The coronavirus has caused an increase in inquiries from divorce lawyers, but has made the financial process of dissolution more difficult.
As the saying goes, absence makes the heart tender, so what happens when couples are forced to be with each other 24 hours a day, seven days a week for months on end? Throw in school closures, child care issues and work pressures, and even the strongest relationships have been put to the test in the past few months.
Supporters say the silence has increased the financial and emotional burden on couples, leading to more divorce questions. Between the announcement of the lockdown in England on March 23 and mid-May, the number of people asking for a divorce increased by 42 percent, according to law firm Co-op Legal Services. In some weeks of the epidemic, the increase was 75 percent compared to the previous year.
Mark Harrop, Attorney for Family Law Partners, says, “From the earliest stages of foreclosure and increasingly, we get requests from people who just want to understand their situation so they can see where they are and where they are. plan.”
Couples who managed to live together at regular intervals – helped by distractions at work, friends, and the opportunity to leave home – reached the limit of having to close the place, with “tension and simmer,” he. He says.
Forced time sharing isn’t the only factor causing problems, says Sara Coles, financial analyst at Hargreaves Lansdown. “Many people face the pressures of changing circumstances and the challenges of living on less money.”
Negotiating a divorce during a booming economy can be tricky. As commodity prices fluctuate due to the coronavirus crisis, the task of finding the right classification becomes even more difficult. Whether you are considering divorce or your relationship has come to an end, there are many financial and practical factors to consider when deciding on a wedding.
There is no standard way to calculate appropriate financial support in a divorce. But Charlotte Coyle, senior lawyer at Goodman Derrick law firm, says the court must consider all the circumstances of the case and a range of factors, including income, financial resources, needs, standard of living, age. and disability.
“These factors are used to determine the appropriate financial outcome when assets accumulated in a marriage are divided equally,” Ms Coyle said. He says that the guidelines that are applied to achieve the correct financial result are “separation”, “needs” and “compensation”, with “needs” lifting everything.
He says, “The matrimonial home is usually considered matrimonial property, even if it was owned by the same person before marriage,” he says.
Classifying assets correctly in this climate is difficult. Julian Lipson, partner in family law at Withers, says: “At some point, the court will look at the couple’s financial situation. Investments, pensions and real estate are likely to be worthless in the current environment and very different from, say, the start of the year.”
Lawyers and courts are sensitive to the perception of risk, he said, so they divide things into percentages. For example, cash from the sale of a family home can be split as a percentage of the proceeds of the sale instead of a fixed amount, so that both parties share the ups and downs of the real estate market.
However, Covid-19 poses both potential challenges and opportunities in regards to the valuation and distribution of assets between divorcing couples. The timing of a divorce can lead to very different outcomes, especially for couples in financially unequal marriages.
For a financially strong group, there may be a clear benefit to a strategy to go ahead with the divorce now, especially if there is an opportunity to exploit the lower value of the property and achieve separation from the expected increase in its value. Lois Rogers, director of divorce at law firm Vardags, says: “For some, waiting to see what happens may seem like the best option, for example if important business assets have been affected by Covid-19.”
Extreme volatility in the stock markets in recent months has been reflected in budget revenues. Hetty Gleave, partner at Hunters Law’s family division, says this could affect pensions or maintenance payments. “Many people have also had their pay cut, so until they know if this is a temporary or permanent measure, discussing long-term care may not be safe,” Ms Gleave said.
When comparing products to each other, their relative prices become an issue. “For example, your pension may have decreased in value while your property has not yet shown a significant decrease,” Ms. Coles explains. “If you were planning to trade one for the other, the numbers might not add up.”
The problem with most people is that they can’t tell what will happen if they wait. “Your pension could bounce back and home prices would fall, so your pension could be effectively sold for a house,” Ms Coles said.
“Alternatively, pensions could fall again and property prices remain high. The inability to accurately predict the future makes it impossible to determine the right moment to start divorce proceedings.”
What to do with your retirement basket is one of the most difficult areas of financial planning in a divorce. Although pension baskets are the second most important asset in the division, they are neglected. A study by the Pension Policy Institute released this week found that seven out of 10 (71%) divorce agreements did not include pensions.
This may leave one group – women – at a disadvantage when they retire. The average divorced man’s pension is £103,500, a third of the average man’s (£156,500), but the average divorced woman’s pension is £26,100, half the average woman’s savings. £51,000, the study found.
Matt Sullivan, head of paid services at Brewin Dolphin, says: “Statistically, if any organization in dealing with the financial crisis is most likely to be treated unfairly, it is the wife. For many reasons, including the amount of time we spend as housewives, many women tend to invest less in retirement throughout their careers.”
Courts currently review pension plans in three ways. The other party may receive a percentage of the former partner’s pension basket, an option called pension sharing; the value of the pension can be reduced in comparison to other assets, which is called a pension offset; or a portion of one person’s pension may be paid to another person, which is known as a pension attachment order.
Mr. Sullivan says an annuity split is a popular way to split a pension fund because it provides a “clean break.” This includes spouses who share one or more pensions.
Problems arise when there is a combination of defined benefit plans and defined contribution pension plans, or when there is a need to obtain fair financial compensation associated with the payment of pension assets and other types of assets.
Keith Daley, founder of Amicable, an online divorce service, says the withdrawal of a pension could have unexpected consequences. “If you’re trading assets against each other and one asset class drops in value by more than a unit, for example, your pension drops by a percentage more than the value of your home, you could be at a disadvantage.”
Most lawyers urge those who are considering starting divorce proceedings during a period of violence to be cautious. Joe Edwards, head of family law at Forsters, says now is not the time to make life-changing decisions.
“My advice is not to make hasty decisions during this most stressful time that many people have ever lived. Before putting an end to your marriage, go for couples counseling to try and mend the cracks that have formed or deepened during this unusual time.”
If the spouse is determined to proceed, remember that it is important to get advice on the financial aspects of the divorce as soon as possible. “This should not be the end of the process,” said Carla Morris, financial planner at management company Brewin Dolphin. “Many people think about the house . . . but ignore savings, investments and pensions.”
We recommend that you have all financial documents and make sure you have an up-to-date valuation of your investments and pension policies. This will give you the best possible picture of your mutual funds.
The impact of Covid-19 on investment performance and return on savings has only exacerbated this debate. “Who has the right to depend on when this or that asset was bought. It is important to understand what was before the couple got married and what has been built together since then,” Ms Morris said.
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