Tag Archives: Disclousre

Financial Settlements on Family Breakdown – How to Get it Done.

Mediators and lawyers have their own role to play in helping you to reach decisions following on from your separation.  Most of the hard work is done by you both during the mediation sessions.  The two of you will discuss the issues that need to be resolved, with the help of the mediator.  The mediator is there to help you to communicate in a constructive way while your respective lawyers will help you individually by advising you about the proposals.   They can then translate the settlement proposals into a legally binding agreement or submit it to the court for the court’s approval.

An out of court settlement is something you often hear about.  It is a settlement that is often reached within the mediation process.  It can then be endorsed and approved by the court to make it legally binding.

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For a financial settlement to be binding it is important that both of you disclose to each other your respective financial positions.   This would be the same whether your settlement was reached through mediation, through solicitors or through court.  You cannot come to an agreement if you don’t know what the assets and incomes are.  This process is called full financial disclosure.  You are then able to have discussions and negotiate a settlement   Even in court most settlements are reached through discussion and negotiation rather than the Judge making your decisions for you.  In mediation, you can go straight to those discussions after the financial disclosure stage, without waiting for the court to give you appointments and paying for costly court fees, and solicitors’ and barristers’ costs.

Just because you and your ex can’t communicate doesn’t mean that you have to go to court.  Mediation can help you look at how your relationship can be improved to enable you to resolve your issues, particularly communication.  You can become more co-operative and make your own decisions together.  The benefit of mediation is that it is the two of you who will be making the decisions about you and your children, rather than having a Judge decide what is best for your future.

Do you think that you will be better able to communicate if you have solicitors writing letters between you?  No, I suspect not too.  Often what you said and what you meant can get misunderstood or blurred by using a third party.  The advantage of mediation is that you are both putting forward your views and the other can listen and respond at the time, not 2 or 3 weeks later.  The mediator can help by translating and clarifying if necessary.  Then, in a constructive and problem-solving way you talk through the options and work out what is best for your separated family. Then you do it, job done!

Hearing about Mediation before you can apply to Court – why it’s a good idea.

The Children and Families Act came into force on 22nd of April 2014. For the first time it requires would be applicants to court to hear about mediation and how it might be able to help them, before making their court application. This simply gives them a choice of court or mediation before they embark on the court route. As such it is a useful intervention. This meeting is fast becoming known as a ‘mediation awareness meeting’? Its formal name is  the Mediation Intake Assessment Meeting or MIAM.

A qualified mediator will tell couples about mediation and the alternatives to court adjudication. This is greatly needed, as put simply, if mediators don’t tell people about how mediation may help them, mostly people do not understand it and don’t try mediation. Before the compulsory referral to hear about mediation from a mediator in 1999, there were only a few hundred mediations a year. After legal aid applicants had to hear about mediation from a mediator in 1999, this rose to about 13,500 mediations a year and it has stayed about the same every year that is until last May, when all compulsory referrals to a mediator for mediation assessment stopped, along with the abolition of legal aid for family cases. Then, couples unaware of mediation simply went straight to court and the number of court applications has increased massively everywhere, with many fewer mediations taking place. The fact is, in many cases lawyers do not sell mediation, they are more likely to sell legal services and to negotiate the case in a conventional, positional way. This increase in adversarial resolution is bad for families, turning them into opponents in what is often an expensive, long drawn out ‘ping pong’ of letters and court hearings.

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Compulsory mediation awareness meetings do not mean compulsory mediation, nevertheless many people will choose to go on to mediate and save themselves and their families a great deal of time, money and avoidable stress. If some family lawyers don’t like it, and it is only some lawyers, we have to ask why are they so worried about people simply hearing what mediation has to offer? They don’t have to mediate and no one is saying people should not hear about the legal resolution methods. If people need to go to court, they can still go to court, if they want lawyers to write letters then they can pay for that, but a tiny proportion of cases do actually get decided by a judge, so deciding them even earlier in mediation seems like a good idea to most people.

The reality is that in most disputes over children, the worst thing that can happen to a family is a brutal fight over the children, replete with welfare reports, adversarial arguments and adjudication or shuttle diplomacy between lawyers at court, cobbling something together under immense pressure and making that into an order. A series of mediation sessions over a few weeks or months with changes being introduced and reviewed, improvements made and children’s views taken on board where possible, is just so much better for most families.

