A Guide to the Adoption Process

The most important requirements for adoption are that the adopter must be over 21 years of age, the child to be adopted must be under the age of 18 and joint applications to adopt can only be made by married couples and civil partners. Unmarried couples can adopt, but only one person can become the adopter

People who do not already know the child they wish to adopt usually use an adoption agency. As a first step, the agency will arrange for a social worker to visit and make a home study assessment. As well as assessing the family, they will also take two references and obtain medical information from a GP. After this assessment is made, an adoption panel will make a recommendation and, if the initial application is approved, the process of matching a child to the family begins. If the adoption has not been carried out through an agency, it is necessary to inform the local council of the intention to adopt a child three months before placing the application with the court.

The next stage in the process of legally adopting a child is carried out through the courts. In most cases, applications for adoption orders are made through specialised Adoption Centres. These are courts that have specialist judges and adoption officers who are experienced in the process.

Once the official application has been made, the judge has a number of options. He or she may order that a reporting officer be appointed. This will happen if the current parent or guardian of the child agrees, or appears to agree, to the adoption. The reporting officer will produce a report on matters that may help the court to make a decision on the adoption application. If the parent or guardian does not agree, then a children's guardian is appointed by the court to protect the interests of the child. The children’s guardian will make a report to the court advising on the interests of the child and will represent the child in court. The local authority or adoption agency may also be required to provide a report. This will include details about the family and the child.

About four weeks after the application for adoption, the judge may arrange a hearing called a 'first directions hearing'. At this meeting the judge will consider, amongst other matters, whether the application contains all the correct documentation and when and where the final hearing will take place.

Once an adoption order is granted by the court, the effect is to break all legal ties between the child and his or her birth family, or current guardian, and transfer those ties to the adoptive parents.

The Directgov website provides guidance on adoption and the adoption process.

Taking Children into Care - The Legal Process

We often hear of children being taken into care, but the process by which this occurs is not well known. The Children Act 1989 lays down the circumstances under which it is appropriate for a child to be taken into care or a supervision order made. The necessary criteria, somewhat rephrased, are:

• that the child concerned is suffering, or is likely to suffer, significant harm; and
• that the harm, or likelihood of harm, is attributable to the care given to the child (or which would be given if a care or supervision order were not made) and is not what could be reasonably expected of a parent, or that the child is beyond the control of the parents.

In order to determine whether these criteria are met, a thorough fact-finding exercise must first be carried out. One common difficulty arises when the proceedings to take a child into care are based on an expectation that the child may be harmed in the future, rather than on the basis of harm having been done to the child in the past. In such cases, the local authority is required to prepare a clear written analysis of the facts on which the authority’s decision to apply to take the child into care is based. This analysis should be divided into three stages:

• an establishment of the primary facts;
• an assessment as to whether the criteria outlined above are met; and
• an overall assessment of what action is likely to be in the child’s best interests.

There is more information on this topic on the CAFCASS website.

We can assist you in your dealings with the local authority and other bodies.

Divorce and Foreign Residence: Children

When a marriage breaks up, it is usual for the couple to separate physically as well as legally and in some cases the physical separation can be considerable. With the increase in international travel and residence abroad, marriages between persons of different nationalities are becoming increasingly common.

When a couple divorces and one of them wishes to return to their country of origin, this can cause particular problems where there are children. Strictly, it is a criminal offence for a divorced or separated person to take a child under the age of 16 abroad contrary to the wishes of their spouse, unless they have a residence order in respect of the child. This is taken very seriously by the courts. In a recent case a man had his daughter removed to the Middle East and claimed he then did not know her whereabouts, thus failing to comply with an order of the court to return the child to the UK. The court imposed a custodial sentence and then reimposed when it had been served, for contempt of court. See the CAFCASS guide on international child abduction.

Recently, a number of cases have tested the limits of the previously established rule as regards taking children abroad, which was that permission should only be denied when there was a strong reason for so doing. This rule appears to be less strictly applied than before. A 2013 case confirmed that it was possible for  child who had never set foot in the UK to be regarded as hibitually resident in the UK and thus subject to UK law.

When a parent wishes to relocate children within the UK, problems can arise if the other parent objects to the move. In a recent case, an application by a mother to move her children to the Orkney Islands from the North East was objected to by her ex-husband. Evidence was given of the mixed views of the proposed move held by the children, who were between nine and 14 years old.

The Court of Appeal supported the family court’s ruling that the move should not proceed.

A second case, involving a man who sent his daughter abroad and refused to return her in defiance of a court order to do so, led to his being jailed for contempt of court. In late 2012, the child was returned to the UK.

In another case the principle was confirmed that where the question of in which country the children of the marriage should be raised is concerned, the needs of each child must be considered separately: the children are not to be considered ‘as one unit’.

Regrettably, there are no hard and fast rules about what the courts will or will not think is acceptable in the event that a move (especially one to a quite different locality) is proposed, with each case being decided on its own facts.

In 2012 the UK improved the ability of parents to enforce residence orders if their children have been taken to a foreign country, when the provisions of the 1996 Hague Abduction Convention came into effect.

A 2013 case confirmed that where a foreign court has no outstanding matters before it with regard to the residence of a child, the UK court does not need the foreign court to formally renounce jurisdiction if the child concerned has become habitually resident in the UK.

In 2013 and 2014 a number of cases were heard which have established that 'habitually resident' largely equates to 'belongingness' and this depends on factors such as where the child is best integrated and the nationality of the child.

In the Summer Budget of 2015, the inheritance of the foreign domicile of the father for UK-born children was abolished and the concept of domicile was amended (similarly to the way it operates for Inheritance Tax) to remove foreign domicile from long-term UK residents.

