Payne Hicks Beach

Payne Hicks Beach

05 May 2022

The cost of family breakdown

A hot topic in politics today is the cost of living crisis.  On 26 April 2022, Downing Street confirmed that the Prime Minister would chair a committee to tackle the issue very shortly (within the "next couple of weeks").  It is an undeniable fact that the cost of living crisis will sadly hit fractured families even more significantly than most.

The Relationship Foundation produces a "Cost of Family Failure Index" in which it estimates the cost of family breakdown to the taxpayer.  In 2018, the cost of family failure was estimated at an eye watering £51 billion. 

The sad reality is that when families separate, the resources that were available to them as a single unit have to be shared between two households.  It is inevitable that almost all families will find themselves significantly worse off after the breakdown of a relationship.  Families will often have increased reliance on state benefits (including tax credits, lone parent benefits and housing benefit.) Additional healthcare is often required and it is a sad fact that the majority of young offenders come from broken homes.

Inflation is currently running at 7% and expected to increase later this year.  Households are already beginning to struggle with increased fuel and heating costs that are placing families under even more pressure.  There is disquiet amongst the legal profession that, for some, these very real financial pressures may make it seem impossible for couples to separate due to fear of being unable to manage financially in two separate family units.  This consigns many families to living unhappily, or, of far greater concern, to remain in an environment where they are unable to escape from an abusive and/or violent relationship.

At a time when families are feeling financial pressure, what more can be done to ensure that spouses who believe that their marriage has run its course are able to separate with the minimum amount of acrimony and with as little financial expenditure as possible?

The Divorce Dissolution and Separation Act 2020 came into force on 6 April 2022 and introduced no fault divorce.  This has effectively removed the need for one spouse to blame the other party for the breakdown of the marriage in order to get divorced.  This will certainly reduce the acrimony and streamline the process.

However, the reality is that the actual cost of getting a divorce is relatively modest (£593 court fee plus the time spent dealing with the administration).   The real costs come in relation to sorting out the financial arrangements and arrangements for the children. 

One way to control the costs incurred in unravelling a married couple's financial affairs is to make provision for the financial consequences of marriage breakdown at a time when the couple are on good terms and contemplating a married life together; including, if well advised, the financial arrangements that would be considered fair and reasonable in the event the marriage fails.  Pre (or post) nuptial agreements permit a couple to agree upon and record clearly in a written agreement the financial arrangements that will take effect in the unfortunate event that the lifelong commitment they are embarking upon fails.  Whilst, strictly speaking, not binding in the sense that a pre (or post) nuptial agreement will tie the hands of the Family Court Judge, following the ground-breaking decision of the Court of Appeal in Radmacher v Granatino[1], provided always the agreement passes a three-stage test, spouses contemplating an application for financial provision should expect the Family Court to hold them to the terms of their agreement. 

The commonly held view that pre (or post) nuptial agreements are only for the very wealthy is outdated.  Provided always the parties can be said to have freely entered into the agreement; to have a full appreciation of the implications of the agreement and (most importantly) that it is fair to hold the parties to the terms of the agreement, not at the time the agreement was entered into, but at the time the marriage breaks down, spouses with the benefit of a pre (or post) nuptial agreement that passes the three-stage test should expect to be held to its terms.  Looked at another way, pre (or post) nuptial agreements are almost as good as binding, provided they are fundamentally fair. 

Why is it that as long ago as 2014, the Law Commission recommended making "qualifying nuptial agreements" binding and yet we still do not have a law on the statute book?  Accompanying its report, the Law Commission produced a draft Nuptial Agreements Bill but, unfortunately, there was not time to progress the bill before Parliament was dissolved in May 2015 for the general election.  In a recent radio 4 interview, our own Baroness Shackleton pointed out that the Government has a bill that is "oven ready" and yet has manifestly failed to bring it to the statute book.

Given the increasing pressure on families and the cost of living crisis, making nuptial agreements binding would provide certainty and security for many in the event of marriage breakdown.  At a stroke, it would potentially remove from what are already heavily congested Court lists (more so, following the Pandemic) the meritless financial remedy application; the “try-on” and those applications seemingly motivated by spouses intent upon prolonging the agony of a long and acrimonious unwinding of the relationship.  In relatively short order Family Court Judges, practitioners and, most importantly, the man on the proverbial omnibus in Clapham would have the benefit of certainty. 

The draft bill ensures that a party cannot be left in a situation of real need by signing an unfair pre (or post) nuptial agreement.  The bill requires the parties to have financial disclosure and legal advice and provides that the parties cannot seek to contract out of providing for both party's (and any children's) needs.  If an agreement does not make adequate provision for needs then it will be "disqualified."  In those circumstances, the court would retain the jurisdiction to make appropriate decisions.

If a couple have invested time and effort with legal advisers at a point when the relationship is harmonious to reach conclusions about what would be a fair settlement in the event their marriage fails then it is more likely that they will be able to separate their finances in accordance with the agreement leading to a smoother, relatively trouble-free exit from the marriage.  We anticipate that couples who put thought into what they would consider a fair outcome on divorce at a time when they are happy and working together in a constructive manner will find themselves able to separate in a more dignified way.  This can only be a positive step.

If ever there was ever a time, eight years after the Law Commission’s report and at a time when the Government is committed to addressing the country’s cost of living crisis, to dust down the draft Nuptial Agreements bill and pop it into the oven, that time has come.

 If you require any family advice please do not hesitate to contact Kelly Gerrard of the Family Department.

[1]  [2010] UKSC 42

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This publication is not intended to provide a comprehensive statement of the law and does not constitute legal advice and should not be considered as such. It is intended to highlight some issues current at the date of its preparation. Specific advice should always be taken in order to take account of individual circumstances and no person reading this article is regarded as a client of this firm in respect of any of its contents.

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