Where property and finance issues are concerned, mediation has a massively important role to play in resolving settlements quickly and at proportionate cost. How much do you think should be spent on legal fees  of resolving a financial settlement on divorce? Should it be 10% , 20% or some other proportion of the overall value of the family pot?  This is the thorny problem the courts are not addressing. There is a court rule that the legal costs must be proportionate to the value of a dispute. This is universally ignored, as it seems to convey no meaning to the judges or the legal representatives. It is common for the costs to be half or even more of the value of the dispute – where is the sense in that? If you bear in mind that in most family cases, unless it’s a very short marriage or there’s a pre nup, there is a starting point or yardstick of equal division of the assets, then the value of the dispute is probably no more than between 10% to 25% of the overall pot. Legal costs frequently exceed 10% to 25% of the value of the family pot. How can that to be regarded as proportionate to the value of the dispute? It isn’t proportionate at all.

So, in a nutshell, the changes with regard to compulsory mediation assessment meetings brought in by the Children and Families Act are mostly welcome and long overdue.  Compulsory mediation meetings before court applications can be made will enable a significant number of families to avoid court proceedings and expensive legal costs by choosing mediation, once they know how it can help them. Previously, they often simply issued proceedings and the legal route was the default option. Now a real choice is being offered and it is up to mediators and lawyers alike to help couples make the best choice for their family, taking into account everything relevant to the family.  It is the couple that matters most and finding the best way forward for them, not what matters to the lawyer or the mediator – selling the service they prefer to sell. The family is at the heart of separation and divorce, how they sort out their arrangements, which process they use, should be an informed decision they take and the advent of mediation assessment will help ensure public awareness of mediation when they need it most.

Lots of new enforcement rules for the new Child Maintenance Service, so why did they drop the word “Enforcement” from its name?

The Child Support Agency (CSA) will close and is being replaced by the Child Maintenance Service – but they’ve dropped the words “and Enforcement” from its title – because that’s what it will do. So we can’t say what it’s to do on the tin, it might upset people! There will be changes to the child support calculation. The old basic formula (15% of the paying parent’s net income for one child, 20% for two and 25% for three or more children) is being replaced by rather less memorable percentages of the gross income.

 

  1. There will be a £20 application fee and collection charges. There will be additional charges if the child maintenance service has to collect money from the paying parent and that will be 20% on top of the child maintenance amount and the receiving parent will have their maintenance reduced by 4%, so those are quite significant payments, particularly for the paying parent.  However, if you make the arrangements for payment direct between you these charges do not apply, so it’s very much in everyone’s interest to avoid using the CMS if they can.

 

  1. Transfer of CSA cases to CMS. Over the next few years everyone using the CSA will have their cases closed, so once the new service is working well, parents will be given six months notice their CSA cases are closing and you then have the option of applying to the CMS if you need to BUT you can always contact out and a agree yourselves direct.

 

  1. CSA Arrears. If you’ve got to arrears of maintenance of the CSA those stand and they can still be enforced, so they’re not going to disappear, but you may have the same problems you’ve got now – though the CMS and can help setting up and collecting maintenance and its new powers are likely to make it very effective at this.

 

  1. HMRC to tell CMS paying parent’s income  Perhaps the most effective change is that the CMS will use information from Her Majesty’s Revenue and Customs (HMRC) to access information about the income of the  paying parent’s income and this will be checked with HMRC each year to make sure the calculation is still correct. This is a really practical development, as previously some people who might not want to defraud the HMRC,  might still play games with the CSA, now they can’t.

 

  1. Family-Based Arrangements – DIY  Before you can apply to the CMS you will speak to the Child Maintenance Options Service to talk about whether you can make a Family-Based Arrangements instead. Although they will try and encourage you to make your own arrangements where possible (as this will save the CMS money) you can apply to the CMS.

 

  1. Process If you apply the CMS will contact HMRC and find out the paying parent’s income, then using information given to them by the parent with whom the children live – the CMS will just assess the paying parent and tell them what to pay.  This information includes how many children are in each household and how many overnight stays the children have with the paying parent.  HMRC will use people’s National Insurance numbers to try and find them if they have disappeared, so it should be harder to escape paying.

 

  1. Once the maintenance is calculated there are two payment options:
  • Direct pay, where the calculation is done but  you sort it out between yourselves
  • Collect and Pay, where the CMS will collect the money from the paying parent and can enforce arrears, but charge you.

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The CMS calculates child maintenance using the paying parent’s gross income before deductions, to work out the payment – previously pension contributions tax and national insurance could be deducted. Other income such as interest on savings, income from a company, or on rental property is ignored in the initial calculations. Assets such as savings and property are also ignored. If the paying parent has other income or savings you can ask the standard child maintenance calculation to be varied so that these are taken into account. An important note – income of the paying parent’s partner is not included in the calculation, never has been, no change. Details of special rules are beyond the remit of this article.

 

The rates; there are different rates of child maintenance depending on the paying parent’s income.

 

There are nil, flat and reduced rates for none or low income parents, but for most parents paying maintenance the situation is set out below:

 

  • The basic rate of child maintenance: the paying parent pays the basic rate if none of the other rates apply. It’s a percentage of the paying parent’s gross income calculated in two stages:
  • Stage one –  the paying parent’s gross income is reduced depending on the number of children living with them, if any, this includes the children of the new partner living with them.