Cohabitation Agreements - Protection for Unmarried Couples

One of the most common myths in English law is that there is such a thing as a ‘common law marriage’. It simply doesn’t exist and this misapprehension has led the Law Commission to suggest proposals giving additional rights to cohabiting couples. However,  a proposed revision of the law appears to be many years away if it takes place at all. Currently, cohabitees will continue to have few rights. When a marriage or civil partnership breaks up or one partner dies, the rights of the respective partners are relatively clear. When the relationship of a couple who have been living together breaks up or one of them dies, the difference between a legally-recognised partnership and an informal one becomes all too obvious.

For example, in a case involving two barristers who had lived together, long and expensive court proceedings were necessary to decide the appropriate apportionment of the two properties they owned, both of which were held in the name of one partner.

On the death of an unmarried partner not only do the intestacy laws make no provision for the surviving partner to inherit from the estate of their partner, but also the surviving partner does not benefit from the exemption from Inheritance Tax that would apply if the deceased’s estate passed to a spouse or civil partner.

Indeed, in order to receive anything at all, the surviving partner may well have to go to court to show that they co-owned assets which in some cases may have been paid for by both partners but were owned in one name only. The surviving partner may also have to show that they qualify for financial provision to be made out of the estate under the Inheritance (Provision for Family and Dependants) Act 1975, which is designed to protect the dependants of people who die without leaving adequate financial provision for them. In any event, the surviving partner may face severe financial pressure whilst a claim is ongoing, even if it is ultimately successful. In 2014 the ambit of this legislation is being widened to remove remove anomalies which can unfairly limit access to support by some dependants.

For example, consider a case involving a woman who had lived with her alcoholic partner for nearly three decades before moving out, shortly before he died, because she feared for her safety. He left no will. Had they been married, the situation would have been simple. However, in this case the woman was forced to go to court to prove her entitlement to financial provision, which was resisted by her late partner’s family.

What Can be Done to Prevent Such Problems?

One easy and inexpensive solution is to make a cohabitation agreement. This is a contract, between two people who live together, which sets out their agreement on the division of their combined assets. It is sensible when cohabiting with anyone, without the protection afforded by marriage or civil partnership, to enter into a cohabitation agreement so that ‘who owns what’ is clear. This is not only important if a relationship breaks down, but also if one partner dies.

What Should the Agreement Contain?

Like any contract, it should state who it is between, how long it is intended to last and that it is intended to be legally binding. If there are assets (e.g. your home) which are to be dealt with in a particular way, these should be specifically mentioned and details provided as to how they are to be dealt with on death or on break-up of the relationship. It is not uncommon for a couple to sell one of their properties when they move in together, with the property they live in being retained in the name of the original purchaser. In such cases, it is sensible to decide if the non-owning spouse’s contribution is to be treated, for example, as a loan or if they are entitled to a percentage of the property value.

The ownership of all significant assets – bank accounts, insurances, specific valuables etc. – should be considered. Details of income and expense sharing arrangements should be included if possible and if there is the intention that one partner should support the other, this should also be mentioned, as should any financial arrangements regarding family members.

It is obvious that a cohabitation agreement is normally best considered in tandem with your will. There are tax planning and other issues to consider – for example, you might think about writing any death in service benefits or insurances in trust for your partner.

In the summer of 2013 a Private Member's Bill was introduced into Parliament with the intention of giving unmarried cohabitants rights similar to those of spouses on the break-up of a relationship The bill did not pass through Parliament, but the question remains a 'live issue' for the legislators.

Business Assets and Divorce

Divorce is seldom an easy business, but the problems are compounded when there is a family business involved. The division of the spoils has traditionally been the subject of a great deal of argument, but recent cases have at least clarified the thinking of the highest judges in the land. The leading case, which was decided in the Lords, involved a Mr and Mrs White, who were farmers. The ruling established the principle that there has to be a good reason for the division of assets to be unequal.

Unequal splits of joint business assets can be proper in some circumstances. For example, in a case in which the husband’s business did not have sufficient liquidity (ability to generate cash) to finance an equal split, Mr Justice Coleridge awarded the wife a 39 per cent share of the total assets, which included the family home. Because of the financial circumstances of the business, the balance of her settlement was ordered to be paid over a period of years. The judge commented that the “…old taboos against selling the goose that lays the golden eggs have been largely laid to rest…but if it is necessary to sell her, it is essential that her egg-laying abilities are damaged as little as possible in the process.”

In a more recent case, a husband who argued that his ex-wife’s settlement should be reduced, because she had taken up with a new partner and had a luxurious lifestyle, failed in his attempt. Similarly, a husband's attempts to persuade the court that the settlement required for his daughter should be reduced was rejected when it was considered that she would have to change schools, which was not in her interest. The needs of the child, not the father, are paramount in such cases.

One important factor in the division of 'marital assets' generally is the relative contributions of the two parties to the creation of the assets. This need not be direct, as a 'stay-at-home' spouse can be awarded a substantial proportion of the assets if they were instrumental (ie by supporting the 'wealth creator') in the creation of the family's wealth. 

Where there are no 'surplus assets', the courts will look first to the housing needs of the parent who looks after the children, with any additional assets being fairly apportioned by reference to the needs of each party and their ability to provide for their needs.

Following a recent decision of the Supreme Court, it would appear that where a pre- or post-nuptial agreement has been entered into, in appropriate circumstances, business assets may be divided in accordance with the agreement.

A recent court decision that where assets are held in a company (which is is law a legally separate person from the shareholders themselves), the court will 'raise the veil of incorporation' to allow the company's assets to be treated as directly available has been overturned on appeal, and then overturned again in the Supreme Court., although it is clear that this will only occur in exceptional cases. . However, a case in which assets were placed in a trust was decided differently: the trust assets were deemed to be 'under the control' of the ex-husband, and thus available for division.

In early 2014 it was announced that 'pre-nuptial' agreements are to be made legally enforceable.

