This week has seen one lucky person win £166 million in the Euro Millions Lottery. Whilst a happy event for most, such unexpected windfalls (whether from sale of an asset or company interest, family inheritance, or lottery win) can bring unwelcome claims for those who have not fully dealt with financial matters after separation or divorce.
When financial settlement is negotiated following the breakdown of a marriage the assets to be taken into account are those that exist at the time of the negotiation ie not at the time of separation. It matters not whether separation has been some years before and indeed in some instances there can be consequences even if there has been a financial order already.
Angela Moores, Solicitor at Jarvis Family Law LLP, and an expert in financial settlements upon divorce, considers different scenarios which may arise;
The general rule is that all assets, pensions, liabilities and incomes of both parties are considered at the time of the negotiation. This would mean that the wind fall would be included in the asset pot available for division. How the pot is divided would depend on various factors that have to be considered. In certain circumstances, ie where there are already a great deal of assets prior to the windfall, the recently acquired monies may be able to be protected in whole or in part.
It is possible, upon separation, to record what you have agreed in an informal financial agreement otherwise known as a Deed of Separation. However, such Deed of Separation is not legally binding upon any future Court asked to divide assets. This means either party can depart from the terms at any time. Indeed if there has been a change in either parties financial circumstances since the deed was signed (such as receipt of a financial windfall) this would be good reason to depart from the original terms.
In some cases agreement is reached informally and verbally and never recorded in any form of agreement. The main point to be aware of at all times is that without a sealed court order made within divorce proceedings, all financial claims arising upon separation and divorce remain open including capital claims, income claims (known as maintenance) and claims upon death.
A court order, whether obtained with the consent of both parties or imposed by the Court, is the only document which can dismiss future claims thus drawing a line in the sand in respect of the financial obligations of the parties. If you want to avoid unwanted claims on future windfalls such as lottery wins, it is essential that you obtain a financial order dismissing future claims from your spouse or ex spouse. It is not sufficient merely to obtain a divorce.
If the sealed financial court order provides for a “clean break” where no party has any ongoing financial responsibility for the other ie dismissal of capital, income and death claims, then it is highly unlikely that an ex spouse would have any claim upon the wind fall. The only caveat to this may be if the settlement was fairly recent and the wind fall could not have been foreseen. Similarly, non disclosure of an anticipated windfall may give cause to set aside the order and reopen a financial claim.
Where a court order has dismissed only capital claims and income/maintenance claims are left open (whether maintenance is being paid or not) issues arise as to whether future maintenance should now be paid in one lump sum – known as capitalisation. An ex spouse receiving monthly payments for themselves (not for any children) should consider claiming against the wind fall for a lump sum paying out the lifetime of the maintenance claim. The court would generally consider this to be entirely reasonable.
Everyone’s circumstances are different upon separation. In the event of an unexpected financial windfall arriving either during the separation or shortly after settlement has been negotiated, you should take independent legal advice as soon as possible.
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