Divorce - is this a fair settlement?

dryriser

Pile_o_stone said:

Wow this is VERY similar to my current circumstances. We are further along in the process and so I will be able to provide some clarity.

We had a similar issue where my wife earned less than me and wouldn't be able to afford a mortgage on her own, so we agreed to split the house equity 60%/40% in her favour and the pensions 60%/40% in my favour. Basically she would be getting (for example) £300k in mortgage equity and I would be getting £300k in Pension value. These figures would obviously fluctuate with the eventual vale of the house sale - so if we had to drop the house price then her 60% equity would drop, so my pension equity would also drop accordingly. So for example, if her 60% house equity dropped to £280k, then my pension equity would also drop to £280k

However, when we approached a solicitor to draw up the Consent Order they said having these two different assets connected would not be allowed as the house had not yet been sold. We had to have a fixed percentage of the pension and a set percentage of the house equity, and not have them dependent on each other. We therefore had to agree on me having the pension 60% - £300k pension equity (as that was immediately available), and she would get 60% of the house equity. The issue is that she may get less than £300k. It was then for us to decide if I would take less but outside of the court agreement.

The one thing in your agreement that raised a red flag, was "we're taking out a £100k mortgage". Is that in your name?  The whole point of getting a Consent Order is essentially to have a complete and final split of your finances, except for child support (which should end once the kids are adults). If you're not having that and will continue to be the breadwinner for the family even though you are divorced then there is no point to having a formal consent order via the courts, you can just decide to do it.

However, I would caution you. While you want to make sure your kids have a safe and secure home and so you are being incredibly generous, will you still feel so generous when your wife gets another partner? Would you feel happy to continue to pay a mortgage on a property that she and another man are living in (especially after the kids have grown up and left home)?

In my situation, my wife will buy a small terrace house outright, with no mortgage. Once the settlement is done, then the only payment she will receive from me is for the kids. When the kids have moved out as adults, that payment will stop. SHe will be financially independent of me (apart from child support) from day 1 of the divorce (once we have sold the house) and she will be financially independent of me completely once the kids are adults. That's the point of us divorcing - It's no longer my job to take care of her anymore, and vice-versa. 

Thanks Pile O Stone. I hear exactly what you're saying. My plan for the consent order is so she can't come after or have any legal right to any future earnings post move out, though I appreciate the 2nd mortgage makes this complicated. 

The 2nd mortgage will be in both of our names, but she'll be the one paying it (I know I'll be liable). It's a 2-year fixed so once it's ended, she'll remortgage in her own name only. Whether this can be baked into the consent order I'm not sure. 

dryriser

Exodi said:

Erm, let's just say I'm not suprised she's amicable and keen to get this progressed... it seems pretty onesided against you.

None of it really makes sense to me, but I guess I don't understand your relationship.

You're agreeing to pay her £613 a month... for what exactly? How long do you plan on gifting her £613 a month? I expect when you eventually move on your new partner won't be terribly impressed with this generous gift... You have the children 50/50, there's no requirement to pay child support (which you accept this is not) so not clear on why you've used a CMS calculator.

I think you're also facing the symptom of the age old problem of expectations after a divorce. It's not logical to expect the same living standards once you've broken up and need to pay to run two households (e.g. each in a 4 bed detached house) yet most couples exactly expect this. Are you intending to buy a second house while you're still not divorced for her to move into, your post kind of suggests that? Madness if the case.

I don't know why there's any of this back story to be honest.

(cash + vehicles + any other assets + pensions ) / 2

You are looking after the children equally right? Spousal maintenance isn't really a thing in the UK so I'm not sure why all the extra freebies are being thrown in for her (e.g. cars, insurances, you meeting 100% of the childrens costs, random £613 monthly gift,etc).

I feel like this is the situation where you feel really amicable now and are best friends or whatever (I'm sure most soon-to-be ex spouses would be on cloud 9 with their ex with that offer on the table) but a few months/years down the line when the dust has settled, you're used to being apart and she's moved on with someone else you'll be kicking yourself for your misguided generosity.

FlorayG said:

Can a judge say it's not fair if you've both agreed it? that doesn't seem fair in itself. If you are both happy surely the judge will just sign it off as is?
(never been married so don't know, just curious)

Imagine a situation where a guy guilt trips or convinces his ex that most of the assets should stay with him and offers her a pittance of the estate, convincing her that's all she's legally entitled to. Her, not knowing any better, agrees.

Or a partner feels guilty about a break up and caught up in their emotion offers to reduce their share.

You now have a situation where both parties agree, but a judge feels that the agreement is one-sided and declines the application.