In 2015 two important cases were decided. In one, the Court ruled that  a woman whose ex-husband was retiring should not continue to receive the previously ordered maintenance for life and that she should get a job to support herself. In a second, a woman who divorced her then impecunious, but now multi-millionaire husband more than a decade ago was given the right to open an application for financial support from him.

These decisions may significantly influence decisions going forward.

Recently, the Government has published online advice on the process.

Divorce and Money

When it comes to dealing with money and divorce, it is important to know what has to be taken into account and the powers available to arrive at fair decisions.

For most couples, the basic problem is how to finance two separate households from income and assets which previously provided for only one.

The first consideration of the courts is the welfare of any children, although in most cases they have little power to order maintenance for children because that function is currently performed by the Department for Work and Pensions although since October 2008, parents can make their own financial arrangements and the Child Maintenance Options website offers information on this. See also our articles on divorce and child custody and divorce and child maintenance.

The Matrimonial Causes Act 1973 sets out the factors to be considered by the courts in deciding questions about money. The courts will consider:

1. on the one hand, the income, earning capacity, property and other financial resources available and, on the other hand, the financial needs, obligations and responsibilities, which each  of the parties to the marriage has or is likely to have in the foreseeable future;
2. the standard of living enjoyed by the family prior to the breakdown of the marriage;
3. the age and health of each party to the marriage and the duration of the marriage;
4. the contributions which each of the parties has made or is likely in the foreseeable future to make to the welfare of the family, including looking after the home or caring for the family;
5. the value to each of the parties to the marriage of any  benefit (for example, a pension) which, by reason of the dissolution or annulment of the marriage, a party will lose the chance of acquiring.

Essentially, the courts, or the solicitors or mediators negotiating in anticipation of obtaining a court order, will apply these factors to the family assets which are available to be split between a divorcing couple. It is a process of listing all sources of finance to discover how big a cake is available to be cut up and then achieving a fair and reasonable division.

The court has virtually unlimited powers to transfer and divide assets between spouses and usually does this by using the following types of order, for one or other of the spouses, or for the child(ren), together known as ancillary relief:

• an order for maintenance pending suit;
• a periodical payments order;
• a secured provision order;
• a lump sum order;
• a property adjustment order; and
• for a spouse only, a pension sharing/attachment order.

In exercising its powers, the court has an obligation to consider whether to make an arrangement which will bring about a ‘clean break’ between the parties as soon as is reasonably possible. In most cases this does occur.

Recent case law has made significant changes to the approach of the courts when ruling on the division of assets on divorce. In general, 'matrimonial property' (wealth generated during the marriage) is regarded as warranting an approximately equal  division and non-matrimonial property (which is brought into the marriage or created independently after it ceases) and belonging mainly to the prerson introducing or creating it.

A landmark case in 2010, however, changed the landscape in 'big money' cases in which a pre-nuptial agreement is made. In it, the Supreme Court ruled that a 'pre-nup' agreed between a German heiress and her ex -merchant banker husband should stand. In the view of the court, both the ex-spouses were sophisticated adults who should be bound by what they agreed in advance would happen if their marriage failed.

In 2015 two important cases were decided. In one, the Court ruled that  a woman whose ex-husband was retiring should not continue to receive the previously ordered maintenance for life and that she should get a job to support herself. In a second, a woman who divorced her then impecunious, but now multi-millionaire husband more than a decade ago was given the right to open an application for financial support from him.

Also in 2015, the Supreme Court delivered important judgments allowing wives whose ex-husbands had under-disclosed the true amount of their wealth to reopen their previously agreed financial settlements.

The thing that surprises most clients is that the courts will not take conduct into account except in the most extreme circumstances and if it would be unjust to ignore it. The courts are mainly concerned with practical money matters.

The announcement of a review of the area in 2016 was made even more timely by cases decided late that year and early in 2017 which gave highly mixed messages, throwing  the whole area into more uncertainty again.

Financial Settlements in Divorce: Factors

The headline-grabbing decisions in a spate of  ‘rich list’ divorce cases in 2007 confirmed that the House of Lords  (now the Supreme Court) is emphasising that marriage is a partnership and that the relative contributions of the couple to the marriage will be relevant to the financial settlement terms as will the legitimate expectations of the couple. The judgments will be seized upon by divorcing spouses who sacrifice their own careers for those of their partner or who marry with the expectation of a well-to-do lifestyle only to have that prospect dashed. In delivering his judgment Lord Nicholls of Birkenhead stressed that marriages were partnerships of equals and that this principle is as relevant to short marriages as long ones.

In the first case (McFarlane v McFarlane), a wealthy accountant’s wife had given up her own successful career to help support his career and to be wife and mother of their three children. Nearly two decades later, the marriage broke down. The House of Lords heard the appeal against the decision of a lower court that the wife should receive a settlement of £250,000 a year for five years out of his income of £750,000. The Lords decided that Mrs McFarlane should receive that sum for life subject to possible future revision if circumstances change. This judgment confirms that for ‘stay at home’ spouses, the settlement will not be based on just an assessment of their needs, but also on their contribution to the wealth of the family. In addition, in this case, the Lords also took account of the loss to Mrs McFarlane caused by foregoing her career. In 2009, Mrs McFarlane obtained an increased payment based on her ex-husband's income having risen.

In the second case (Miller v Miller), a brief (under 3 years) and childless marriage was followed by divorce. The lower court ruled that since the wife had a reasonable expectation of a wealthy lifestyle, she should be given a settlement of £5m from her husband’s fortune, reported as being between £15m and £30m. This ruling was upheld, at least in part because Mr Miller earned a great deal of money during the period of their marriage. In general, the courts will look somewhat differently on wealth brought into the marriage by each spouse as opposed to the wealth accumulated during the marriage.

The question of the actual conduct of the spouses during the marriage was regarded as being of no importance in these cases.

