It is a fact of law that when a court is considering the appropriate division of financial resources between two people at the point of divorce, it must have regard to the standard of living enjoyed by the former couple during the marriage. It is one of many factors that the court weighs when deciding who gets what.
The problem is that it is difficult – in most cases, impossible – to replicate that former standard of living across two separate households. The court’s first consideration is always the welfare of the children while they are under 18 so if there are limited resources it must house them adequately first, with the parent who will be caring for them more of the time. Any other needs come second to the requirement to put a roof over the children’s heads and enable it to be kept there.
It is very tough to adjust to a new level of standard of living, or to see your children having to do so, and we find that this can be something that causes a great degree of resentment on divorce. Because who did what to whom, and why or how the marriage ended, is rarely relevant to who is entitled to what financially (or how care of the children is shared, for that matter), the financial division process can feel very unfair when the wounds are still raw. Unfortunately it is almost inevitable that each person’s economic standards will take a hit after divorce. Judges and advisors try to minimise this as far as possible, but there is only ever so much to go round.
Standards tend to come to the fore because as part of the process of financial disclosure, it is required that each person draw up a summary of their likely financial needs, going forward. This is to assist the court in thinking about how it allocates the available income resources. It is inevitable that people assess their ‘needs’ with reference to their former standard of living: first, because it is what they know, and secondly, because they tend to want the court to be as generous as possible to them in its interpretation of their needs, so they achieve a more generous result. However, it is a fine balance. What the court considers unrealistic expectations can damage a person’s standing in the eyes of the judge, harming them in the final settlement analysis.
This can be illustrated by a recent case where one would have thought there was enough to go round – about £58 million plus a further £105m in trust. The husband’s income was about £800k per year, excluding the amounts retained by the trusts. The marriage was 11 years in length, with four primary school-aged children.
The interesting point in this case was that the wife alleged that the husband had kept the standard of living during the marriage artificially low, claiming that he was ‘income poor’. She felt she should be awarded sufficient resources to enable her to live at the level she should have enjoyed when they were together. She wanted a clear half of the assets, which were almost entirely inherited on the husband’s side.
These two people have so far spent a combined £1.4m on costs. (This is neither usual, nor, according to the judge, proportionate.)
The judge found that the family’s average annual running costs during the marriage were about £250,000. In the year after separation the wife spent £865,000 exclusive of legal fees. The judge found that this was sufficiently exorbitant to satisfy the high bar required for a proportion of it to be deducted from the wife’s final award. He said, “The wife’s approach was made plain during her oral evidence. She did not see the marital standard of living as relevant. Rather she had adopted a new lifestyle which she asserted was not extravagant because it reflected how she wanted to live [and her social circle].”
It will be a very rare case indeed in which someone is awarded more as an income than a sum that reflects the marital standard of living. In this case, the wife wanted £29million, and the husband offered to give her £8m. The judge’s award was £8.8m, which he considered was enough to satisfy her needs in the context of the standard of living during the marriage. She will also get child maintenance until the last child is independent.
Most families do not have access to this degree of wealth. The judge acknowledged this in his decision, commenting that in most cases it is rare that standards of living can be maintained across two households. However, the principle remains: beware of too-high expectations when considering what everyone needs after divorce. If ever there was a time to be realistic, this is it. If you’ve got any questions about this or any other family law issue, please give us a call on 01223 443333 and make an appointment with Tricia, Simon, Adam, Gail or Sue.