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Family Law Issues for the Elderly
If you are embarking on a separation from your spouse during your later years in life, it is vital to be aware that there are certain matters which warrant particularly careful scrutiny, especially when the relationship has been a very long one.
Where a marriage sadly ends after 20 plus years, both parties may well be approaching retirement and the plans that were made for life thereafter are no longer going to come to fruition. The question as to how each party will manage financially when both are closer to retirement, and thus (often) a significant drop in income, becomes more pertinent to them than to their younger divorcing counterparts, who hopefully still have a good number of years to recover from the financial blow of divorce.
The Court takes a number of factors into account when deciding how matrimonial assets should be divided. There are no hard and fast rules however, and the ultimate decision of the Court is very much a discretionary one. The factors the Court considers are contained in Section 25 of the Matrimonial Causes Act 1973 and are as follows:
- First consideration to the welfare of any children under 18
- All the circumstances of the case
- Specific factors:
- Income, earning capacity, property and other financial resources which each of the parties to the marriage has or is likely to have in the foreseeable future including in the case of earning capacity any increase in that capacity which it would in the opinion of the Court be reasonable to expect a party to the marriage to take steps to acquire
- The financial needs, obligations and responsibilities which each of the parties has or is likely to have in the foreseeable future
- The standard of living enjoyed by the family before the breakdown of the marriage
- The age of each party to the marriage and the duration of the marriage
- The physical or mental disability of either of the parties to the marriage
- The contributions which each of the parties has made or is likely in the foreseeable future to make to the welfare of the family including any contribution by looking after the home or caring for the family;
- The conduct of each of the parties, if that conduct is such that it would in the opinion of the Court be inequitable to disregard it;
- In the case of proceedings for divorce any benefit (for example a pension) which by reason of the dissolution of the marriage, that party will lose the chance of acquiring.
For older couples, the children have often already flown the nest, and so their needs no longer take priority. Instead, certain of the factors listed above may be more relevant after a longer marriage where the parties are older, than where a younger couple are separating and have school age children. The matters listed at d., e., h. f. and h. may well involve more detailed interpretation with older couples. For example, consider the following scenario which often occurs when an older couple separate after a long marriage:
A couple of equal age whose home is owned solely in the Husbands name. The Husband has paid all of the mortgage payments and bills and built up a pension fund whilst for 18 years of the marriage the Wife has raised the children at home and undertaken only a part time job to pay for the housekeeping and food. She has no savings and only a state pension.
In these circumstances, the parties needs (factor a.) are similar; they are both going to need to re-house themselves and receive an income sufficient to meet their living costs. The Wifes needs are no greater than those of her Husband in the first instance as the children have left home so she will not need a larger property. The wife may also be able to take up full time work, depending on her job and age, until retirement (factor a. again). Both parties will need an income when they retire. The Wife, as things stand, will have only minimal income from state pension whilst the Husband would receive his company pension as well (factor a. resources the Husband has more, and factor f. the Wifes contribution in raising the children is equal to the Husbands financial contribution). A possible division of assets in these circumstances may be for the house to be sold and the proceeds divided equally and a pension sharing order effected (factor h. provision for the Wife under her Husbands pension would otherwise be lost on divorce) to provide the Wife with half of her Husbands pension to be placed into a pension fund of her own for her to receive income from on retirement. The Wife may also be able to claim a supplement to her state pension based on the national insurance contributions of her Husband. This is often overlooked but can provide an important source of additional income.
The issue of pensions is often particularly pertinent for older divorcing couples. Next to the former matrimonial home a pension may be the largest capital asset of the marriage.
The Pensions Act of 1995 gave the courts power to make "ear marking" orders which allocate a certain percentage of the future pension funds of one party for the future benefit of the other. The Welfare Reform and Pensions Act of 1999 developed this and enabled the Court to immediately split pensions in appropriate shares, so that both husband and wife have completely separate, independent pensions.
However, before either of the above pieces of legislation were introduced, the Courts dealt with pensions by offsetting the interests of the party without a pension against other assets. So, for example, if one party had a substantial pension provision and the other had none because h/se had given up their job to raise the children, that party might seek compensation for their lack of pension entitlement. In a long marriage, where the children are grown up and both parties are older, the party lacking pension provision can be at a real disadvantage.
In simple offsetting terms, if the value of one partys pension fund was 100,000 and the equity in the family home was also 100,000, the party without pension might suggest that s/he should retain the home whilst the other spouse retains his/her pension.
But is this fair? A case decided in 2001 said not. In the case of Maskall, Mr Maskall successfully argued that because his pension fund couldnt be sold for cash like a property could, Mrs Maskall ought to be compensated by receiving an extra share in the equity in the home, equivalent to half of only the 25% cash lump sum he would receive on retirement, and not half of the full value of the fund. He further argued that this was fair as his wife would be receiving the cash now, whereas he would have to wait until retirement, many years away.
One might ask why we worry about it now we that we have pension sharing legislation. Well, the fact is that offsetting has proved to still be the most popular, and usually cheapest, way of dealing with pensions, though it is not always appropriate - especially for older couples approaching retirement where income upon retirement is a pressing issue.
So, did the case of Maskall provide a simple mathematical formula for use in the vast number of offsetting cases still arising?
Unfortunately not. It is speculated that the main reason the Court accepted Mr Maskalls argument was to justify him receiving at least some cash from the sale of the family home to help him rehouse in a case where there were no other assets to enable this; also that such a cut and dried mathematical approach is highly prejudicial to the wife, as the loss of any dependents benefits is not accounted for by having regard only to the cash element of the pension.
About a year later, in a case called Norris, the Court agreed and decided that the entire value of the unvested pension fund should be added to the pool of assets before division. But it didnt specifically overrule Maskall, leaving the somewhat uncertain approach that we have now.
Part of the problem is how pension funds are valued in the first place. The method prescribed is the cash equivalent transfer value (CETV), which calculates the value of the pension as though the member was leaving the scheme early and transferring accrued benefits to another pension arrangement.
However, on divorce, the pension scheme member will usually not be leaving service and the CETV may therefore not give a fair value of the retirement benefits as no account is taken of future salary increases or dependant benefits. To ascertain the true value of the pension fund for the purposes of negotiation, parties would have to go to the trouble and expense of commissioning a report from an actuary, which many divorcing couples simply arent in a position to do.
So how are solicitors dealing with the issue? Well, we have to undertake a finely tuned balancing exercise having regard to all the circumstances of each individual case. The various factors contained in Section 25 of the Matrimonial Causes Act 1973 (as set out above) have to be applied and it can be quite an intricate process. Many couples do well reaching an agreement amicably until they stumble over the pension issue and this can create the potential for acrimonious litigation. For this reason those facing divorce need professional advice on these complex pension issues.
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