Divorce formulae assessed by forensic accountant

Divorce|May 9th 2016

Lawyers’ fees in divorce cases have hit the news again, thanks to Gary Lineker’s recent claims. Surely, he said, there was a better way; a fixed formula perhaps, or use of regularised pre-nups?

When parties marry, it is a time of sometimes lavish celebration for them and their nearest and dearest. It is also usually at a time when the parties are setting out on life’s journey and when their incomes and assets are modest when compared with their aspirations.  The fortunate few, or those embarking on second marriages, may be wealthy and seek to protect that wealth through a pre-nup, but for the majority that is not the case, so how can the future division of assets or incomes on divorce be controlled by a pre-nup when the extent of future wealth cannot be known?

I would agree that in an ideal world, on divorce or separation assets and incomes should be capable of division without too much fuss. However, that is to ignore basic human emotions and the reason(s) for the break-up of the marriage in the first place.

At the end of a marriage trust is invariably lost between the parties and that loss of trust can extend to the disclosure of finances. In many marriages, a single party controls the family finances and has sole knowledge of the assets.  This is particularly the case when there is a business involved and this will usually create a situation in which one party has the financial high ground. The result can be one party suspicious that one other is being economical with the truth

The legal process in the UK is adversarial and not inquisitorial and that perhaps provides a greater opportunity for those who wish to conceal assets. Fairness (the whole aim of the legal system) is impossible to achieve until the Court has full knowledge of the parties’ assets and incomes.

Mediation is being championed as a non-confrontational way of resolving finances on separation but there are many cases that are just not suitable, because one party is determined to conceal or undervalue assets and income to gain an unfair settlement.

So, can a settlement be driven by a dedicated formula for division?  Well, there is already a formula: the starting point of equality, 50/50, yet that formula even when agreed between the parties will still not provide certainty.  Also, how does the formula determine what assets go to which party, and why?

The valuation of assets is highly subjective but is often material to the achievement of fairness.

As a mathematician myself, with well over ten years’ working in the divorce arena, I am sceptical that any single formula covering valuations and distribution could even begin to come close to being acceptable for divorce purposes.

There are those cases that cost huge sums in fees, but in my experience those are cases that either involve complex assets with high values or cases in which one party to the proceedings is hell-bent on failing to disclose and seeks to artificially reduce or manipulate the values of assets and/ or the extent of their income.

Fortunately, and contrary to what Mr Lineker appears to think, those cases are in the minority and the vast bulk of cases are dealt with promptly and with pragmatism by both the parties and their lawyers.

When the parties in a divorce are trusting, open and are pragmatic in their negotiations, they will always achieve a prompt settlement.  By contrast, it will always take far longer to settle those cases where one party chooses to be confrontational and engineer an unfair settlement in their favour.

Author: Nick White

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

Comments(8)

  1. D says:

    Gary seems to have annoyed the legal profession just a little bit 🙂 Hopefully, he be keeping to the speed limit, not saying anything that might be potentially libellous, avoiding property transactions, contacts, a few other thing and … oh… marriage …

  2. spinner says:

    “However, that is to ignore basic human emotions and the reason(s) for the break-up of the marriage in the first place.” – Got it so it’s the users of the service’s fault not the fault of the system itself, my bad.

    “because one party is determined to conceal or undervalue assets and income to gain an unfair settlement.” – Or maybe one party is on legal aid and so has no reason to consider a “fair” settlement and uses the fact that even if that person is perceived to have been obstructive or to have prolonged the proceedings the other person cannot claim their costs against them. This is why providing legal aid to one party only is inherently unfair.

    “As a mathematician myself, with well over ten years’ working in the divorce arena, I am sceptical that any single formula” – I’m also a mathematician by training and I’ve pointed out several times that trying to model the current dysfunctional system would be difficult, require large amounts of empirical data to validate the model but essentially it would be a pointless exercise. What is needed is new legislation from our representatives to define among other things what the expectation of the level of support actually is. Baroness Deech has put forward her Financial Provision bill which cover’s a lot of the issues that I personally have with the current broken system. In the majority of modern countries in the world they use at the very least guidelines for setting length of spousal maintenance for example based on how many years you were married, very simple formula but would reduce large area’s of potential argument. Scotland has rules over what is and what isn’t marital property which again reduces large area’s of potential argument and somehow having these rules over capital has not led to societal collapse in Scotland.

