Heidi Fleming, Senior Associate in Divorce and Family Law, answers some of the most Frequently Asked Divorce Questions (FAQs) posed to her during the coronavirus COVID-19 lockdown.
"During my own isolation, besides binge watching Tiger King and suspecting Carole Baskin did have a hand in her husband’s disappearance, I have had a number of clients ask me questions relating to how Covid-19 is going to impact on their case and I wanted to share some of these with you."
Here are the top 5 questions
Will my divorce be delayed?
Inevitably the short answer is yes. Bury St Edmunds Divorce Unit is currently dealing with divorce petitions from February 2020 and whilst we are told that decree nisi and decree absolute applications are being prioritised there are still delays. Liverpool Divorce Unit has said they are not issuing divorce petitions at all at the moment. We have been successful with getting divorces petitions issued within a week by using the online digital divorce route for clients to ensure their case is progressing and delay is minimalised.
How will Covid19 impact on my financial settlement?
There is no easy answer to this question because it all depends on your case and the assets involved. Most cases are going to have property so Covid19 is naturally going to have an impact as the property market is volatile and selling a property will carry some delay.
Vagaries in the property market and fluctuating house prices is not something new to lawyers. We have always considered balancing the risk so that one party is not left with the copper-bottomed cash based assets whilst the other is left taking all the riskier illiquid or equity backed assets. Whilst previously we would be mostly considering the risks when dealing with clients with businesses and shares we are now doing the same with other assets.
Property - Some estate agents have said that they are not in a position to comment on the impact of Covid19 on houses they have valued. Clients are being provided with broad valuations subject to caveats that there may be a 5-10% drop. Careful thought needs to be given to whether you can rely on valuations you have obtained, or whether it is better to wait and see what house prices will do.
If you are agreeing a sale and that you will both receive a percentage, the reality is that you will each bear the market volatility equally. However, if one party is receiving a lump sum, retaining cash, or another asset where the assets are of a different type, inevitably one party is likely to lose out.
Pensions are a huge area that are often overlooked by clients. Pensions are either the largest or the second largest asset in most divorce cases. Local government pensions based on final salary or career average schemes have not yet been affected, but for company schemes the reduction in gilt yields means the Cash Equivalent Transfer Values (CETVs) for defined benefit schemes will increase but the value of the schemes’ assets is decreasing so schemes may move from surplus to deficit. A pension expert on divorce report may be required more than ever in this ever changing environment. Personal pension plans are usually invested in the stock market, so a fluctuating stock market means the Transfer Value of these pensions are changing daily. Caution must be exercised in reaching an agreement that offsets or shares pensions.
Bonuses - If spousal maintenance is an issue in your case then consider how to structure a maintenance order to limit the risk of bonuses being lower than usual.
So what are your options?
a. Agree a settlement – The importance of clarifying the up to date value of the assets cannot be underestimated. Relying on valuations pre Covid19 is dangerous. Obtain legal and wealth management advice.
b. Not ready to reach final settlement but wish to agree an interim arrangement? Have a separation agreement drawn up by your lawyer.
c. Wait it out until the market recovers - how long is anyone’s guess.
You decide to proceed with your separation and get the financial matters done - now what?
Consider whether you have assets which need revaluing.
Enlist the help of a financial advisor/wealth manager - they can add significant value to your case not only once you receive your settlement but from the beginning when exploring how to attribute the risk. Like any good wealth manager would tell you, do not put all your eggs in one basket.
You already have a settlement but do not think it is fair?
This is a complex area of law and each case has to be considered on its own set of circumstances. You should get legal advice immediately as any delay in doing so could be fatal. Whilst the court can vary an order in exceptional circumstances there are some orders which cannot be varied such as capital. The court can set aside an order but this is rare and a market crash has previously been regarded as an insufficient reason to set aside an order.