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Topic:
Potential financial settlement (18 Posts)
Started By:
Date:
28 January, 2018 08:56AM
Potential financial settlement
Beerfund - 28 January, 2018 08:56AM
My marriage is not going well, and we are likely heading for a separation. Im nervous about this and want to get an idea of potential financial settlement

We have three kids (1, 6 and 7). My wife used to work but stopped about 3 years ago as she wanted to stay at home with the kids. She now refuses to get another job.

We don't have much in savings (a few thousand), but have a lot of equity in our house. It is worth about £800k and we have a mortgage of about £170k. When we bought it, I put in £100k from a previous house sale and my wife £200k. I have paid the mortgage since the start.

I earn about £90k a year.

Does anyone know roughly what split would be likely for the property? I'm worried that I will end up with nothing. Will my wife need to move out so we can sell and split it, or as she refuses to get a job will I have to pay the mortgage whilst she lives there with the kids?

I've no experience of this, so any advice would be welcome. Let me know if I need to give any more details.

Thanks
Re: Potential financial settlement
HatMan - 28 January, 2018 09:40AM
The priority will be housing the children...presumably with her, so she will most likely get the lions share of the equity or you could go for the (very ) long game of obtaining a Mesher order whereby she stays in the house until such time as the kids have reached a certain age....NB you say that she REFUSES to get a job...she does have three children by you to deal with, some might say that is a job in itself.

You will not be walking away a rich man that's for sure.
Re: Potential financial settlement
davidterry - 28 January, 2018 05:48PM
I think with this much equity it is very likely that it will be shared. If it is practical to rehouse your wife and the three children by selling now and dividing the equity then how much your wife gets will very much depend upon how much she needs to buy a suitable property free of mortgage (she has no mortgage capacity). If it is not practical to sell it now and/or your wife wants to retain the house then I think you could reasonable ask for a charge on the property equal to one half of its net equity. You might have to wait some time before you get that money (typically until the last child ceases to be dependent) but in principle you would be asking for one half in that event.
Re: Potential financial settlement
Beerfund - 29 January, 2018 02:47PM
Thanks for the feedback so far.

Looking at some posts about mescher orders, the negative seems to be putting off the problem for the ex of rehousing at a later date. But with this much equity, that should not be a problem I would have thought.

To buy a 3 bed house in the area would be a minimum of 450k. If our equity is about 600k (ish) then would a judge split this 450 to 150 in her favour? I think I would prefer the mesher order in that case...

But if she stayed in the house, and I paid child maintenance then how would she afford household bills etc? The CSA calculator states I would be looking at maintenance of between 800-1000 a month. But if she has no income, how would she pay for utilities, council tax, etc etc? Would I then have to pay her more to cover child maintenance and all the household bills as she doesnt have an income?

And presumably I would still need to pay the outstanding mortgage? Because if I had to pay the mortgage plus child maintenance plus her household bills, then I wouldn't be able to even rent a one bed flat...
Re: Potential financial settlement
davidterry - 29 January, 2018 06:23PM
>>To buy a 3 bed house in the area would be a minimum of 450k. If our equity is about 600k (ish) then would a judge split this 450 to 150 in her favour? I think I would prefer the mesher order in that case...

I think if the house was sold now you could well be looking at that sort of division because of the children.

>>But if she stayed in the house, and I paid child maintenance then how would she afford household bills etc? The CSA calculator states I would be looking at maintenance of between 800-1000 a month. But if she has no income, how would she pay for utilities, council tax, etc etc? Would I then have to pay her more to cover child maintenance and all the household bills as she doesnt have an income?

If she stays in the house you would have to pay her spousal maintenance as well as child maintenance. The amount you would have to pay her in spousal maintenance would be the amount she needs to stay in the house after taking into account her income from all other sources (such as the child maintenance and child benefit etc).

>>And presumably I would still need to pay the outstanding mortgage? Because if I had to pay the mortgage plus child maintenance plus her household bills, then I wouldn't be able to even rent a one bed flat...

No, you would not have a separate obligation to pay the mortgage. Your (ex) wife would be responsible for that. She would pay it from the spousal maintenance, child maintenance and child benefit etc that she received.
Re: Potential financial settlement
Beerfund - 29 January, 2018 07:00PM
Thanks that's very helpful.

So if the house was sold now with that kind of split, then to allow her to buy another place outright, would I still need to pay her spousal maintenance? Because presumably she would need to pay her household bills in a new house - or would the selling of the house mean a clean break and therefore she would need to get a job to support her new property and life etc?

If the house wasn't sold now, then I'd have to pay spousal maintenance to an amount to pay the existing mortgage plus bills... And then child maintenance on top. I'm assuming the spousal maintenance is only until she cohabits or remarries? And I would have had a charge on the house of 50%or something until kids turn 18 or she cohabits or remarries - whichever is sooner? Have I got that right?
Re: Potential financial settlement
Beerfund - 31 January, 2018 12:59PM
Bit of a left field question, but brain is working overtime trying to figure out the different options here...

If I were to change career and earn a much lower income, e.g. stop working my *** off and get a job I would enjoy more and earn like 20-30k a year - how do you think that would affect a potential outcome?

Even if I were to do something similar, but go part time and in an easier environment. I'd earn a lot loss, but have a lot more time to spend with the kids which would be great. And financially my situation would be very different, but how would that potentially affect what would happen with the house and any spousal maintenance?
Re: Potential financial settlement
Willapp - 31 January, 2018 01:27PM
I asked my solicitor a very similar question during discussions about spousal maintenance. The answer I received was that I had a duty to "maximize my income" after separation in order that a fair settlement is achieved. What this exactly means I think is vague and I've no idea how it would be enforced in practise, but for example with my skills and experience I could expect a salary of £60 - 80k and therefore if I took a job at McDonalds earning £11k then this would be deemed to not maximize my income.