Reasons like this are why independent legal advise is preferred in these type of proceedings, to ensure they're fully aware of what they might be entitled to (but this can be a double-edged sword as oftentimes solicitors can over-represent what each party may be entitled to!).

Thanks Exodi for taking the time. I may be a mug but i've taken this decision based on quite a bit of info from friends who have been through this before me. I understand now that no maintenance is due on 50/50 custody, but I'm also conscious that she'll also be on child benefits at first, and even then will have low income.  There is no way to calc spousal maintenance so I used the GOV cms calc to come up with a number i'm happy with.  It sounds like the CMS/courts can rule in favour of the parent who has a very low income, is on benefit, and has not earned properly for a number of years - plus her future earning potential is reduced. 
I would retain the right for this to reassessed every 12 months based on my salary, and her income/assets.

Emmia

dryriser said:

Emmia said:

dryriser said:

Hi all, i'm a newbie at this, and guess what... divorce too.  Hoping there's someone on here is more experienced at divorce than I am. 

I'm here, cap in hand, seeking opinions on whether my separation/divorce plan is a sound one, or if i'm missing something obvious, or if i'm being a tool.

Here's the background (i'll try and keep it very factual)

Married 10 years, 3 kids (9 and 2x 7s). I won't go into why but suffice to say it's all very amicable and no dramas or hurt.

We have a home with £300k equity, and a £300k mortgage. Two cars (one leased), and circa £330k in cash/investments.  The plan was to pay off the mortgage in two years, but now we're not.

I work full-time on £105k pa, my wife runs her own business p/t but earns very little and she will shortly start a new full-time job on £30k.

The original separation plan was that I would remove her from our deeds/mortgage, and she would buy her own home using the cash we have. (our martial home is a larger house and needs lots of maintenance, which she didn't want to take on, otherwise I would have been happy to move out).

But, my lender wouldn't allow me to remortgage to the value of current loan (even though they lent me all the money 2 years ago and i'm the only one paying all the bills). So, she's staying on the mortgage until the fixed rate term ends.  Next problem, she doesn't earn enough, at the point we did this, to get 'any' mortgage, so she's buying a £400k home and we're taking out a £100k mortgage for 2 years fixed, and the rest as deposit.

This means triple stamp duty but it's where we are.

That's the hard facts... here's the settlement status.  We've agreed 50/50 on finances, and 50/50 on custody.  We'll only live 5mins away from each other and i work from home 85% of the time so logistically it works.

As i'm the main earner (I have paid for literally everything for 10 years - every bill, every household expense, all of it - she saved up and paid for our family holidays), i'll pay her £613 a month, based on the CSA calculator. This isn't strictly spousal payment or child maintenance, but we needed some way of agreeing a figure.  I'll also pick up the large majority of the kids expenses, plus insurance etc.

To facilitate the house purchase she'll need more than 50% of our estate, plus she'll need to buy more furnishing than I will.  So my plan is these extra costs will be off-set against my pension.

In short... She'll get:

£330k in cash

Vehicle worth £18k

Monthly payment of £613

Most insurances paid

Kids costs covered by me (i'm a good dad and need the best for them)

I'll be left with equity in a property and a leased vehicle, that's it.  Neither of us will have any savings, so we start again.

Is this fair on both sides?

We're trying to do this without solicitors involved, but we will for the final consent order of course.  Our plan now is to document all of this and have it overseen by a solicitor, and then processed.  I think my last question is once we eventually get to divorce stage, could a judge look at all this and say that what we have 'agreed' is not right, and make a judgement on it to the contrary?

What about pensions? It sounds like yours will be worth substantially more than hers, even with offsetting for furniture

Yes you're right, and begrudgingly I know she's entitled to half for the period we were married. I'd love to offset more but short of selling out house, there's no other assets to give.

Honestly, if I was her I'd be relinquishing some property now in exchange for a portion of your pension.

There are two reasons for this,  firstly (mainly) pensions are long term and take ages to build up - I expect she doesn't currently have much in the way of pension savings.

Secondly, a colleague who divorced her husband (who was politely a bit of a scoundrel) got 50% of his pension (they'd been married for a long time) and said that the thing she was most pleased about was that the reduction would punish him financially every month of his retirement...

caprikid1

I gave up more pension in favour of property, my theory was I could control the property and its income, I effectively took a tax free pension draw down at age 40. There are two ways to look at it.

Exodi

dryriser said:

Exodi said:

Erm, let's just say I'm not suprised she's amicable and keen to get this progressed... it seems pretty onesided against you.

None of it really makes sense to me, but I guess I don't understand your relationship.