    For someone who qualifies their post on a subject with a statement such as “As a mathematician myself” there’s surprisingly little about maths in it and 90% of your post is essentially mood music that everything is fine with the current system and that because you studied maths and so consequently must know a thing or two about formulas we should consequently be assured that a formula would not work, sorry but all this tell’s me is that someone is really starting to be concerned that a large number of people are beginning to question the appropriateness of the current damaging system.

  3. spinner says:

    To really put to bed this falicy that spousal support somehow could not be determined by a formula I’ve copied a link to the alimony calculator for Massachusetts based off of a 2011 law.

    ma-divorce-center.com/Alimony_Calculator.html

    And then again a formula based approach for Canada

    justice.gc.ca/eng/fl-df/spousal-epoux/ssag-ldfpae.html

    Massachusetts is just one state that uses a formula among a growing number so a formula based approach is in place and working in a system that is based on English common law. I haven’t covered the countries in Europe who also use formula’s but it’s is most of them.

  4. D says:

    Anyone entering into marriage has to be at peace with the idea that 50%/50% division of assets at the end is the ‘fair’ starting point, with the pre-marital state being way down in the priority.
    .
    And that potentially they could be have a adult financial dependent beyond the end of the union for life with all other ties cut. In both cases regardless of whether they want or indeed protest the union ending. That this arrangement ends when the claiming ex-partner re-marries is rather dis-empowering. They simply transfer to being dependent on the next partner. Fine if this is what both parties really want.
    .
    Some people don’t want to enter into adult dependent/provider relationships which aren’t possible to dissolve. Hence not everyone wants marriage forced on them.

  5. Andrew says:

    D: it’s worse than you think. If a pension is shared and the ex-wife marries she keeps her share of the pension. It is not returned to her ex. Is that preposterous or is that preposterous?

    • D says:

      It does appear to be a ‘fantastically bent’ system. Even if it was gender neutral (and I don’t believe it is) .. the idea that you can terminate the majority of an agreement but then expect a living is morally questionable. It’s a clever way to transfer provision of welfare for another from the state to an individual.
      .
      You could really start to argue that if society still expects women to be sole carers (re: mothers not wanting father’s to have parental leave) and expect to be compensated if /when the relationship ends, then gender differential wages are socially justified (they have a greater financial liability). It would make the formula simpler I bet.
      .
      Of course, we all know you should pay someone for their abilities and not the label you wish to attach to them.

  6. Mike says:

    “Gender differential wages are socially justified [if men] have a greater financial liability….”

    Unfortunately, I see this as the proverbial “chicken and egg” situation. But certainly I agree that the system as it is, is NOT fair at all. For a start, it punishes men individually, rather than “the system” or society, which sets the differential. It is thus inherently unfair, as it must count as “group punishment”, which is AGAINST HUMAN RIGHTS.

    Why should a man have to cough up so much more, because his wife’s employer (or employers across the country) pays women only “80%” (or whatever) of what men earn? The government could put a stop to that, virtually overnight — by a change in the labour laws, which are then strictly enforced.

    HOWEVER, do you think the government would THEN immediately and automatically, REDUCE the ratio of the awards that judges are allowed to hand out to the wives? Certainly a lot of the wives would then be happy to have it both ways and, like someone awarded a pay rise that surprised them, soon find reasons to justify why they SHOULD get so much money.

    They ALREADY do.

    So, changing this part of the system, being already so entrenched, is going to be hard to change.

    But change it must.

    • Luke says:

      This is factually inaccurate:
      ===
      “Why should a man have to cough up so much more, because his wife’s employer (or employers across the country) pays women only “80%” (or whatever) of what men earn? The government could put a stop to that, virtually overnight — by a change in the labour laws, which are then strictly enforced.”
      ===
      .
      No, the government couldn’t, the labour laws ARE enforced but the gender wage gap is a myth – it’s been debunked over and over again – even some feminists have started to admit this in their own figures !

Leave a Reply

Close

Newsletter Sign Up

For all the latest news from Stowe Family law
please sign up for instant access today.

Privacy Policy