In a divorce, the process of resolving financial issues between the parties (transfers of property, maintenance etc) is referred to as 'ancillary relief'. In every case it is preferable if the parties can come to a mutually acceptable agreement outside of a court, but there are many reasons that can make it difficult to do so.

With a divorce there are no fixed rules about division of assets or formulas that can be relied upon where property and money are concerned. There is no ruling that a husband or a wife are entitled to a half share of a property and no ruling that automatically favours one party against the other. Whilst this may be good news in as much as every case is dealt with on its own merits and without prejudice, in the more financially complex divorces, it can lead to lengthy and sometimes hostile settlements. Obtaining expert advice is essential to resolving financial matters, but even then, their findings and recommendations may be challenged by the other party. Ultimately, if an agreed settlement cannot be reached, the court can make whatever financial orders it thinks fit, but this decision will be based upon substantive documentation. So understanding what is involved at the commencement of the process is essential. A good starting point is to list all of the things you may need to do - the following may help you:

• Change your Will at the earliest opportunity - consider organising an enduring Power of Attorney. Our Personal Estate Planning Department will be able to assist you
• Make a list of all assets - attach receipts if possible
• Obtain professional valuations for everything, including property, pensions, assets and investments
• Write to your mortgage lender and every credit card company you deal with and advise them of the situation (this is to safeguard your credit rating for the future)
• Obtain redemption statements or notification of settlement figures from your mortgage lender and other sources of credit
• Write to all the services providers - gas , electricity, water, phones etc and advise them of the situation
• Close joint bank accounts and open new accounts in your own name
• Review every direct debit/standing order mandate and take appropriate action
• Review any/all children's accounts if funds can be removed upon providing either parent's signature
• Change every PIN number
• Keep copies of everything related to your financial dealings - don't forget to include on-line statements if appropriate

What is an Asset?

Whilst defining some assets may be obvious, such as property and cars, many 'intangible' items such as life assurance policies and ISAs are also assets. Technically, all possessions qualify as assets, it's just a case of where to 'draw the line', The following checklist serves only as an example of the scope of assets, but should not be considered as a complete list.

Property: Including holiday homes, overseas property and part ownership.

Possessions: Cars, boats, jewellery, paintings, electrical items, clothing, sports equipment, animals, etc.

Pensions: All pensions relating to either of the parties.

Savings: Bank, building society, National Savings, offshore deposits.

Insurances: Endowment, life, including insurances that may be surrendered as a result of the divorce.

Investments: PEPs, ISAs, TESSAs, Shares, Unit Trusts, Investment Bonds.

If in doubt as to whether something is an asset, always get advice. A more difficult asset to itemise is where one or both parties is involved with running their own business which itself has assets.

Property and its Transfer

Usually, the most valuable asset will be property, so the subject deserves greater attention.

Most property is jointly owned, but even so, a claim to property will ultimately be decided by the court; even if the property is only in one name, a court may order it to be transferred to the other. If the property is in one name only, entitlement to make a claim is determined by whether a financial contribution has been made towards home costs (domestic bills etc) or by caring for children which allowed the other party to pursue a career or run their own business. Under such circumstances, the court may deem the property to be 'Matrimonial Property'.

Having determined that both parties may have a claim on the property, what are the options that can be pursued?

1. Sell the property and come to agreement regarding division of the proceeds
2. One party can transfer their share to the other (this is an option when there is no equity in the property and the party retaining the property can arrange a mortgage)
3. One party buys out the other's share (this is an option when there is equity in the property; the party retaining the property may need a new mortgage to fund the 'buy out')
4. The parties mutually agree not to sell the property until the youngest child reaches 18 or finishes full-time education (this option may require a new mortgage being made to reflect the level of financial support that one party is offering the other regarding monthly mortgage payments)

Mortgages and Cedit Complications

Although not strictly anything to do with the legal process, a common by-product of divorce is the damage done to credit ratings and the subsequent difficulty in obtaining a mortgage or other forms of borrowing.

Capital Gains Tax

Capital gains tax (CGT) can affect divorcing couples, so it is worthy of a comment here. CGT arises on the 'chargeable gains' of individuals such as the sale of any assets. CGT liability is subject to some complicated rules which means that advice from an accountant or other suitably qualified person is recommended.

Whilst there is no CGT payable on the sale of the 'principal private residence' i.e. the property that is considered to be the family home, it may well be payable on a second home that is disposed of. The sale or transfer of other assets may also incur CGT liability if the gain exceeds any allowances entitlement.

Pensions / Pension Sharing

Determining the outcome of pension and related matters is extremely important because of the number of factors that need to be taken into account and because after the family home, the pension is likely to be the second biggest asset. Below are the most common scenarios:

• The husband will soon be able to retire and has substantial pension provision
• The wife will be losing her entitlement to a widow's pension and/or any death in service payments from her husband's employment
• Because of her age or other circumstances such as caring for children, the wife will not be able to build up an adequate pension fund of her own in anticipation of her retirement

There are no hard and fast rules regarding the preferred solution to these scenarios because every set of financial and other contributing circumstances will be different, similarly there is no automatic entitlement for one party against the other. However, the following solutions are often the most appropriate based upon the fact that a sum equal to the cash value of the pension needs to be included in the value of assets:

• The maintenance payments given to the wife can take account of the need to fund her own pension
• A proprtionate amount of a lump sum payable on retirement can be promised
• The equity passed on via the family home can be used to fund retirement as a lump sum following the sale of the property (after the children have grown up)
• The courts can 'ear mark' a percentage of future pension benefits for the ex-spouse
• The court can order the pension provider to divide the existing pension fund between the husband and wife (usually not in equal amounts) so that both parties have an independent pension. Either party is then free to treat their pension fund as they see fit
• Insurance arrangements can be revised to take account of the changing circumstances

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