Jacket Pockets

When people split up they often try to get the better of the other person. They most often fight about money. Resources feel scarce. You may think if the other person has more, you will have less. This seems unfair and a struggle for money can begin. However, our instincts lead us astray so often in this situation. Why? Simply because if the case is decided by a judge or when it is settled by agreement, all the assets and liabilities are added up and the total divided very often equally but in any event what each person has spent has gone, so making your ex pay for something makes no difference, as their position is taken onto account and you’ll pay half. Whatever has been spent on anything is effectively paid pretty mulch equally once those assets are split, as each party’s current position is added into the pot and that effectively takes their spending pre settlement into account. Examples include:

  • Bank accounts and investments
  • Properties
  • Pensions
  • Credit cards and debt

The way to think of it is as a jacket with lots of pockets. The pockets have money or debt in them. The up to date value of the pockets will normally be used in the settlement or judgment. Very occasionally someone may succeed in an adding back argument, for example, adding back a significant value they argue the other person has squandered in some way or applied in a way that is prejudicial to the outcome. Much would depend on scale and if the application of money was unusual and prejudicial to the person who had no control or say in it.

jacket

Very often couples argue fiercely over which pocket something is paid from. They don’t want it paid from ‘their’ pocket, it must come from the other person’s pocket. This is an illusion when the pockets are totalled as it simply makes no difference.

Recently I was mediating a case where everyone got very bogged down in pockets arguments. Even their advisers struggled to remember it was all one jacket. Each was taking the same drawings from their business and getting their bills paid on top, they were ticking over OK, but one wasn’t paid any child support, the other wanted child support. This would mean the other person didn’t have enough to live on, they would have to take more from the business or get into debt. It was a joint business, so very much a one jacket situation. There needed to be a discussion about the extra costs of the children and an agreement for that to be met where it arose. However there was a feeling of outrage no child support was being paid. It looked as though an application to the Child Maintenance Service would be made. This would result in an assessment on historic and very high figures that would necessarily involve the paying person having to take more from one jacket pocket to pay it, even if it was overdraft and debt, and then later it would be taken into account. These people has agreed to take less from their business not more, so the whole argument was a pointless totemic argument over the contents of the pockets of the same jacket, the jacket they were going to be splitting between them anyway and they had agreed it would be split equally! Other examples include:

  • Someone making a big pension contribution to take money off the balance sheet and out of their pocket – it does no such thing, as the pension is part of the jacket and the contribution and its tax relief is included and split!.
  • Buying an expensive car then seeking to depreciate it as it isn’t new any more – this takes money off the balance sheet, but the car is usually included at its purchase price
  • Leaving money undrawn in a business controlled by one party, in the hope no one will include the full value of the undrawn capital or take into account the undrawn income as relevant to maintenance. It has to be one or the other. It is usually quantified and included.

I have lost count of how often this type of thing happens and people think their thinking is so original and they are so clever and they will get more in ‘their’ pockets and be better off. People who work with separating couples for long will have come across all this countless times, they know where the bodies are buried!  How ferociously people fight over all this – when it doesn’t matter. Thought you should know, just in case it affects you. You’d be better of saving your breath to cool your porridge, as they say. For more case studies, please visit: http://www.focus-mediation.co.uk/case-studies

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