In his judgment, Lord Nicholls said that ‘in the case of a short marriage fairness may well require that the claimant should not be entitled to a share of the other's non-matrimonial property’. Non-matrimonial property is property brought into the marriage rather than acquired during it. He also emphasised that unless the misconduct by one spouse is ‘such that it would in the opinion of the court be inequitable to disregard it', it cannot be a factor in the financial settlement. This should enable more divorce cases to avoid the courts and the negotiations to be conducted in a more conciliatory manner.

House of Lords Judgment.

The courts are reserving the right to take account of all relevant circumstances in making their judgments. For example, in the largest divorce case in UK history, the Lords awarded the wife of an insurance magnate £48m of a family fortune of approximately £125m, virtually all of which was created during the marriage.  Another case saw a division of assets which took account of the fact that pension assets are not immediately realisable, which would have left a divorced spouse with a large future pension entitlement 'asset rich' but 'cash poor'.

For example, in the divorce of Heather Mills and Paul McCartney, the court took the view that Ms Mills's contribution to the wealth of the McCartney family was slight and the resultant settlement Ms Mills received was accordingly based on the needs of herself and the couple's daughter only.

In 2009, a husband whose wealth fell dramatically after reaching a settlement with his ex-wife went back to court to obtain a variation of the settlement - and failed. In another case, the wife of a husband who, a few months after their financial settlement was agreed,  sold a company for far more than its valuation in his assets on divorce, sought a larger settlement on the ground that his assets were understated when negotiating their settlement. She also failed.

A lotto win, which a woman did not disclose to her husband, was largely discounted in the divorce settlement in a 2011 case.

More recently, the courts have been taking more and more notice of pre-nuptial agreements when dividing assets of divorcing couples. These are now well worth considering when there is substantial family wealth to protect. The Supreme Court case of Radmacher v Granatino confirmed that where a 'pre-nup' is agreed by two consenting adults without pressure being exerted and where there is the ability to take professional advice, then the courts will in general uphold the terms of the pre-nup unless there is a compelling reason (such as child welfare issues) to not do so.

The courts take a strong line if parties attempt to conceal assets. In decisions in late 2012 and early 2013, two men were jailed for failing to 'come clean' to the family court. In the first case, the man had made fraudulent claims regarding expenses incurred (reducing his disclosed income) and in the second had refused to provide information to the court about his assets.

Following a number of inconsistent decisions by the courts in 2013, the Government decided to legislate to make give validly created pre-nuptial agreements legal status. Decisions in 2014 make it clear that when a 'clean break' agreement is made on divorce, the courts are unwilling to reopen the settlement to give a 'second bit of the cherry' to either party save in the most exceptional circumstances.

The 2015 Supreme Court decision in Gohill v Gohill and a related case  (Sharland v Sharland) confimred that where one spouse deliberately fails to disclose the true nature of their wealth, the settlements can be reopened.

In a bid to make financial settlements in divorce more easily enforceable, the Law Commission has presented proposals which (at March 2017) are receiving consideration from the Governement. These will, if adopted, greatly increase the penalties available for non-cooperation.

Pensions and Divorce

Divorces among the over-60s are by no means infrequent and, whilst the potential for acrimony arising from issues concerning young children is absent, they often do produce a great deal of dispute regarding the division of the family assets.

There are two assets which are typically substantial – the family home and the value of pension entitlements. The former is normally relatively easy to value, even though there may be disagreements over what to do with it: the latter can be more problematic, however.

The first step is to obtain a valuation of the pension rights. Where large sums are involved, seeking professional advice is sensible. The pension can be dealt with either by a sharing of the pension when it vests (this is called ‘attachment’) or as a value to be taken into account when a division of the assets at current values is under consideration.

When an attachment of a pension takes place, the attachment will cease if the person benefiting from it remarries. The attachment will be in the form of an entitlement to an agreed percentage of the fund as calculated on the relevant valuation date, not as a percentage of a particular figure (Called 'earmarking').

The alternative is for a part of the fund to be transferred to a pension provider to administer for the spouse receiving it ('pensions sharing').

 State pension rights should also be ascertained and considered.

Pre-Nuptial Agreements: Wise Planning for the Wealthy

Following a decision in the Supreme Court, in which a pre-nuptial agreement entered into by a German heiress and her husband was held to be enforceable, wealthy families worried about preserving family assets in the event of a divorce should certainly consider advising betrothed family members to create a pre-nuptial agreement. Where the marriage or civil partnership has already taken place, a post-nuptial agreement may be worth considering to achieve the same end.

Pre-nuptial agreements have been commonplace in the USA for many years, but have not been widely used in the UK for the simple reason that previously the courts have refused to enforce them. As recently as December 2008, the Privy Council, dealing with a 'big money' case, commented that it was for Parliament, not the courts, to change the status of prenuptial agreements.

Most European countries recognise pre-nuptial agreements and Resolution - First for Family Law (formerly the Solicitors Family Law Association) has called on the Government to enact legislation in the UK to make such agreements enforceable in the UK courts.The possibility of creating formal legislation to govern pre-nuptial agreements is under discussion in Governmental and legal circles.

For a 'pre-nup' to be enforceable, it should be freely entered into and with the benefit of legal advice on both sides.

Recently, the Government has announced its intention to give pre- and post-nuptial agreements legal effect and a 2017 decision confirmed that the Courts will enforce a pre-nuptial agreement which is properly entered itno.

Civil Partnerships And Same-Sex Marriage Explained

The first civil partnerships were formed on 21 December 2005, after the Civil Partnerships Act 2004 came into effect on 5 December 2005. Same-sex marriages contracted abroad, however, have been recognised as valid civil partnerships from 5 December 2005. Whilst the legal formalities may differ from those of marriage, the practicalities make them almost identical, including the granting of the full range of paternity and child care rights enjoyed by married couples.

