Divorce Deal During Covid-19

Is it wise to make a divorce deal during Covid-19? Do negotiations and financial agreements stop because of lockdown?

At this uncertain time, it is hard for divorcing couples to know whether they should start or continue negotiations about dividing their matrimonial assets or whether or not to enter into a consent order to record that agreement.

When considering this question it is important that we go back to basics. Before any negotiations can usually take place (or before an agreement is reached) it is vital that we understand what is in the “matrimonial pot” (ie what assets there actually are that can be divided).

The starting point in law is that matrimonial assets should be divided equally upon divorce. However, in many cases, an equal division of assets may not lead to a fair result.

Scenario 1

One party may be a higher earner and have a larger mortgage capacity – in those circumstances a departure from 50/50 may be more likely when one party requires more capital or income to meet their “needs”.

If we were acting for the lower earner in this scenario, a question would need to be asked about whether it would be advisable for them to enter into an agreement with their spouse/former spouse now. For example, if the other party was usually a high earner but perhaps has been furloughed from work (and therefore their usual income and potential mortgage capacity has been reduced) arguably, they may require more capital from any settlement than they otherwise would have done.

In that scenario, a question would need to be asked as to realistically whether we could properly advise on a fair division of capital to ensure that it met our client’s own needs. If the other party was earning less than usual, than our client’s entitlement to spousal maintenance may also be less than it would be if things go back to normal in a couple of months’ time.

In this instance it may be better for our client to wait.

Scenario 2

In cases of high net worth, one party may have a successful and valuable business, and they may need to raise some capital to offset their partner’s interest in that business. In those circumstances, tactically negotiating on a potentially lower business valuation could be beneficial.

However, entering into any agreement or consent order at the moment does come with a degree of risk. As can be seen from the two scenarios above, it is essential that there is a carefully calculated risks vs benefits analysis which can significantly differ case by case.

If you are considering “doing a deal” with your spouse/former spouse throughout the ongoing Covid-19 pandemic, it is essential that you take legal advice. Any consent order is legally binding and it is vital that you enter into it with your eyes open as to the risks and benefits.

If you require legal advice in respect of divorce and matrimonial finances generally or any other family law matter, do not hesitate to contact the team on 01625 544 650.