An introduction to divorce costs

Divorce|August 22nd 2014

One of the first questions we are usually asked by a new client is, “What is my divorce going to cost me?” But when it comes to divorce costs, there is no hard and fast rule. Whilst the divorce itself only costs a matter of a few hundred pounds, settlement of the financial issues surrounding a divorce can cost anything from a few hundred pounds to hundreds of thousands in some instances.

Whilst this may sound frightening, the divorce costs actually incurred will depend on two factors – firstly the attitudes of the parties involved and secondly the complexities of their financial affairs. It is generally the former that is the primary driver to high costs, in situations where the parties deliberately try to conceal assets or income, understate the values of assets or income or simply will not agree about the value of anything or even who gets to keep it. In these cases, the cost may spiral and it is only when such people are told by a judge what their total costs are and how much more it will cost them to go to a final hearing that reality, usually and suddenly, dawns. Even so, there will always be those cases where one party refuses to settle and the matter goes to a final hearing, with the resultant costs implications. Such cases are, though, in my experience rare.

So, what about costs?

It had long been the case that the non-working wife could reasonably expect her husband to pay all legal fees arising from their divorce. That changed in April 2006. Thereafter, the starting point, subject to any ‘litigation misconduct’, is that each party would pay their own divorce costs. This shifted the burden of the wife’s costs directly onto her shoulders. In April 2013 legal aid was also withdrawn for the vast majority of divorcing couples. The government decided that as state help was not required to get married it should not be available to reverse the process.

To many wives the changes in the costs rules was as unwelcome as the decision in White v White had been welcome in 2000. White introduced the concept of equal sharing as the accepted starting point for financial settlements between a wealthy divorcing couple, irrespective of one party’s role as the bread winner and the other party’s role as the homemaker. Gone was the entitlement of the breadwinner (usually the husband) to retain the lion’s share of the wealth. If a couple begins married life with little then gathers wealth during their marriage, the wife can reasonably expect to receive half of that wealth, even if she has never or rarely worked outside the home. The significant shift in favour of wives in 2000 was thus tempered by the need to pay for one’s own legal representation.

Difficulties in arranging for payment of ongoing fees can be very real, especially if the husband controls the family purse strings. Wives may start from a position in which they lack knowledge of their husband’s financial affairs and if so, they may incur higher costs obtaining the necessary information.

Lawyers have for many years now generally been able to work around such situations. There are in fact many ways of paying for legal fees:

  • Cash savings or liquid investments in your own name.
  • Cash savings or liquid investments in joint names.
  • Your regular income.
  • Loans from a bank, potentially secured against assets in which you have an interest. Secured loans are generally cheaper than unsecured ones.
  • Loans from friends or family.
  • Loans arranged by your spouse and/ or secured on assets owned by them.
  • Credit cards, although these should only be used for short-term funding.
  • An agreement with your spouse to use funds in their name or to extend the mortgage on your property for both parties’ benefit.

Your divorce solicitor may also be able to assist with:

  • Litigation loans, although these can be expensive unless there will be substantial funds to invest after settlement.
  • A Sears Tooth agreement, where your fees are deferred until settlement.
  • A Legal Services Payments Order against your spouse to pay your legal fees.

Costs orders can also be secured against your partner in the event of litigation misconduct, although this is a rare occurrence.

Your solicitor will generally invoice monthly and she or he should have a good idea of the costs that will be involved once they have an idea of the complexities and values of the assets. But, as mentioned, you should temper such estimates with the attitude of your partner to the proceedings.

Your solicitor can help you budget and will advise you on key events during the process when monthly costs are likely to be higher.

One final thought: irrespective of whose fault a divorce is, how the costs are funded during the proceedings and who wants to keep which assets, both parties’ costs are only ever (with the exception of trusts, family contributions or generous friends) going to be funded from the assets owned by the divorcing couple and the incomes they generate. Therefore, the total value of the assets to be divided between you will be reduced by the total amount of costs you both incur.

Author: Nick White

Nick White heads Stowe Family Law’s in-house forensic accountancy department. He is a chartered accountant of 30 years’ standing.

Comment(1)

  1. Andrew says:

    To make each party pay their own way was nothing more or less than the proper course in a system intended to be non-discriminatory – but it was absurd to abolish Calderbank which imposed on both parties a sense of reality, as it does in other forms of litigation.

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