This week a study by the Government about the Money and Pension Service (MAPS) indicated that nearly three in five of those aged between 25 to 34 are reckoned to be the most secretive about their financial affairs during the course of a relationship. Four in ten people have kept financial affairs, such as a savings account or a loan, hidden from family and friends. Partners are the most likely to be left in the dark.
Many stay silent about financial worries with what they said is an embarrassment or a fear of being judged.
Those in relationships tend to underestimate the extent of money secrets their partner keeps but 23% of people in relationships suspect their spouses kept the money secret, 45% of those in relationships admitted to having undisclosed money products. Often, in divorce proceedings, a secret can be uncovered and can lead to the Court considering that there has been litigation misconduct which can impact on the settlement. In other words, the Court can lessen the settlement of the person who has been guilty of hiding assets. It can also lead to the Court drawing adverse conclusion ie not believing the disclosure of the party who has lied.
Furthermore, and more importantly, if the lack of disclosure ie disclosing for example a property or asset would have made a difference to the settlement if it is agreed or imposed by the Court, then the settlement can be reopened at a later date. The basis for the reopening is that there has been misrepresentation or fraud that would have made a significant difference to the settlement itself.
Over the last few years, more settlements have been reopened than ever before since the ability to discover information has become ever more prevalent.
Due to the introduction of very stringent money laundering provisions at banks, building societies etc and in offshore entities, more offshore assets have been revealed than ever before. This has not been helped by some whistle blowers who have revealed offshore accounts and led to tax investigations which in turn have impacted in divorce cases.
There is much confusion about what needs to be disclosed in divorce proceedings and in this article I will emphasise the importance of being open and exact about the information that is provided:-
- The Form E document of disclosure requires the parties to reveal all details of any properties that they own, whether in their own name or jointly with another or whether such properties are held on trust for them. There are various parts of the Form that are ‘catch all’ so that if there is any misunderstanding about what items should be disclosed, each section reveals the necessity of the information set out.
- Full details of bank, building society and any savings accounts must be revealed, as well as details of any National Savings accounts, Post Office accounts, anything that could be designated as an account into which money is held, either current or saving.
- Details relating to shares in public companies or any companies, or TESSAs, or ISAs must also be provided. Sometimes it may be the case that your partner or husband or wife has taken out assets in your name, of which you are unaware. If you have a suspicion that such an incident has occurred, then questions should be raised by you to ensure that you do not accidentally fail to disclose assets in your name.
- Full details of any cash items over £500 should be disclosed and any contents of the home, jewellery or individual items worth more than £500. These can include cars that are not on HP or PCPs, jewellery, paintings, antiques, collections etc, or simply the estimated value of the contents of your home.
Debts must be revealed as well since you could become liable for the debts that have been run up by your partner. These can include credit card debts, loans, tax liabilities etc. Sometimes these debts that you may not even know about could be taken off the top slice of any settlement, since they have to be catered for in any divorce settlement.
Full details of any potential tax liabilities must be set out ie any Capital Gains Tax liabilities on the sale of any properties or shares etc. Parties should be aware that the Capital Gains Tax rules relating to the sale of your principal home have now been changed and that you have nine months to sell the matrimonial home in the year of separation or else Capital Gains Tax can apply. If in any doubt about how these rules apply to your individual circumstances, do either contact your own family accountant or specifically take advice on this point.
Potential inheritances will be taken into account if they are sufficiently proximate. If a parent is seriously ill and about to die, then their income and capital position, that you may inherit, can be taken into account. In some circumstances, if that inheritance comes right at the end of your marriage or in a period of separation, this may be ignored by the Court. In most cases, the potential inheritance is ignored because the families are well and will be enjoying the benefits of their own monies for years to come.
In a Form E it will also require you to set out the standard of living that you have and whether you perceive that there has been any change of circumstances or anticipated change in the next twelve months. The intervention of COVID may impact on your financial settlement if your salary or that of your partner has decreased substantially or they have lost their job.
There may be many other aspects to your case that may affect the outcome. In those circumstances, contributions that you have made or the other side have made, will be relevant. It is therefore essential that your Form E and disclosure is fully filled in with all the information, so that the Judge dealing with your matter or solicitors on the other side can have a full appreciation of all of the aspects of your case and that of your opponent.
There are many clients that believe that they should be very restrictive in the information that they give in a Form E. That is not an approach that we would recommend. It is vital that from the outset there is an open sense of full narrative of all the aspects required by a Form E document of disclosure so that negotiations can begin at the earliest possible time. Further, judges take the dimmest possible view of badly completed Form Es which could ultimately lose you a significant amount of your settlement or cause more monies to be paid than had previously been anticipated because it is regarded as conduct that the Court cannot ignore.
It is vital in any divorce scenario that you take full and proper advice from a solicitor to understand the boundaries of what your settlement might look like, and discuss the various options of the way that your financial case can move forward. Liars often get discovered and penalised in the Family Courts. Always think carefully before you try to construct a scenario that could easily unravel and come back to haunt you for many years to come.