the online portal.
Whilst the legal process for obtaining the divorce is unchanged, the online service is quicker and more ‘user-friendly.’ In many cases, our clients choose to issue and manage the divorce proceedings for themselves, with our team able to offer advice regarding the process behind the scenes. This is often appealing to clients as it enables funds to be used for obtaining detailed bespoke advice regarding the more complex financial arrangements following a divorce.
The online portal is a particularly positive development for couples who have separated in fairly amicable circumstances and the long-awaited introduction in April 2021 of ‘no fault divorce’ within the Divorce, Dissolution and Separation Act 2020 will further emphasise this. However, obtaining the divorce is only a small part of the picture and it is crucial that a divorcing couple do not overlook the importance of also resolving the financial claims which arise out of their marriage.
A common misconception
It is a common misconception that couples can reach an agreement together regarding the division of their finances and that there is no need to involve the Court. Where possible, it will always be better to reach an agreement by consent but it is vital that this agreement is recorded in a Consent Order and sent to the Family Court for approval. It is not until the Family Court approve a Consent Order that the agreement contained within it becomes legally binding. Until that time, it is possible for either party to withdraw their agreement or to try and make a further claim for financial provision, long after the divorce is finalised and in some circumstances after the death of their former spouse.
What does a Consent Order do?
A Consent Order will record the terms that have been agreed, but will also dismiss some or all of the rights of either spouse to make an application to the Court at a later date. A widely reported case gathered national attention in 2015 and 2016 when a wife made a claim against her former husband following their separation in 1984 and subsequent divorce. The husband applied to have her claim struck out due to the passage of time, but in 2016 the Supreme Court ruled that there was no statutory time limit for a claim to be made.
It is for this reason that it is vital that a couple obtaining a divorce should ensure that any financial agreement is approved in a Consent Order sealed by the Family Court.
A Consent Order should also dismiss some or all of the rights of either spouse to make a claim against their former spouse’s estate in the event of their death.
Failure to do so could leave your estate open to a claim under the Inheritance (Provision for Family and Dependants) Act 1975 (“the Inheritance Act”). There is no automatic right to benefit from a former spouse’s estate which will either pass either in accordance with the terms of their will or the rules of intestacy. If there is a valid will in which someone leaves a gift to their spouse and they later divorce then the usual position is that the ex-spouse will be treated as if they had predeceased and their inheritance will not fall due.
However, the Inheritance Act allows certain categories of people to bring a claim. One category is the former spouse or former civil partner of the deceased unless they have entered into a subsequent marriage or civil partnership. They would be claiming that their former’s spouse’s Will (or the position on intestacy) does not provide reasonable financial provision for their maintenance.
What does this mean?
The claim is brought against the estate and if the claim was successful the court has a wide discretion as to the type of provision to order including payment of a lump sum or periodical payments out of the estate.
The court will consider a number of factors in exercising its powers such as the financial resources and needs of the applicant or any other beneficiary, the obligations and responsibilities of the deceased to the claimant and the size and nature of the estate.
Even where the terms of the divorce settlement mean claims cannot be brought against each other’s estates under the Inheritance Act it may be possible for the former spouse to fall into another category of eligible claimant. For instance a case in 2015 involved a divorced couple who later reconciled and cohabited but did not marry. On his death the ex-wife was able to bring a claim as someone who had cohabited with the deceased for two years prior to his death.
In the case of couples who divorce but continue living in the same house for financial reasons it is unlikely that cohabitation in that scenario will be sufficient to make them eligible as you need to be living together as if you and the deceased were a married couple or civil partners for two years prior to their death and it could be argued that arrangement was purely for financial practicalities.
Therefore, whilst there may be other circumstances in which a claim could be brought by an ex-spouse against your estate these are perhaps less common and the inclusion of a clause in a Consent Order preventing such claims will dismiss their right to bring a claim under at least the one category of the Inheritance Act (applicable to former spouses or civil partners).
Each claim will be dependent on its facts and it is therefore important to consider obtaining legal advice.
This article is part of Private Client Issues – November 2021