A civil partnership can be terminated only by death, legal dissolution or annulment and dissolution is allowed, as in marriage, only on the grounds of irretrievable breakdown. One difference between civil partnerships and marriage is that adultery is not a ground for irretrievable breakdown in the former, but is in the latter. On the breakdown of a civil partnership, the normal claims for financial relief – such as division of assets and maintenance payments – apply as in a marriage and with the first breakups of civil partnerships already taking place, it is clear that the courts are taking the same approach to dissolutions of civil partnerships as they do in the breakdowns of marriages.

Civil partners have the equivalent rights of a spouse on the death of their civil partner, so the same sort of thinking needs to be applied towards making a will and Inheritance Tax planning as should be done by married couples. A civil partnership, like a marriage, invalidates an earlier will.

More recently, the Government has announced that same-sex couples are to be allowed to hold civil partnership ceremonies in churches and other places of worship in England and Wales.

In 2012 the first 'high net worth' dissolution of a civil partnership occured. The decision of the court confirmed that the same principles on the sharing of assets apply when a civil partnership ends as apply when a marriage ends.

In July 2013, the Marriage (Same Sex Couples) Act 2013 was passed into law. This effectively puts same-sex marriages on the same footing as heterosexual marriages and deals with some of the anomalies that result.

Among other important legal issues dealt with by the Act are:

• Same-sex marriages solemnised in foreign jurisdictions before the passage of the Act will be recognised as marriages in England and Wales;

• It does not change the effect of any ‘private instrument’ made before it comes into force. So, for example, the definition of ‘spouse’ in an existing Trust providing for children and spouses would not include same-sex spouses; and

• It does not extend the common-law presumption that a child born to a married woman is also the child of her spouse to the circumstance in which the spouse is also female.

It also provides that civil partnerships may be turned into same-sex marriages. However a court ruling in 2017 confirmed thet heterosexual couples cannot formalise the relationship using a civil partnership.

One aspect of non-equivalence that should be mentioned is that where a ‘private instrument’ (such as a trust document) was created before the Act was passed, the term ‘spouse’ will not include a same-sex spouse. However, it has been confirmed that when a civil partnership is turned into a marriage, the wills of the civil partners continue to be valid.

Unfortunately, a 2015 case confirmed that same-sex spouses and civil partners do not receive the same rights in respect of their occupational pension entitlements for dependants as do heterosexual spouses insofar as those rights relate to pension rights accrued before the passing of the Civil Partnerships Act.

What Are Financial Needs?

When financial settlements are being made on divorce, one crucial aspect that is taken into account in deciding the structure and value of the settlement is the 'financial needs' of the person receiving maintenance from their former spouse.

However, one of the recurring problems in such cases is that 'need' appears to mean somewhat different things to different people – including different judges.

In a bid to introduce more consistency into decisions regarding financial needs on divorce, the Family Justice Council has introduced a 64-page guidance document for the judiciary.

The guidance specifies that the question of financial need will be decided by the court as a matter of fact and will, in most cases, take into account housing needs and present and future income needs, which will normally include income in retirement.

The level and duration of the need will be decided by the court. Where greater resources are available, the guidance states that, as regards the definition of a party's 'reasonable needs', the 'key point…is that in cases involving more financial resources and higher marital standard of living, "needs" can be met at a higher level than would otherwise be possible'. The importance of the standard of living in assessing need will generally depend on the duration of the relationship, and some reduction in living standards may be expected as a result of 'the objective of transition to independence'.

Where resources are 'modest', the needs of children may predominate.

The guidance stresses that all available assets should be taken into account when determining the terms of the settlement, not just those acquired during the relationship.

The Process of Divorce

Although divorce is a commonplace occurrence these days, few people going into their first divorce have much idea about how the process operates. Here is a brief guide. The process for dissolution of a civil partnership is essentially the same, as are the grounds for claiming irretrievable breakdown - with the exception that adultery is not listed as a reason for irretrievable breakdown in civil partnerships.

The basic requirements for obtaining a divorce in England and Wales are that a couple must have been married for a year, the marriage must be legally recognised under UK law and it must have broken down irretrievably. Irretrievable breakdown must be demonstrated to the court by one of five reasons or 'grounds':

• adultery;
• unreasonable behaviour;
• desertion;
• two years' separation with consent; or
• five years' separation without consent.

In practice, if both parties want to be divorced quickly, then the most common ground on which to proceed is unreasonable behaviour. This is used when there has been no adultery and the parties wish to avoid the delay caused by the last three grounds. Unreasonable behaviour can be evidenced by, for example, violence or mental cruelty as well as more subtle complaints such as the exercise of unreasonable control. To support the claim of unreasonable behaviour, one party must agree to give a brief description of the behaviour in the divorce petition.

It is useful to understand the outline of the process and some of the legal terminology. The party to the marriage who makes the application, or petition, for divorce is known as the petitioner while the other party is called the respondent. The petition for divorce is delivered to, or served on, the respondent. The respondent then has 29 days in which either to admit that the petition is true or to defend the divorce – although defended divorces are very unusual. The respondent agrees by returning an affidavit, a signed statement of the truth, to the court.

Normally, a district judge will then decide on the date of a decree nisi, which is the first step towards the formal divorce. Six weeks after the date set for the decree nisi, the petitioner can apply for the decree absolute. When this is granted, the divorce is final. If the petitioner does not apply for the decree absolute, the respondent may do so three months after that date.

It is beneficial if arrangements concerning any children from the marriage and the split of family assets are agreed without having to go to court. However, it is important to have good legal advice even if these decisions are made amicably. The court will always suggest mediation first in order to reach a mutually acceptable agreement between the parties.

In all, the divorce process is likely to take between five and eight months to complete. It will, however, take longer if there are disagreements over children or money which cannot be settled without the intervention of the court.

In April 2011, a new pre-action protocol was introduced in which the process starts with an attempt to mediate the issues between the divorcing party, the idea being to reduce the cost to them and reduce the necessity to spend time in court.  

