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The highs and lows of blame-free digital divorce
But while the headline process may be easier, couples going through the legal stage of break-up are still experiencing many challenges.
Heralded as a new dawn for parting couples, the Divorce, Dissolution and Separation Act 2020 aimed to streamline the divorce process when it became law in April 2022. The legislation has made divorce less confrontational, allowing couples to end a marriage with a statement of irretrievable breakdown, where previously one partner had to be blamed for adultery, desertion or unreasonable behaviour, or the couple had to go through a long period of separation.
The new law also makes it possible to file for divorce jointly, so couples can emphasise a mutual agreement to part.
Importantly, the change was welcomed as a major advance for those looking to leave abusive marriages. Now, victims of domestic abuse can take action knowing the application cannot be contested, nor do they have to make allegations requiring investigation or risk their allegations being challenged before the divorce can proceed.
The reforms marked a significant milestone in family law, with the potential to reduce the emotional strain on couples going through marital breakdowns, but one year on, the bigger picture is a mixed outcome for those directly impacted by the process.
How simplification creates complication
The attraction of what has been promoted as ‘digital divorce’ via an online portal, together with the removal of apportioning blame may seem like a quick-fix, low-cost solution to what was previously a complex procedure.
Certainly, that’s the promise offered by an internet search for divorce: one top result promises: ‘complete and submit the court forms yourself. This will be the cheapest option as you only have to pay the court fees.’
But getting divorced doesn’t just involve a legal process to end the marriage: in most circumstances it will require negotiation and agreement on everything from how any children may be cared for, division of bank accounts, businesses and pensions, to where each partner will live once all things financial have been agreed.
And while the new process undoubtedly makes it much easier to take a DIY route to ending of the marriage itself, very real problems may arise if the divorce is finalised without tackling and making agreement on all these other aspects.
Claims over finances cannot be resolved purely by personal agreement, even if it seems very amicable at the time. Without a financial order approved by the court, either party can make a financial claim on the other, long after the marriage has ended. It is possible to formulate your own agreement and instruct solicitors to formalise this for the approval of the court however.
Lack of advice may also leave one side open to exploitation by the other, either because they do not realise what they may be entitled to in a fair division of assets, or they may not even know what assets their former spouse owns. Full disclosure through the process of drawing up an application for a financial order, combined with independent legal / financial advice and oversight in asking the court to make a decision as to whether the agreement is fair, can help overcome these issues.
And lack of knowledge affects not just those taking the DIY route. Increasing numbers of online operators have entered the digital divorce market who may not have the expertise to guide couples along the journey. The Competition and Markets Authority (CMA) has begun a review of digital legal services, including ‘quickie’ divorces, because of concerns over unregulated advisers.
The CMA say that while alternative providers can be innovative and sometimes cheaper, it found “misleading claims about both the simplicity of the process and prices” from those offering divorce, leaving consumers “unclear about what they can be helped with or what they are paying for”. The CMA highlighted “inadequate quality of service, including firms using the wrong forms, entering incorrect details, sending papers to the court late”.
The new divorce deal breaker
In recent years, financial negotiations have focused increasingly on the value of the family home and the challenge of providing a roof for each partner in the face of soaring house prices, particularly when both homes need to be big enough for children to spend time living with each parent. Alongside pension sharing, business assets and inheritances, property remains the big issue, but over the last year an unexpected bargaining chip has been the mortgage deal on the family home.
Following steep rises in interest rates, the cost of borrowing may lead to inequality between separating spouses if one is holding on to a long-term low interest rate. Combined with tougher affordability tests from lenders, it may lead to one spouse asking for compensation for the higher cost involved or for a bigger share of the pot to enable an equivalent purchase. Some may negotiate with the lender to have the existing deal split between them, but this is up to the lender and their borrowing terms.
Tax changes give breathing space
Alongside all the challenges, there is at least some good news, with a valuable change in the way divorcing couples are taxed. Since April 2023 there has been a new timetable on capital gains tax reliefs when couples break up.
While together, transfers and disposals between a couple can be on a ‘no gain, no loss’ basis, and previously the relief was also allowed during the first tax year of any separation. But once outside that first tax year, matters became complex and could involve tax charges on the spouse or civil partner who was transferring the asset.
Now, the new rules give separating couples up to three years after the year they cease to live together in which to make a no gain, no loss transfer, with no time limit when the transfer is part of a divorce agreement covered by a court order.
With financial matters becoming increasingly complex, combined with delays in the courts, many divorces are taking longer to complete, so this change is important and valuable for many couples.
My team at Farnfields are very happy to assist with any enquiries you may have in respect of family breakdown, whether about the divorce process or concerning financial arrangements / arrangements for children. Please do contact the office on (01747) 825432 or via firstname.lastname@example.org