Can an ex-spouse nonetheless go after your belongings years after the divorce?

Stephen Gold is a retired judge and author who has written popular series for This is Money on how to be a successful executor, writing a will, bankruptcy, consumer rights and legal disputes.

In part one of his latest guide, he explained the ground rules courts follow to decide how finances are split in a divorce, and maintenance payments to exes and children.

Today, he looks at pension sharing, belated applications to divide finances, remarriage and tax.

The court must look at any pension rights held by the parties, even when they are not going to turn into cash in the foreseeable future.

It will also take into account any loss under the pension scheme which a party may suffer because of the legal end of the relationship.

An example is rights the pension holder’s widow would have enjoyed had she still been married to them on their death instead of divorced and so no longer the widow.

But it may be that neither party makes a court application for financial relief.

Perhaps the party without any or a matching pension is unaware of what the court could give them. Or the existence of the pension might be hidden from the other party and so no court application is made for that reason.

One of the orders the court can make with regard to a pension is a sharing order.

It is common for a percentage of what is known as the cash equivalent value of the pension rights to be debited from the holder’s pension and credited to a pension in the other party’s name.

Alternatively, the court might consider allowing one party to keep their pension and the other party to have the family home.

It is possible to apply for a pension sharing order without seeking any other financial relief such as maintenance or a lump sum.

For a detailed discussion of how it all works – though you will want a damp towel or flannel to be applied to the head every quarter of an hour or be an insomniac- I recommend the free Guide to the Treatment of Pensions on Divorce, published by the Pension Advisory Group and recently amended. Only 192 pages.

And for bang up to date information about the appropriate approach to sharing, have a look at paragraphs 34 to 41 of the March 2024 judgment in a case named SP v AL [2024] EWFC 72[B}.

There the judge, who eats and breathes pensions, tackled the legal conundrum as to the extent to which a party’s pension earned outside the relationship should be excluded from a sharing order.

They and their employers might have been paying into the pension scheme for 20 years before the marriage and then continued to do so for ten years between marriage and divorce. Ignore 20 years of pension value when calculating what share the other party should take?

It will depend, said the judge, on whether it is a ‘needs’ case (see part one of this guide under the ground rules section LINK) or the available capital to be shared out exceeds the needs of the party after a pension share.

The judge adopted the proposition that in a needs case, it would often be fair – but not always and other circumstances might make a difference – for the whole 30 years’ worth of pension to be shared out.

But in a non-needs case such as the one he was deciding, it was likely that the focus would be on sharing according to the length of the relationship.

Done it again?

It may be that a party after some financial remedy has remarried or entered into a new civil partnership. That in itself does not bar pursuit of an application to the court made beforehand, except for maintenance.

They are still entitled to a fair share of the assets. They have earned it. Similarly, entry into permanent cohabitation does not debar an application, even for a maintenance order.

But going after maintenance while cohabiting is likely to be over ambitious unless, say, the applicant has children of the previous relationship living with them, full-time or part-time, who are still being educated and that inevitably increases the household expenditure.

Much will depend on the cohabitee’s finances and the extent to which those finances benefit the applicant.

Better late than never

If you have failed to make an application for financial remedies within a reasonable period but now feel you should have done, don’t kick yourself. It may not actually be too late.

Should you have married or entered into a civil partnership without notifying an application to the court, either in a prescribed form or in the document that started off the divorce or other matrimonial case, you will have had it.

Too late to apply now except – and this is a big one – for a pension share.

However, provided you have not married or entered into a civil partnership, there is no time limit for making a financial remedies application against your former spouse of partner.

The court might be unsympathetic if you left it for ages and then suddenly pounced when the other party thought they were out of the woods.

The delay would usually mean a discount on what would have been awarded with a prompt application.

A Supreme Court case where the wife had delayed making an application for 19 years after her divorce hit the headlines in 2015.

When they had separated the parties had been leading a nomadic lifestyle and there had been nothing about the husband’s financial circumstances to excite the wife into making a court application. But how things changed with time.

When the wife finally made her application, the husband was alleged to be worth £107million! The appeal judges gave the wife the green light to pursue the application, holding that the wife was entitled to have her case heard even though it was exceptional.

A substantially belated application would be afforded decent hearing unless there were really compelling reasons against.

So, what happened in the end? Answers on a postcard? No, I could not keep you in suspense. The case settled with the wife accepting…£300,000.

The morals of the story are that, while delay may not be fatal, it will not help. 

And, if you dislike acute shocks, seek an order from the court, even where it is agreed that no financial remedies for either party are appropriate, which dismisses all claims by both sides.

This would rule out a future application.

Taxing matters

The recipient of maintenance does not pay tax on the money: conversely, the payer cannot claim relief on the maintenance they pay.

The position is more complicated in relation to any possible liability for capital gains tax when the family home (or other asset) comes to be sold after separation.

The rules were changed from 6 April 2013 by the Finance Act 2023. Provided certain conditions are satisfied, when the asset is transferred by one of the parties to the other, it is treated as not involving any gain.

But when the asset is subsequently disposed of, the recipient could be liable to capital gains tax on any gain made between the date of transfer and the date of disposal, on the basis that the recipient acquired at the original cost to the transferor.

If the asset is the family home, then the gain may be cancelled out by principal private residence relief which applies if the property has been the only or main residence of the recipient during ownership, apart from the last nine months. There may otherwise be partial relief.

That, as I say, is subject to certain conditions. These are that the transfer was made within three tax years following the tax year in which the parties separated: alternatively, it was part of a formal agreement or court order made in connection with the divorce or civil partnership dissolution.

The message, then, is that if the transfer is to be made outside the three years, enter into a formal agreement for it or obtain a court order requiring the transfer to be made.

Other changes from 6 April 2023 relate to a court order for the home to be transferred from one party to the other but for the receiving party to grant the other party a charge (a sort of mortgage without repayments and usually without interest) on the property.

They will usually mean that there will be no tax liability for the transferring party when making the transfer or when the charge is realised. Tax advice is recommended.

IN PART THREE… Stephen Gold explains how to reach an agreement, and what happens when one ex tries to cheat the other out of their fair share of assets.