Relationship Break Up and Tax

Getting divorced is never a pleasant experience and couples going through the process have a lot to think about. Whilst management of the tax consequences of the split is not normally at the top of their priority list, these can be considerable, even where family income is fairly moderate.

For example, under the present rules one per cent of child benefit is added to the tax liability for every pound of income where income is in excess of £50,000. Where a couple have elected not to receive child benefit in order to avoid the charge, child benefit can be applied for again if the income level falls. It can be paid retrospectively for up to two years if the level of income would mean that there is no longer a clawback. Child benefit cannot be split, and the tax charge will be applied to the higher earner of the couple.

With tax credits, only one household can make a claim for any one child and a 'protective' application should be made if the split would make your income drop to the point at which you qualify for credits, as a claim can only be backdated one month. Under the new tax credit regime due to be introduced in 2017, maintenance received from a spouse will reduce entitlement to tax credits. Tax credits are unaffected by child benefit.

Older people can benefit from the extra Income Tax (IT) allowance known as the married couple's allowance, which is given if one spouse was born before 6 April 1935. It is given for the whole of a tax year in which a married couple have lived together. Where maintenance is paid in the circumstances in which one spouse was born before 6 April 1935, IT relief is given by way of a reduction in the tax payable from the year of separation. The reduction is a maximum of 10 per cent of the maintenance paid to a maximum of £3,040.

Income from jointly owned assets is taxable on the person beneficially entitled to it after the date of separation, so the presumption of an equal split of the income will no longer apply.

Capital taxes are also affected by divorce and separation. Most assets transferred post-separation are exempt from a charge to Capital Gains Tax (CGT) under the rule that exempts assets with a useful life not exceeding 50 years. However, post-separation transfers of assets will potentially be taxable after the end of the tax year in which separation takes place or, if a divorce is concluded within the tax year that separation takes place, after the divorce.

The main capital asset of a couple is usually the marital home. Although a couple who are not separated can have only one residence that qualifies for the CGT 'private residence' exemption, after separation each can qualify and, where the marital home is sold, the qualification period for the spouse that moves out of the property is extended for a further 18 months (this was 36 months until April 2014). However, where the property is transferred to the ex-spouse, no taxable gain arises, although if an election has been made for another property to be treated as the private residence, a taxable gain may arise on a transfer back to a former spouse.

Where a property is transferred into trust for children until they reach adulthood, it is normally possible to avoid a CGT charge arising on both the transfer into trust and the transfer from the trustees to the child or children.

Where there are business assets, a transfer can normally be made CGT-exempt through the use of 'gifts hold-over relief'.

Managing the tax issues on separation and divorce is an important issue. Contact us for expert advice on all issues relating to relationship breakdown.

Post-Nuptial Agreements - the Basics

More than 40 per cent of marriages end in divorce (in England and Wales more than 110,000 couples divorce annually) and when one in five of all men and women seeking to end their marriage have already been through one divorce, it is perhaps not surprising that more and more people are seeking to safeguard their individual positions by entering into a pre-nuptial agreement prior to marriage or securing protection by drawing up a post-nuptial agreement at a later time.

For couples who are already married, particularly those with children, drawing up a post-nuptial agreement, which is agreed upon by both as being a fair statement of their wishes, can prevent a lot of potentially harmful stress in the event that the relationship turns sour.

To be binding a post-nuptial agreement must be seen to be fair. When considering whether to enforce a post-nuptial agreement, the court has regard to: 

• the conduct of the parties leading up to the agreement; 
• the circumstances surrounding the making of the agreement; 
• whether there was undue pressure by one side or exploitation of a dominant position to secure an unreasonable advantage; and 
• the interdependence and mutual influence that existed between the parties.

For more information on the financial aspects of divorce, see  Divorce and Money.

Recently, the Government has announced its intention to give pre- and post-nuptial agreements legal effect.

Living Together Agreements

When you begin living together as a couple, without being married, it is best practice to set up a trust deed to make clear your joint wishes and intentions concerning ownership of the house you live in. Preferably, this should be in association with a ‘living together agreement’ setting out your general intentions.

If you buy the house as a couple, in joint names, the trust deed can be very useful. Firstly, it should set out a brief history of the property, including when it was bought, how the purchase money was provided by both parties and some information about the mortgage. Next, it should describe how you want to own the property. If you want an individual's share to pass automatically, on their death, to the surviving partner, then the house should be owned as beneficial joint tenants. If you want to keep strict shares, then it should be held as tenants in common. It is possible to say whether the property is held in equal shares, which means that you both own half, or in any other proportion you wish to specify. The declaration as to the proportions can specify that this is by reference to the actual amount of money each party contributed to the purchase, or that the proportion you have agreed on is irrespective of the monies provided by each party in this or previous transactions relating to the property.

The deed can then make clear plans for future insurance, mortgage payments etc. and can specify any rules which the owners (now also referred to as trustees) have to abide by. For example, you might agree that any future mortgage obtained on the property must be with the consent of both parties. You can also include an option for one trustee to be given the chance to buy out the share of the other if the relationship breaks down.

If the house is in only one name, the deed is very similar but much more important to the person whose name does not, for whatever reason, appear on the title deeds. For example, this could be because he or she is still married to someone else. In this case, the trust deed makes it clear that the house is being held by one partner, in his or her sole name, but that he or she accepts that the other partner is entitled to a share of it and is holding that share in trust for the other partner. The deed can specify how the property is to be shared. It can give detailed instructions as to how the proceeds of sale should be divided, specifying for example that one partner is to be given credit for the money they contributed from the sale of a previous property or that one partner is entitled to 25%, even though they have not contributed anything to the property, because their income is to be used primarily to pay the mortgage instalments. Most importantly, the trust deed can record the agreed value of the property at the time of purchase, the amounts which it is agreed have been contributed by both parties and it can specify how any future increase in value is to be owned by the parties.

