While matters of the heart dominate for couples getting married, financial advisers will have other concerns in mind, particularly when their clients need advice about what to do about divorce, writes Simon Bruce, senior counsel at Farrer & Co.
I was thinking of that as I came to write about the new divorce law which will come into force in England and Wales from Autumn 2021.
‘No-fault’ divorces, at last.
The modernization of the law will enable couples to divorce or dissolve civil partnerships when they want to bring their union to an end, without the need to apportion blame
Isn’t that a proper way to mark the (often) sad ending of what began as a beautiful relationship?
The Divorce, Dissolution and Separation Bill passed through the House of Commons with a significant majority on 17 June 2020 and has received Royal Assent.
While it does not explicitly change the mechanisms for the financial proceedings of a divorce, the intention is to make the process less acrimonious, which in turn will lead to smoother financial settlement between the parties.
In particular, the new rules are likely to lead to a reduction in long separation periods where running two households can quickly deplete a family’s resources.
Financial advisers should prepare to advise their HNW clients on a more amicable approach to the division of their assets to align with the new approach.
The Current Law
Until the new law comes into force, divorcing couples will still have to navigate the divorce provisions of the Matrimonial Causes Act 1973, long criticized by practitioners and judges alike.
The current law does not allow couples to simply arrive at a mutual decision to divorce; the process is more complex.
As a result, couples who want to divorce or dissolve a civil partnership quickly can find themselves in a bind in which one spouse has to allege that the other is at fault, forcing both parties into a counterproductive “blame game” that can take time – in truth too much time -and a lot of money to resolve.
It certainly discriminates against people who do not have abundant financial resources.
Allegations of fault can also be harmful to the parties and the process, which can lead to increased hostility between spouses, especially where children are involved.
Allegations made in fault-based divorces can also have a detrimental effect on the respective parties’ bargaining positions as the proceedings develop.
Out with the old, in with the new
Some 20 years ago, The Right Honorable Baroness Butler-Sloss, then President of the Family Division, called our behavior divorces a legal “fiction”.
It remains shocking that, for decades, parliament, the judiciary and the legal profession have connived in bringing marriages, and more recently civil partnerships, to an end on the basis of a fiction, something that is not true.
Looking forwards rather than backwards, the direction of travel is to be welcomed for a number of reasons:
1. A kinder passage from marriage to divorce
Couples marry or enter into civil partnerships out of love and shared commitment.
Why, then, has it been the case up to now that acrimony is embedded into the divorce process?
Couples who come to a mutual decision to divorce or dissolve a civil partnership deserve a dignified ending to their relationship, not an exit characterized by blame and negativity.
Under the proposed changes, the couple, or one party if acting unilaterally, will be required to provide a statement of irretrievable breakdown.
It will not be possible to contest a divorce and no evidence of “divorce-worthy” conduct will be required.
These measures will take out the element of fault and help facilitate a kinder parting of ways.
With couples able to divorce in a more co-operative and collaborative way, financial advisers will be able to turn their attention to developing a collaborative strategy for the parties’ finances going forward.
2. Putting the children first
When couples who have children divorce or dissolve a civil partnership, the children are always the most important consideration.
Parents should be able to focus on what is important when a marriage breaks down and find a solution that protects the welfare of all involved; they should not find themselves stuck in a cycle of blame.
Lady Hale has pointed out that “the evidence is quite clear that children suffer most from parental conflict. The present law does nothing to dampen down conflict and can exacerbate it”.
It is hoped that the new law will alleviate some of these conflicts.
3. Easing financial negotiations
Divorces will often involve financial implications, and these are sometimes difficult.
We all know that the way one party begins a divorce will have a profound influence on everything that has to be resolved within the divorce proceedings.
Steps taken at the beginning of a divorce to suggest fault on the part of one party can negatively influence what happens next.
It is hoped that no-fault divorces will soothe combative divorces where finances are used as ammunition to bolster allegations of fault.
In turn financial advisers can rethink how the finances in a divorce are used for the benefit of both parties.
4. Redefining the divorce process
No-fault divorce will prevent the over-lawyering of a case and the excessive involvement of lawyers in matters which shouldn’t need them at all.
It is bound to reduce the vice of excessive legal costs.
The role of the family lawyer is to advise clients and facilitate the settlement of their cases as amicably as possible. You can check out sites like https://www.thetxattorneys.com/fort-worth-divorce/high-net-worth-divorce if you are looking for a reputable legal expert.
Moving away from conduct allegations, this redefinition of divorce will help practitioners to focus above all on their principal objective: reaching resolution.
Financial advisers have a key role to play in this process too, advising individuals and couples on ways in which they can structure their finances with a view to achieving a workable solution for everyone, and moving away from a model where financial assets serve as a weapon in the battleground of divorce.
In short, the new divorce law becomes a more fertile ground for financial advisers to work in with their clients.
It will take time to adjust to the new approach to ensure it is fit for purpose.
There is plenty of time for the clever lawyers and sociologists to do that.
In the meantime, we welcome these forthcoming changes which will result in a better divorce law.
This article was written for International Adviser by Simon Bruce, senior counsel, and James Swaden, trainee solicitor, Farrer & Co.