You're agreeing to pay her £613 a month... for what exactly? How long do you plan on gifting her £613 a month? I expect when you eventually move on your new partner won't be terribly impressed with this generous gift... You have the children 50/50, there's no requirement to pay child support (which you accept this is not) so not clear on why you've used a CMS calculator.

I think you're also facing the symptom of the age old problem of expectations after a divorce. It's not logical to expect the same living standards once you've broken up and need to pay to run two households (e.g. each in a 4 bed detached house) yet most couples exactly expect this. Are you intending to buy a second house while you're still not divorced for her to move into, your post kind of suggests that? Madness if the case.

I don't know why there's any of this back story to be honest.

(cash + vehicles + any other assets + pensions ) / 2

You are looking after the children equally right? Spousal maintenance isn't really a thing in the UK so I'm not sure why all the extra freebies are being thrown in for her (e.g. cars, insurances, you meeting 100% of the childrens costs, random £613 monthly gift,etc).

I feel like this is the situation where you feel really amicable now and are best friends or whatever (I'm sure most soon-to-be ex spouses would be on cloud 9 with their ex with that offer on the table) but a few months/years down the line when the dust has settled, you're used to being apart and she's moved on with someone else you'll be kicking yourself for your misguided generosity.

FlorayG said:

Can a judge say it's not fair if you've both agreed it? that doesn't seem fair in itself. If you are both happy surely the judge will just sign it off as is?
(never been married so don't know, just curious)

Imagine a situation where a guy guilt trips or convinces his ex that most of the assets should stay with him and offers her a pittance of the estate, convincing her that's all she's legally entitled to. Her, not knowing any better, agrees.

Or a partner feels guilty about a break up and caught up in their emotion offers to reduce their share.

You now have a situation where both parties agree, but a judge feels that the agreement is one-sided and declines the application.

Reasons like this are why independent legal advise is preferred in these type of proceedings, to ensure they're fully aware of what they might be entitled to (but this can be a double-edged sword as oftentimes solicitors can over-represent what each party may be entitled to!).

Thanks Exodi for taking the time. I may be a mug but i've taken this decision based on quite a bit of info from friends who have been through this before me. I understand now that no maintenance is due on 50/50 custody, but I'm also conscious that she'll also be on child benefits at first, and even then will have low income.  There is no way to calc spousal maintenance so I used the GOV cms calc to come up with a number i'm happy with.  It sounds like the CMS/courts can rule in favour of the parent who has a very low income, is on benefit, and has not earned properly for a number of years - plus her future earning potential is reduced. 
I would retain the right for this to reassessed every 12 months based on my salary, and her income/assets.

I really don't understand you one bit, do all your friends happen to be American?

Spousal maintenance is extremely rare in the UK. I'm lost on the logic of "CMS/courts can rule in favour of the parent who has a very low income" when there is no child maintenance or spousal maintenance obligation?

The right to "reassess every 12 months based on my salary, and her income/assets" sounds like a practical nightmare since you're relying on her goodwill to disclose her full situation in good faith and is filled with issues - e.g. "yes I know I live in a massive house with my new partner and drive a sports car but we've put it all in his name". You'll be unsurprised to hear it's commonplace in the US to deliberately avoid re-marrying to extend spousal maintenance orders.

dryriser said:

The 2nd mortgage will be in both of our names, but she'll be the one paying it (I know I'll be liable). It's a 2-year fixed so once it's ended, she'll remortgage in her own name only. Whether this can be baked into the consent order I'm not sure. 

Aside from the contradiction (most people get divorced to separate their finances, not commingle them further) you will inevitably become one of the countless people we see coming to this forum complaining two years on that their ex is not able to get a mortgage in their sole name (and why would she as from your description she "has a very low income, is on benefit, and has not earned properly for a number of years - plus her future earning potential is reduced." - and if she can, why can't you just do it in her name to begin with?).

I just can't help but think you'll regret all of this once the situation changes and you both have moved on.

Emmia said:

Honestly, if I was her I'd be relinquishing some property now in exchange for a portion of your pension.

There are two reasons for this,  firstly (mainly) pensions are long term and take ages to build up - I expect she doesn't currently have much in the way of pension savings.

Secondly, a colleague who divorced her husband (who was politely a bit of a scoundrel) got 50% of his pension (they'd been married for a long time) and said that the thing she was most pleased about was that the reduction would punish him financially every month of his retirement...

I'm not sure the first one makes much sense unless it was a DB scheme as a divorcee could of course contribute their split of the assets to a pension pot if that's what they want to do.

The second reason I guess is the primary motivation, to use it as a punishment and to each their own, but I tend to try and make my decisions excluding emotions.

I agree with you insofar as it sounding like the pension hasn't been considered at all (and should be).

