IFAs are playing an increasingly important role in divorce proceedings, working closely with divorce lawyers. In the following blog for IFA Magazine, BDB Pitmans’ Meredith Lawton (pictured) explains why.
The long-established starting point in divorce cases in England and Wales is the equal division of matrimonial assets – typically the family home, holiday homes, savings and pensions. Where those assets do not meet the financial needs of each party or children, the courts can justify a move away from equal division and take into account non-matrimonial assets, such as an inheritance received and assets acquired before marriage. That is why, in part, divorce proceedings can be protracted and heated.
The pressure on the family courts is acute, with court hearings often scheduled many months if not a year or more ahead. To ease pressures on the courts and to encourage divorcing individuals to meet agreement between themselves, there is now an obligation to enter what is called non-court dispute resolution procedures (NCDR).
Alternative dispute resolution, such as arbitration and mediation, has always been available to divorcing couples, but there was no obligation by either party to fully engage with the process.
Now the message is unequivocal. If you do not, the courts can put a hold on proceedings and force one party to meet the legal costs of another.
Despite what many people may believe, family lawyers do work hard to keep proceedings out of the courts. We regularly encourage clients to explore mediation, arbitration and other ways to try and reach a settlement, and a court application should be a last resort.
There is good reason to do so. It can help couples find common ground and meet agreement over the key financial aspects of their divorce, and it is much quicker. Less will be spent on legal fees, and individuals can move on with their lives faster.
IFAs have always played an important role in supporting individuals in divorce and are invaluable when one party is financially weaker. They typically would step in once an individual had received a financial settlement at the end of their divorce.
Now, with greater focus on NCDR, IFAs are increasingly being used within the early stages of divorce proceedings.
If engaged from the start of proceedings, IFAs can assist with assessing immediate financial obligations and inform clients what settlement would be required to ensure needs are met now and in the future.
IFAs can bring a better understanding early on of the issues in the case which could result in a smoother and quicker resolution through NCDR for the couple involved. IFAs can deploy their skills in calculating the impact separation will have on each party’s finances and with their softer skills of negotiation to bring about an early resolution without the parties litigating through Court.
IFAs increasingly use sophisticated cash flow modelling tools, and this is of great help to lawyers when negotiating a financial settlement. The information can be used to demonstrate what level of capital and investment is needed to provide for their needs long-term.
The rise of collaborative law, where both the husband and wife instruct specially trained lawyers that work in collaboration with each other, also opens up interesting opportunities for IFAs. Where divorcing couples opt for the collaborative route, an IFA can work for both husband and wife as a financially neutral advisor.
The IFA’s role within the collaborative law process involves acting impartially and providing information, rather than advice, to both parties to ensure they both fully understand all the financial issues in the case and their options.
IFAs are a valuable addition to lawyers who are advising separating couples, but a word of caution: they can also make divorce proceedings more challenging.
There are instances where an IFA could suggest to one party, usually the financially weaker, that they are entitled to more from the matrimonial pot than is realistic, or that they need more from the matrimonial pot to continue to support their current lifestyle.
This can all too easily become a sticking point in divorce proceedings and could lead to the parties being unable to negotiate a settlement, leaving the courts to decide.
It is important for family lawyers and IFAs to work together from the point of separation in order to ensure a joined-up approach and the best outcome for their mutual client.
Meredith Lawton is a solicitor in the Family Law team at BDB Pitmans. Visit www.bdbpitmans.com