I would be interested to hear David's view on how this is enforced. I assume a person is still entitled to choose employment that suits them and - taking aside my extreme example above - how would one prove that a higher paying job could be achieved? I could easily take a less stressful job paying £45k instead of £60k, and could argue that the reduction in stress is necessary for my health and wellbeing, so how could a court force me to take a higher paying job?

I suspect (correct me if I'm wrong) that the other party in the divorce would have to apply to court and try to prove that you have intentionally limited your earnings in order to skew a settlement figure, and then it would be up to a judge's discretion whether they allowed that to affect their decision.

The justification for not being able to do this is obviously to stop high earners quitting their jobs entirely, living off saved income and then claiming they are unable to pay spousal maintenance at all. I understand that view but feel the implementation of such rules must be very subjective in all but the most obvious cases.
Re: Potential financial settlement
Beerfund - 31 January, 2018 02:14PM
Reduction in stress would be a big driver - I.e the stress of going through a divorce as a man in the UK!!

Just because someone has qualifications and experience, I don't understand how they could be forced to take a higher paid job. And who is to say you would actually get a higher paid job - it's very easy to mess up an interview Would a judge be able to put some kind of condition in place that meant you would build up maintenance arrears, so if you returned to higher paid work In the future you would be liable?

What if someone literally wants to change their career or work part time to focus on more contact with the kids? If a dad worked part time and therefore looked after the kids 50% then that would allow the ex wife to also get a part time job... Is that too simplistic a view?
Re: Potential financial settlement
Willapp - 31 January, 2018 02:24PM
I have exactly the same misgivings about it and sadly no clear answers. For example I am currently a self-employed IT contractor, which has a better earning capacity but is less reliable work and more stressful. I am seriously considering switching to permanent employment for which the equivalent role would likely net me around £1k less per month - no small sum.

In my eyes I am entitled to do this for legitimate reasons (less stress, more job security etc.) but who knows if a judge could see this as me "taking the easy way out" and ducking my duties to provide for my ex! Divorce is stressful enough without the fear that you could be forced into working an unsatisfactory job just because it pays more.

It would be great if there is some guidance on this but I suspect it's very subjective. For my part I will risk the career change and if my ex wants to challenge it then I will defend my decision as vigorously as I can!!
Re: Potential financial settlement
Beerfund - 31 January, 2018 02:32PM
I'd be interested to hear how you get on!

Whilst i agree it is probably hugely subjective, I don't see how you could be forced to change back to a higher paid role.

If all kids were at school, could a judge 'force' the ex to take a part time job? Unlikely I would have thought.
Re: Potential financial settlement
davidterry - 31 January, 2018 02:55PM
In practice if a person has been earning £100K for a couple of years before divorce and then decides to earn £10K in order to 'de-stress' a court will almost certainly find that person has an earning capacity of £100K. People cannot avoid their financial obligations simply by deciding to earn less for will no doubt be a temporary period. It would be different if there was a compelling reason such as chronic illness but in practice it is not too difficult to identify cases of what is essentially a voluntary reduction of income.
Re: Potential financial settlement
Beerfund - 31 January, 2018 03:10PM
Ok thanks. What would the courts likely course of action be in such a situation?

Also how would this effect the split of equity in the matrimonial home?

What if the stress of the divorce would cause someone to switch to part time from full time?
Re: Potential financial settlement
davidterry - 31 January, 2018 03:23PM
>>What would the courts likely course of action be in such a situation?

I think I have already answered this. If a person normally earns £100K and voluntarily chooses to reduce his earnings to £10K a court will assume he still has an earning capacity of £100K and make a decision on that basis.
Re: Potential financial settlement
Beerfund - 31 January, 2018 03:51PM
Ah ok - sorry for being a bit dim there!

I guess I just don't understand how a court can order a maintenance payment for an amount that isn't being earned.

So a court says pay x per month but current earnings are below x per month... What if you can't manage to get another job earning 100k?
Re: Potential financial settlement
davidterry - 31 January, 2018 05:51PM
I think I have said about as much as I wish to say about this. I can't see much point in further comment. I think my answers have been clear.
Re: Potential financial settlement
Willapp - 31 January, 2018 09:17PM
I suppose what David is saying, which makes sense, is that if you have previously been earning £100k and shortly before or during divorce proceedings that income drops substantially, the court may award maintenance based on the higher amount. It then becomes your problem on how to deal with that - either by increasing earnings somehow, taking a loan or even borrowing money from family (my solicitor said this to me).

To play out the hypothetical scenario where you were genuinely unable to secure higher paid income, I imagine you would then have to apply to the court to vary the agreement down and produce evidence to support the application, such as proof of job interviews or evidence that your earning capacity is not what it was during the relationship.

I can see how this does seem harsh in less extreme scenarios, where stress or other factors might legitimately cause a reduction in earning ability, and perhaps a court would consider that. The extreme other end is people who intentionally limit their earnings to avoid or greatly reduce maintenance payments, possibly to their children as well. The courts would not let the state pick up the tab (through benefits) if they felt that the parties involved could earn more and support each other.
Re: Potential financial settlement
davidterry - 01 February, 2018 11:37AM
The point is that if a person chooses voluntarily to reduce their income then the person who suffers the consequences of that will be the person doing it rather than the other spouse. If a person earning £100K a year was able to avoid his financial responsibilities simply by taking a job with McDonalds for six months then it would be giving the green light to such avoidance schemes. The courts will not tolerate that. In practice not many people adopt this attitude. Those that do get no sympathy from the courts.
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