So –  Stage one example:

If there’s one child living with the paying parent the percentage gross income is reduced by 11%  two children  it’s 14% reduction and three or more it’s a 16% reduction.

  • Stage two

Maintenance is a percentage of the amount left from the gross income after any deductions are made in stage one. The percentage depends on the number of children that need to be paid for. The amount is rounded to the nearest pound.

 

Number of children applied for Percentage of gross income up to £800 Percentage of gross income over £800
One 12% 9%
Two 16% 12%
Three or more children 19% 15%

 

If you share care of your child – and this does mean overnight stays – then the child maintenance award can be reduced by a seventh if on average of the child or children spends 52 -103 nights of the year with the paying parent, and so on and so forth.

If the paying parent has other children they don’t live with from another relationship, then that will reduce the amount of maintenance paid to both families.

 

Useful sources of information:

www.gov.uk/child-maintenance                 There is an online calculator

 

Remember if you are or have been married there may be spousal maintenance due in addition, so worrying overmuch about the CMS may be pointless.

 

Enforcement:

 

The CMS has a range of potentially draconian powers to enforce payment – they can:

  • Take money directly from your earnings.
  • Take money directly from your bank, building society and post office accounts
  • Use enforcement powers through the courts to get  child maintenance paid and
  • Get orders you pay these court costs as well
  • This can affect your credit rating and make it difficult to get loans or mortgages
  • The CMS can apply to court for a Liability Order and then
  • Send bailiffs to go to your home and seize belongings
  • Put a charge against your property or other assets so you can’t sell or re-mortgage
  • Force the sale of your property or assets
  • Take away your driving licence and
  • Send you to prison.

 

If people try to avoid paying child maintenance by giving the wrong information or none, or don’t tell CMS their circumstances have changed or have disposed of assets so they can’t enforce maintenance – there is a long list of rules getting tough evasion and collection action. There may be some rather sad cases, especially if they get it wrong.

 

What are the changes intended to achieve?

 

The gargantuan cost of the CSA has been out of all proportion to the value of maintenance it collected. It has struggled to get it right and to collect money from determined non payers. The changes are intended to bring about a huge change as follows:

  1. Reduce the costs to the tax payer of collecting child maintenance
  2. Increase accuracy of assessment by using HMRC information about income
  3. Collect more child maintenance with better enforcement powers
  4. Make people see they will have to pay so
  5. They calculate the payments themselves and pay without using the CMS, so see 1 above!

 

Will it work? Probably in most cases . . . . but we shall see what effect the Law of Unintended Consequences has this time. . . ..

Setting out the Finances

3 Easy steps to setting out the finances

  1. Honesty
  2. Form E
  3. Summary

If you are separating or divorcing, you will want to understand the legal framework relevant to your situation, but one cannot advise you until it is clear what assets there are.  So, any process to resolve a financial settlement on divorce starts with identifying then valuing the assets. You must supply information and paperwork showing the value of all the assets, the house, the savings, the debts and the value of the pensions and your income.   This is called ‘disclosure’ and the law says this has to be ‘full and frank.’

If you seek legal advice first, your lawyers will often complete disclosure for you – two of them preparing it for each of you then exchanging it and asking questions about anything unclear. If you mediate disclosure, then the mediator does the disclosure with you both together – this is quicker and costs less and again questions can be asked and answered.
The mediator can draft a summary of your financial information so you can take legal advice on options.

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Honesty

It is not an option to decide an asset is out of it and does not need to be valued; no one can proceed on that basis.  Any agreement needs to be binding.  That either means a Separation Agreement or a Court Order in a divorce.  For these to be binding there has to have been full disclosure and, at Court a Judge has to have a Statement of Information with a complete summary of all the assets and what they are worth, nothing can be omitted, or the agreement could be overturned.

Form E

At Focus Mediation we will work with you so that your Form E (the form that your solicitors and the court would want to see) is complete. We go through the process of disclosure and produce figures to work from. This can be done by two solicitors over a few months (court proceedings take over a year), but in mediation you can each see and hear and understand the financial position at the same time and the mediator helps you with suggestions and information.

Open Financial Summary

The mediator as part of the mediation process will prepare a summary of your background, your family assets and income, which can be used as the foundation for your binding agreement. If you seek legal advice you can show this to your solicitor and ask for a realistic assessment of the likely range of possibilities at court. If you both do this and bring your advice to mediation, there should be an overlap where you can compromise. Your Focus mediator will help you both to focus on realistic, affordable and practical options, so that you can reach an acceptable outcome which meets your and the children’s needs for the future.