It is also important to make wills - the assumption that a 'common-law' spouse will inherit in the same way that a spouse or civil partner will is simply incorrect. If there is no will, the intestacy laws will apply unless a successful claim for financial relief as a dependant is made.

if you are considering marriage, a pre-nuptial agreement is often sensible, particularly where there is significant wealth to protect.

Guide to Parental Responsibility

The 1989 Children Act aimed to clarify the law regarding who could look after children. One of the main new concepts introduced by the Act was that of ‘Parental Responsibility’ (PR). This is the legal term which emphasises that the duty to care for one's children and to raise them to moral, physical and emotional health is the fundamental task of parenthood. It affirms that parents have duties, as well as rights, where their children are concerned. This was a fundamental change in the attitude of the legal system and one which does not yet seem to have been widely understood.

The list of responsibilities involved includes care and control of the child, discipline, protection and maintenance, secular education and religious upbringing, medical treatment, consent to marriage and burial or cremation in the event of the death of a child.

So how is PR obtained? All married parents of children (whether born before or after the marriage and including adopted children) automatically acquire PR. An unmarried mother automatically has PR but an unmarried father does not.

There are now a number of ways in which an unmarried man can acquire PR for his child. Until recently this could only be either by entering into a Parental Responsibility Agreement or by the courts making a Parental Responsibility Order. A PR Agreement has to be registered at the Royal Courts of Justice after it is witnessed by a court official. A PR Order has to be approved by a judge after an application to the court by the father and can be made either with the consent of the mother or at the discretion of the court, if the mother objects. However, comparatively few people have so far made use of this process. Perhaps one reason for the low uptake is that both these procedures are cumbersome. Also, many parents believe, mistakenly, that living together does give a father PR. This is only true in specific circumstances. From 1 December 2003 any unmarried man registered on the birth certificate as the father of a child has automatically been given PR, provided both the mother and father are present at the time registration takes place.

Parental Responsibility can also be granted to people who are not the natural parents of a child. Anybody whose care of a child is court approved by the making of a residence order automatically acquires PR. In addition, adopters and guardians are given PR and in some circumstances it is granted to local authorities or even the courts.

PR is a relatively new concept and is still under examination by the courts. One problem area is whether one person with PR has to consult any other(s) about important decisions affecting a child’s life, such as changing schools or agreeing to medical treatment. The current view of the courts is that if there is any doubt or conflict it is probably advisable to apply for a court order.

Divorce and the Family Home

Family break-up is always complicated and when there is a property involved, things can get very complex indeed.

In principle, when a couple are cohabiting (not married or in a civil partnership) the property belongs as of right to whoever is shown on the deeds as the owner.

Where there are minor children, the court will put their interests first and will normally ensure that their accommodation needs are met until they reach the age of majority. The most common circumstance in which a specific arrangement is necessary to secure the accommodation needs of minor children is when the mother and children live in a property which is owned by the father. Such arrangements may well involve a settlement into trust with the trust capital (the property) reverting to the father when the youngest child reaches 18.

In some circumstances, the courts will conclude that there is a ‘constructive trust’, which arises as a result of the arrangements made by the couple. In such cases, it is necessary for the person claiming an interest in the property which is not the same as a legal interest to demonstrate this.

The courts in such cases will consider the intentions of the parties involved. When one party claims a share in the property, the court will first ask whether there was the intention to share the beneficial interest in the property. If the answer to that question is ‘yes’, then the court will decide, on the basis of the evidence, what the nature and proportions of the couple’s shares should be. Note that it must also be shown that the claimant relied on the common intention to own the property jointly to his or her detriment.

Factors which will help substantiate a claim to a beneficial interest in a property in these circumstances will include:

• making a contribution to the costs of purchase;
• making a contribution to the mortgage, rates etc.;
• making a non-financial contribution (such as working to renovate, improve or maintain the property); and
• making an indirect financial contribution (e.g. paying other household bills so that the other partner can pay the mortgage etc.).

Divorce and the Company Director

Divorce is almost never easy and the financial negotiations can be protracted and difficult, particularly when there are business interests involved. In this article we consider some of the issues surrounding divorce for company directors. In the first section, we deal with directors who are, effectively, senior employees of the companies of which they are directors. We refer to them as ‘employee directors’. In the second section, we consider the additional issues that can affect directors of companies in which they have a controlling or substantial shareholding, whom we refer to as ‘equity directors’.

What follows deals with only some of the potential areas for dispute, all of which must be thought through.

General Principles

Firstly, there are some general principles the courts will apply no matter what the circumstances. These are:

1. The behaviour of the parties (unless highly reprehensible) is not normally relevant to the settlement. Divorce is not about blame, it is about negotiating a deal which achieves the necessary objectives;
2. The first priority of the court will be the welfare of any minor children; and
3. Unless you have a pre-nuptial or post-nuptial agreement (and the former are only persuasive, not binding), the court will start from the premise that ‘matrimonial assets’ (those built up during the marriage) should be divided equally.

Employee Directors

The position of an employee director on divorce is essentially the same as that of any other employee. However, directors often have more complicated remuneration schemes – involving benefits in kind, performance-related bonuses and significant pension schemes. Working out the appropriate amount of remuneration that should be regarded as continuing income for the purpose of calculating maintenance payments can be a problematic area. 

One common area of dispute is when one of the divorcing couple has given up a promising career (the most common circumstance is when a wife gives up work to care for children) to support the other spouse in furtherance of their career. Some of the largest divorce settlements in the history of the UK courts have been made in such cases.

One other particularly difficult area is that of future income in the form of bonuses or pensions. Normally, the courts will not look too far ahead when determining the value of likely but unearned income, but in a recent case, in which a husband failed to reveal that he was expecting a substantial increase in income, the court did revise his ex-wife’s maintenance payments. Allowing an ex-wife a proportion of her ex-husband’s pension income when he retires is also commonplace.