And on that note:

dryriser said:

Emmia said:

What about pensions? It sounds like yours will be worth substantially more than hers, even with offsetting for furniture

Yes you're right, and begrudgingly I know she's entitled to half for the period we were married. I'd love to offset more but short of selling out house, there's no other assets to give.

Unfortunately I regret to inform that due to the length of your relationship and situation, it is high likely that your whole pension pot would be considered, not just for the period you were married.

Maybe that will effect your generosity.

VyEu

Have you got pension CETVs and if they're DB then in order to split them fairly you'd need a pensions report (report to include a figure for offsetting as well as equality of income and/or capital on retirement). Without knowing that you can't really assess whether it's fair. Any solicitor will tell your wife that. 

That being said, your division doesn't seem fair as sure you both end up with about 300k cash in which to rehouse but your earning capacity is higher. If I were you, if be looking at capitalising any spousal maintenance offered/giving her a greater lump sum now and having a clean break, children expenses to be sorted between the two of you.

theoretica

Not having a figure for the relative value of your pensions makes it hard to work out what is a 50:50 split.

But my feelings is that it would be simplest all round to have a split now which does not rely on future voluntary payments to be fair - as that is subject to the uncertainties of future changes in everyone's situations.

Angelica123

dryriser said:

Pile_o_stone said:

Wow this is VERY similar to my current circumstances. We are further along in the process and so I will be able to provide some clarity.

We had a similar issue where my wife earned less than me and wouldn't be able to afford a mortgage on her own, so we agreed to split the house equity 60%/40% in her favour and the pensions 60%/40% in my favour. Basically she would be getting (for example) £300k in mortgage equity and I would be getting £300k in Pension value. These figures would obviously fluctuate with the eventual vale of the house sale - so if we had to drop the house price then her 60% equity would drop, so my pension equity would also drop accordingly. So for example, if her 60% house equity dropped to £280k, then my pension equity would also drop to £280k

However, when we approached a solicitor to draw up the Consent Order they said having these two different assets connected would not be allowed as the house had not yet been sold. We had to have a fixed percentage of the pension and a set percentage of the house equity, and not have them dependent on each other. We therefore had to agree on me having the pension 60% - £300k pension equity (as that was immediately available), and she would get 60% of the house equity. The issue is that she may get less than £300k. It was then for us to decide if I would take less but outside of the court agreement.

The one thing in your agreement that raised a red flag, was "we're taking out a £100k mortgage". Is that in your name?  The whole point of getting a Consent Order is essentially to have a complete and final split of your finances, except for child support (which should end once the kids are adults). If you're not having that and will continue to be the breadwinner for the family even though you are divorced then there is no point to having a formal consent order via the courts, you can just decide to do it.

However, I would caution you. While you want to make sure your kids have a safe and secure home and so you are being incredibly generous, will you still feel so generous when your wife gets another partner? Would you feel happy to continue to pay a mortgage on a property that she and another man are living in (especially after the kids have grown up and left home)?

In my situation, my wife will buy a small terrace house outright, with no mortgage. Once the settlement is done, then the only payment she will receive from me is for the kids. When the kids have moved out as adults, that payment will stop. SHe will be financially independent of me (apart from child support) from day 1 of the divorce (once we have sold the house) and she will be financially independent of me completely once the kids are adults. That's the point of us divorcing - It's no longer my job to take care of her anymore, and vice-versa. 

Thanks Pile O Stone. I hear exactly what you're saying. My plan for the consent order is so she can't come after or have any legal right to any future earnings post move out, though I appreciate the 2nd mortgage makes this complicated. 

The 2nd mortgage will be in both of our names, but she'll be the one paying it (I know I'll be liable). It's a 2-year fixed so once it's ended, she'll remortgage in her own name only. Whether this can be baked into the consent order I'm not sure. 

This sounds like a recipe for disaster. What happens when she's unable to get a remortgage in her own name in 2 years - it's unlikely that she, as a low earner, would be in a position to do so for a 400k house. If she can't keep up with mortgage payments then you would be liable. What happens if she meets someone new that she wants to move in? There is also an issue if she remains on your mortgage of your current family home until 2 year fix ends (if the banks won't allow you to remortgage), how on earth is she getting a second mortgage to get a 400k?

You presume everything will remain amicable indefinitely and that you can keep things largely the same - this is unrealistic especially once one of you meets a new partner. You need a clear break and definitely should not have any further financial products with her. 

sassyblue

dryriser said:

Hi all, i'm a newbie at this, and guess what... divorce too.  Hoping there's someone on here is more experienced at divorce than I am. 

