More marriages are breaking up, but couples should jaw jaw
31st January 2012
As Spring is traditional for weddings, so January has earned a reputation for the time to kick off a divorce.
And this year has been no exception, if celebrity announcements are anything to go by. Hard on the heels of Katy Perry and Russell Brand, super-couple Seal and Heidi Klum have said they will be going their separate ways, as will reality star Kim Kardashian.
For the fortunate few, a court battle may bring a secure future and London has become the divorce capital of the world, with the biggest pay-outs and the most sensational splits. John Cleese and Sir Paul McCartney are just two of the recent cases and this month has seen another multi-million pound payout in the High Court in London - this time a £12.5m award to the former wife of a Russian oligarch. It's the sort of sum which has attracted venture capitalists to get in on the act, with two hedge fund companies announcing this month that they are prepared to "invest" in high-end divorce cases in return for a percentage of the final award.
But the big issue for most divorcing couples is how they will manage what can be an emotionally and financially draining endurance test, particularly with the growing clamp down on Government funded legal support, and attempts to shift the emphasis towards out of court settlements through mediation.
So as this month's casualties sit and take stock, we can offer some advice about how to avoid the worst of a warring divorce; the role that mediation can play; and some tips to secure your future:
Figures published by the Office for National Statistics in December show that the divorce rate for the UK has risen for the first time since 2003. The figures for 2010 show a rise of 5% overall, with divorces most common for couples in their early forties, and a big rise in the number of over-60s.
Even if one or both of the parties are keen to settle without acrimony, the cost of divorce is a concern for everyone - from the oligarch's wife who is seeking a million or multi-million pound settlement but has no ready cash; to the Government, who are desperate to reduce the Legal Aid bill; through to the low to middle-income household where neither spouse qualifies for Legal Aid but who may struggle to meet professional fees. It can all add up to a big worry, but there are ways to take charge and to control costs.
The Government took action last year by introducing new rules that require a divorcing couple to consider mediation to tackle their financial or children-related issues before they can take their case to court, although the rules do not apply in cases where there has been domestic violence within the last year or where child protection is an issue.
There is a great deal to be said for mediation, especially in highly personal situations such as divorces, business partnerships and inheritance or similar family problems.
· Mediation is cheaper and quicker: figures published by the Legal Aid Board indicate that the average cost per party of a mediated settlement is £535 compared with £2823 where the case goes to Court. And the average time to complete a mediated settlement is 110 days compared with 435 days for a court case to be completed.
· Going through a divorce is highly stressful and has an impact on time taken off work as well as on an individual's effectiveness at work, so we should welcome anything that reduces the length of time to complete a divorce.
· In a court case, the judge usually has to decide in favour of one party or the other; it is a winner takes all situation. Although judges in divorce cases have a much wider discretion it's not the job of the judge to arrange a compromise that both sides can live with, whereas that is the main objective of a mediator.
· Mediation gives the participants a strong element of control over the outcome since either or both of them can refuse to accept the mediator's proposals. By contrast, the parties have no control over a judge's decision. One of the things a mediator will try to establish at the outset is what each of the parties really want and what are the non-negotiable points; if these can be accommodated a compromise can be achieved.
· Mediators come from a variety of backgrounds, allowing an expert on the topic to bring their knowledge to the table. So for a divorce, many law firms will have specialist mediation departments and a couple could choose to work with a family law expert who is also a trained mediator. The mediator must be wholly independent, so they could not be from a firm which had been consulted individually by either party.
Critics of the Government's increasing emphasis on mediation have accused them of trying to force a "one size fits all" solution on the public, saying that you cannot force people to negotiate and that therefore mediation is not always appropriate.
It is true that parties are now being forced into mediation as anyone commencing court proceedings must show that they have proposed mediation arrangements. The other party in the divorce also knows that the court will take a very dim view of them if they refuse to mediate without good reason. But neither side is obliged to accept the mediator's proposals.
In practice it is surprising how many people go into mediation with no intention of accepting any compromise, but come out of it at the end of the day with a solution that they find acceptable.
Another criticism is that one party may dominate the other and that the outcome might favour that dominant spouse.
But any mediator will recognise when one side is effectively bullying the other and will not be fooled. And if one side really feels that they cannot face the other, there is no reason why they should not be in separate rooms with the mediator shuttling between them. Finally, using mediation does not prevent you from having a solicitor or barrister at your side, who can help you to put your case.
Mediation can only work at its best if both sides put their case clearly and many people benefit enormously from having a legal professional involved from the start, as they will have someone supporting them through the process and advising them on their rights and likely outcomes.
But for those who insist on having their day in court, the question of funding litigation is likely to remain a pressing concern.
At every level, it's the case that most of those going to court will be short of cash, but will have to find the money to pay for legal fees upfront. And that's the case even for the mega-rich who may have the chance of mega-payouts - like Janna Kremen, the former wife of a Russian oligarch who won a divorce payout of £12.5 million this month, after a judge ruled the post-nuptial agreement she signed after 10 years of marriage was "grossly unfair".
The city hedge funds have not been blind to the opportunity presented by this situation, following the huge pay outs that have been ordered in the UK courts in divorce cases over the last few years. Two hedge fund companies have announced in the past week that they are prepared to "invest" in high-end divorce cases in return for a percentage of the money awarded to the client, reportedly as much as 30% in some cases.
At an everyday level, a new company is going to be offering loans to middle income people who do not qualify for legal aid, but who are eligible to receive a loan as a means of paying for litigation arising from their divorce.
This may seem an attractive option, but it could be risky and demands careful thought around the "what if" scenario where a loan is taken out, but the court settlement fails to materialise. Again, good professional advice is vital to assess the risk at the outset.
Another worry facing those couples who divorce later in life, is whether each will have enough to live on in old age. With the increasing average age at divorce, now around early to mid forties, pension funds are likely to be one of the biggest sources of wealth to be divided. Recent research by Sweet & Maxwell, the legal publisher, has shown an 11 per cent rise in the number of pension-sharing orders made by courts in the past year alone.
When you finalise the financial arrangements of your divorce, you should also make sure that they specifically say that your former spouse cannot make any claim on your estate, the assets you leave behind, if that's what you want. Unless it's agreed as part of the terms of the divorce, a former spouse can make a claim against your estate when you die.
And finally, if you have taken the difficult decision to split with your spouse, then make sure you take time out as soon as you have separated to review your will, and any legacies you want to leave. All too often this is forgotten about, but until you have received your decree absolute, any existing will leaving your assets to your spouse will stand, and that may not be what you would now wish to happen.