People facing divorce proceedings may be concerned about how the COVID-19 pandemic may affect dealing with financial settlements, in particular those involving business assets. Below we explore some of the most frequently asked questions:
I am getting divorced. Will COVID-19 affect how my finances are dealt with by the courts?
There has been no change in the actual financial remedy process itself. However, due to court closures during lockdown we are finding that many financial hearings may now take place remotely via a telephone or video. There may also be some delay experienced throughout the process due to this reason.
Will I be entitled to the same financial settlement as I would have received pre-COVID?
The same law and principles still apply when the courts are looking at all of the assets involved in any case. COVID-19 has caused uncertainty in terms of people’s income, the size of their assets, business valuations and the worth of pensions. These are ever-changing in these unprecedented times. The courts will therefore be conscious of ensuring that fair and reasonable financial settlements are reached, taking into account all circumstances of each individual case. Financial settlements reached now may be affected by a decline in the value of assets such as shares, pension and businesses, which have taken a downward turn in the current economic climate. These assets may have all been much healthier pre Covid-19.
With that uncertainty in mind, how should I go about negotiating a financial settlement?
It is wise to proceed with caution. Anyone reaching a financial settlement where there are business assets, significant pension funds and properties may wish to take advice and carefully consider their values given the pandemic’s impact on the economy. It is vital that parties undertake full, frank and clear financial disclosure in order to work out their respective financial positions.
Is there a particular part of the financial settlement that I should focus on?
Yes, particular caution should be paid to business assets, as many businesses have been hit hard during these uncertain times. Certain sectors continue to do well or have been able to diversify, whereas others have faced a sharp decline. Therefore, anyone dealing with business assets should seek advice from corporate lawyers, tax advisers and family lawyers. It is vital that experts are consulted so that any business is dealt with as accurately as possible.
But surely the business assets are simply worth whatever they are valued at?
It’s not necessarily as simple as that, because business valuations might not be an accurate reflection of usual performance. Importantly, the landscape could look very different in six to 12 months time, when we all hope for a more stable economy. Therefore, experts will find it more difficult to conduct valuations now, and any valuer may need to look at ‘pre-COVID’ and ‘during COVID’ business figures, resulting in a range of valuations. This means some people are choosing not to agree their finances now, instead delaying matters to see whether the situation changes in the next few months. The message is to be careful, as other parties, like business owners, may seek to rush the settlement through while the value is far lower.
But surely the judge in any court will make sure I’m not short-changed?
It is important to ensure that any settlement is fair to both parties. At the present time they may find it difficult to know what to do with certain assets such as those referred to above when they are so uncertain. Each individual case will need to be dealt with on its facts and in some cases negotiations may be paused or court proceedings adjourned to await a more settled economy.
We need to deal with things now – how can we best do that?
If you’re still going ahead with a financial settlement, you may wish to think about how to share assets in alternative ways. Consider the uncertainty of the economic climate, and future-proof settlements to take into account the potential future value of a business. For example, postponing payment of any lump sums to allow the business to recover, or sharing other assets in a different way.
If you need any advice about divorce or financial settlements please contact Hannah Nicholls, Associate Director in the Family Law department, at email@example.com or on 0121 227 3377.