I'm here, cap in hand, seeking opinions on whether my separation/divorce plan is a sound one, or if i'm missing something obvious, or if i'm being a tool.

Here's the background (i'll try and keep it very factual)

Married 10 years, 3 kids (9 and 2x 7s). I won't go into why but suffice to say it's all very amicable and no dramas or hurt.

We have a home with £300k equity, and a £300k mortgage. Two cars (one leased), and circa £330k in cash/investments.  The plan was to pay off the mortgage in two years, but now we're not.

I work full-time on £105k pa, my wife runs her own business p/t but earns very little and she will shortly start a new full-time job on £30k.

The original separation plan was that I would remove her from our deeds/mortgage, and she would buy her own home using the cash we have. (our martial home is a larger house and needs lots of maintenance, which she didn't want to take on, otherwise I would have been happy to move out).

But, my lender wouldn't allow me to remortgage to the value of current loan (even though they lent me all the money 2 years ago and i'm the only one paying all the bills). So, she's staying on the mortgage until the fixed rate term ends.  Next problem, she doesn't earn enough, at the point we did this, to get 'any' mortgage, so she's buying a £400k home and we're taking out a £100k mortgage for 2 years fixed, and the rest as deposit.

This means triple stamp duty but it's where we are.

That's the hard facts... here's the settlement status.  We've agreed 50/50 on finances, and 50/50 on custody.  We'll only live 5mins away from each other and i work from home 85% of the time so logistically it works.

As i'm the main earner (I have paid for literally everything for 10 years - every bill, every household expense, all of it - she saved up and paid for our family holidays), i'll pay her £613 a month, based on the CSA calculator. This isn't strictly spousal payment or child maintenance, but we needed some way of agreeing a figure.  I'll also pick up the large majority of the kids expenses, plus insurance etc.

To facilitate the house purchase she'll need more than 50% of our estate, plus she'll need to buy more furnishing than I will.  So my plan is these extra costs will be off-set against my pension.

In short... She'll get:

£330k in cash

Vehicle worth £18k

Monthly payment of £613

Most insurances paid

Kids costs covered by me (i'm a good dad and need the best for them)

I'll be left with equity in a property and a leased vehicle, that's it.  Neither of us will have any savings, so we start again.

Is this fair on both sides?

We're trying to do this without solicitors involved, but we will for the final consent order of course.  Our plan now is to document all of this and have it overseen by a solicitor, and then processed.  I think my last question is once we eventually get to divorce stage, could a judge look at all this and say that what we have 'agreed' is not right, and make a judgement on it to the contrary?

Bit in bold..... it's unlikely once you've used Solicitors to help you draw up a Consent Order for a Judge to refuse to grant it.   Often the judge will query the terms with the Solicitor if they are unhappy about something and you can go back and amend the Order before the judge grants it.

Nobody can answer your question of what you've agreed being fair on the basis of your pension valuation.  I would also say that it's pretty unusual for a 50/50 split in your circumstances.  Your child are still quite young and your wife earns much less than you do, so be prepared that once she sets foot in a Solicitors office they most probably will advise her to go for more than 50% and once you receive letters from her Solicitors saying that is when most parties start to fall out because reading it in black and white causes resentment, when it's simply factual.   (Even if you use a Solicitor to draw up the Consent Order, your wife will be advised to see a Solicitor before signing it too, and if she doesn't, the judge will question and draw her attention to something unfavourable to her).

You say you will be left with £300k of equity and a leased car - but you also have triple income than your wife does. 

The cost of the children and insurances are a moot point, your wife will have her own costs to pay out of her wages and the £613 per month you're paying her (unless you're talking about paying for their private schooling for instance, it's difficult to judge now knowing what you mean - and I don't say that for you to explain yourself).

The monthly sum of £613 (or whatever you end up agreeing) will be written into the Consent Order, this will allow her to prove she will have funds to pay a mortgage for any potential mortgage application.

I assume you don't want to move yourself, otherwise you could put the marital home up for sale?

One thing..... don't start saying that you paid every bill etc, etc to any Solicitor.... it's often said by people who want to come off better in any settlement because they think they contributed more, but any decent Solicitor will tell you that whilst you were married you were presumably happy with that arrangement.   Women doing the lion's share of bringing up children often means she doesn't have time to work too, and judges rightly accept that as part of her contribution to the household.  If she didn't do that, you couldn't have worked.

So to recap, you do need to know what (both) your pensions are worth as the value of those will go in the Statement of Information with the Consent Order which lists the financial information of both parties for the judge to consider when granting the Order AND it could be better to bite the bullet and see a Solicitor now as they may have some advice for you nobody here has thought of.

Good luck.