Divorce in later life

For family law solicitors who specialise in financial remedy proceedings, the phrase “each case depends on its own facts” is a well-worn adage.  This statement is perhaps so obvious as to be trivial – surely every legal case depends on its facts?  But the statement is an acknowledgement of the extremely high level of judicial discretion in financial cases arising out of a divorce.

One can nevertheless identify trends or common themes in cases with a shared characteristic, such as divorces in later life.  The purpose of this article is to identify some of the key characteristics in such cases and to touch on the implications these may have on the division of assets.

Common features

1. A higher level of capital assets
2. Lower current or future incomes/earning capacities
3. No minor or dependant children
4. Larger pension assets and the importance attached to theses
5. Health needs
6. Increased potential for longer marriages
7. The importance of succession planning.

It is generally assumed that by retirement age an individual has saved what they are going to save and that they have a reduced ability to add to their capital pot.  The corollary of this is that if individuals have enjoyed good income(s) over a significant part of their lives, the capital pot may well be significant by the time they retire.  Where parties divorce in later life, many cases are settled on a “clean break” basis – that is, a division of the capital, including pensions, with no ongoing financial connection between the parties (such as periodical maintenance payments).  Even if there are limited assets available for distribution, it is likely that a “clean break” will be imposed if there is no regular income stream to be considered.  In such cases, what assets are available will need to be spread between the parties to meet their needs as best as possible.

When a marriage breaks down in later life, minor children are unlikely to be a factor.  It is enshrined in law that where the parties to a divorce have minor children of their family, their needs must be the primary consideration of the court.  In this sense at least, the absence of such a magnetic factor can help to simplify financial cases involving older parties.

Instead, the complexity in these cases often arises when considering pensions.  Although pension assets are present in most financial cases, pensions in later life are likely to be significantly more substantial.  What is more, parties in their seventies or eighties tend to recognise the value of pensions more than individuals in their thirties or forties.  This is perhaps because the pension assets are more readily available for people over the age at which they can access their private pensions.  Indeed by the time an individual is in their seventies, it is likely that they will be applying their private pensions to some degree, to help fund their lifestyle.

Broadly speaking, on divorce, there are three options for dealing with pension assets: a pension sharing order (transferring pension assets from one party’s name to the other); a pension attachment order (largely disregarded in favour of pension sharing orders); or by reflecting any imbalance in pension assets in the distribution of the capital (a process known as “offsetting”).  However, the devil is in the detail and the complexity of pensions should not be underestimated.  How pensions are treated on divorce and the widespread misunderstandings even among some professionals has recently come under the spotlight.  The guidance is that where there are sizeable pension assets, more often than not it will be necessary to seek the advice of a pension expert.

Another relevant factor to be considered is a party’s health.  It is an unfortunate reality that such issues are more common in later life and if either party has a real and present health need this can be a determining factor.

Although not all divorces in later life will involve long marriages, the potential is there for a marriage to have lasted a long time.  Any division of assets on divorce should be measured against the yardstick of equality.  The longer a marriage has lasted, the more likely the assets will be distributed equally.

As a final point, in later life individuals often become more concerned with succession planning.  Divorce has a direct effect on this.  Upon divorce, an individual’s previous spouse  will cease to be entitled under that person’s will.  However, this will only take effect once the divorce is finalised.  Because of the sometimes lengthy timescale to achieve this, it is essential that an individual should give due consideration to their will at the start of any divorce application (or before), rather than relying on the divorce ending any entitlement their previous spouse has to their estate.