There may be trusts or Inheritance Tax plans which have to be rethought. Issues involving foreign domicile or foreign property may also give rise to additional complexities.

Equity Directors

The position regarding equity directors is more complex, because there are normally several additional areas of potential dispute. For equity directors, there are questions of business value and, in the common circumstance in which both spouses are shareholders or managers of and/or are remunerated by the company, further practical difficulties arise.

In these circumstances, there can be numerous points of contention, such as:

• What is the value of the company?
• Does the value of the company depend on a particular individual?
• What is the value of a particular shareholding (particularly if it is a minority shareholding)? The provisions of the company’s articles are also often in point here;
• How are the business assets (e.g. property) owned and by whom?
• Can the divorcing couple continue to be involved together in the business?
• What are the tax issues raised by the proposed arrangements (e.g. transfers of assets out of the company, sales of shares)?
• Can the necessary non-compete clauses and employment law issues be dealt with?
• Will the proposals cause problems over guarantees with the bank?

Child Maintenance Explained

The Child Maintenance and Enforcement Commission (CMEC) – a statutory non-departmental public body – was established in 2008 to take on the work of the Child Support Agency. At the same time, the Child Maintenance and Other Payments Act 2008 (CMOPA) removed the obligation for new claimants who are on benefits to use the CSA. Unsurprisingly, statistics based on the first quarterly figures since this change was made show that the number of new cases being brought to the CSA has declined.

In October 2008, the obligation for existing CSA clients claiming benefits to continue to use the Agency was removed. All parents can now choose the child maintenance arrangements that best suit their individual circumstances. This could be a private arrangement or the statutory maintenance arrangements. A new Child Maintenance Options Service has been established to provide information and support to help parents reach a decision.

Since April 2010, all child maintenance has been fully disregarded when calculating out-of-work benefits.

In November 2008, the CMEC took over responsibility for the work of the CSA. In 2012, this was closed and the responsibility was transferred to the Department of Work and Pensions (DWP).

During 2009/2010, new enforcement powers were introduced under the CMOPA to ensure that parents meet their child maintenance responsibilities. These include allowing the CMEC to seize the passport and/or driving licence of parents who fail to pay, without the need to involve the courts as is currently the case. Work and Pensions Secretary James Purnell says that the Government is keen to support parents in these tough times, but for those who choose not to support their own children, “we will not stand by and do nothing. If a parent refuses to pay up then we will stop them travelling abroad or even using their car.” The Commission can also seize money from bank accounts, where a parent has failed in their financial obligations toward their child, without having to go through the courts. The CMEC will also be able to apply for a curfew or to recover money from a dead person’s estate.

In late 2012, a new child maintenance scheme was introduced, claimed to be fairer and faster than the current system. It includes annual reviews of maintenance assessment, an increase in the ‘flat rate’ child maintenance deduction from state benefits and the removal of the necessity for parents who share child care equally to pay maintenance through the statutory scheme. Couples wishing to make their own agreement can use the 'family-based arrangement form' available from the Child Maintenance Options website.

The new system bases the maintenance payable on a flat rate per child with the rate varying depending on:

• the gross income of the payee;
• the number of nights the child spends with each parent on average; and
• other factors related to the family circumstances.

For more information see the see the CSA website ,which includes a child maintenance calculator.

From 30 June 2014, all new applicants using the Child Maintenance Service will be charges an application fee of £20, unless they qualify for exceptions from the charge under one of the qualifying categories.

On 11 August 2014, collection charges will be levied for users of the Child Maintenance Service's 'Collect and Pay' system.

The charges will be 4 per cent, made by way of deduction from the payments received by the parent with caring responsibility for the children and an addition of 20 per cent to the child maintenance liability for the parent who does not have caring responsibility for the children.

Child Custody Explained

Divorce and Foreign Nationality

Approximately one in six marriages in the European Union is between persons of different nationalities. Not surprisingly, approximately one in six divorces also involves spouses of different nationalities.

This can make for some complexity on divorce as to which country's law should apply to the divorce proceedings. This is eased to some extent by the fact that some jurisdictions will apply the law of the nation of the person being divorced, rather than their own law, when appropriate. For divorce proceedings commencing in this country, UK law is applied no matter what the nationalities of the divorcing couple are.

The UK has opted out of an EU proposal that seeks to set a list of criteria for deciding which country’s law should apply on divorce, the main criterion being the country in which the couple had its last home. This will no doubt come as a relief to some, as the UK’s approach to financial settlements is among the most generous in the world. Also, prenuptial agreements are not binding in the UK, as they are in many European countries – most of which also exclude from the pool of assets to be divided on divorce any assets acquired through inheritance. However, following a decision of the Court of Appeal in 2009, 'prenups' now must be considered by the court where they have been entered into freely and without undue influence. Post-nuptial agreements are normally enforceable.

By and large, where there is doubt about which country’s law should apply, the divorce will be dealt with under the law of the country in which the divorce proceedings were first commenced. This explains why the UK is a favoured place to commence proceedings in ‘big money’ cases.

A 2011 case confirmed the principle that where the question of in which country the children of the marriage should be raised is concerned, the needs of each child must be considered separately: the children are not to be considered ‘as one unit’.

In recent years a number of cases have come before the courts involving foreign nationals or where there is a foreign residence element to the divorce. The British courts have been robust in their defence of their right to have jurisdiction in such cases. In 2012 the UK improved the ability of parents to enforce residence orders if their children have been taken to a foreign country, when the provisions of the 1996 Hague Convention came into effect.

A 2013 case confirmed that where a foreign court has no outstanding matters before it with regard to the residence of a child, the UK court does not need the foreign court to formally renounce jurisdiction if the child concerned has become habitually resident in the UK.

If you are facing a relationship break-up with a foreign element, contact us for advice.