A common misconception in divorce is that a financial claim cannot be made once a Decree Absolute has been granted. In reality there is no limitation period for bringing a financial claim after divorce and there have been a number of very high profile cases recently where financial claims have been brought many years after the marriage had ended.
Aside from the stress and inconvenience of having to revisit your divorce settlement years down the line, there are a number of other reasons for making sure all the loose ends are tied up during the divorce process.
A cautionary tale
Mr and Mrs B had been married for 18 years before separating. A Decree Absolute was granted in 2005 but there were no financial orders made at the time.
Eight years later Mrs B applied to the court for a financial order. During that time Mr B had continued to operate his business, which formed part of the marital assets. Mr B argued that an agreement had been reached in 2005 when they divorced. Mrs B claimed that she had been waiting for Mr B to clarify his financial situation before making a claim. The judge found that she had suffered intimidation at the time, with Mr B refusing to respond to her requests for financial disclosure.
The family court judge found in favour of Mrs B and Mr B took the case to the Court of Appeal, claiming that the judge had been wrong to conclude that an agreement had not been reached in 2005, that the delay in bringing the claim should be a factor and that consideration had not been given to his contribution to his business since the divorce. He was also concerned that the delayed financial claim did not take into account the value of assets at the time of separation. Mr B lost his appeal.
What constitutes an enforceable agreement?
In order to finalise a financial agreement both parties need to fully disclose their financial affairs. This is important because without this transparency there is no way of knowing for sure what each party is entitled to and what constitutes a fair division of assets.
Many couples believe they have agreed a settlement when in fact it may be dependent on full and frank disclosure being provided. Without full disclosure the agreement is open to challenge at a later date. If one party has gone on to build a successful business or to generate significant wealth, the value of the settlement could be much higher than it would have been at the time of divorce.
Why should a stay at home spouse be entitled to a share of the other’s business after divorce?
The family courts value the contributions of homemaker and breadwinner equally which means that a stay at home husband or wife may be entitled to a share of their spouse’s business assets even if they have never worked in that business or contributed directly to its success.
Taking into account recent court cases, a delayed financial claim tends to look at the value of the assets at the time of the claim. This is because the judge considers that the stay at home spouse’s share of the business has been instrumental in the running of the business since divorce and its value has been put at risk by the failure to reach a settlement sooner. The courts may decide to reduce the claimant’s share, however, to take into account the delay in issuing the claim, particularly if it is made many years after the Decree Absolute.
Does it make a difference if a lump sum has been paid at the time of divorce?
The amount of the lump sum will be taken into consideration, as will the length of the delay, but it does not prevent a claim being made for full financial provision unless it has been paid as part of a financial order following full disclosure.
How to avoid delayed claims
We would always advise that financial matters are clarified and settled during the divorce process and this involves both parties participating in full financial disclosure.
Delayed claims can cause financial and emotional hardship for one or both parties and the share received by the claimant can be significantly reduced by the courts if there is a prolonged delay.
There is often a reluctance to be fully open about finances but if anything is left hidden it risks being disclosed at a later date when its value could have increased significantly. It is far better to agree a fair settlement at the time of divorce in the knowledge that future financial claims cannot be issued.
Andrew Meehan is individually recommended for family law by both Chambers 2015 (York, Hull and surrounds region) and the Legal 500 2016 (Leeds/West Yorkshire and North Yorkshire region).
He is also the only Resolution accredited specialist solicitor in Harrogate for divorce cases involving complex financial and property matters.
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