Make the break and start afresh

It's difficult to relate to the high-profile divorce cases in the media, with celebrities and big-money couples quibbling over a few million here and there, when the reality for most people is very different.

Back in the real world, Moneyexpert.com has found that the average divorcing couple has combined assets of just £230,000. So when this sum has to be split between two households following a divorce, with mortgages and bills to pay, kids to feed and a good standard of living to sustain, every penny counts.

However, what the headline-grabbing cases do underline is the fact that divorcing women are getting a better deal than ever before. "The courts will recognise all contributions made during a marriage, not just financial input," explains Ruth Bross, a partner and divorce expert at Bross Bennett in London.

But while lawyers reckon women are now getting a fair deal, it's arguably much more difficult for them to get back on track financially, and they are more likely than their ex-husbands to retire in poverty.

The main reason for this is that it's usually the woman who puts her career on hold to raise a family, and this time away from work means that many women don't build up enough national insurance contributions to entitle them to the full state pension. Mothers also have little opportunity to fund a private plan.

According to the charity Age Concern, one in five women faces poverty in retirement, while the Department for Work and Pensions found that just 30% of women qualify for a full basic state pension, compared with 85% of men. As a result, it's vital that divorcing women know where they stand and what their rights are.

Many women discover, sometimes the sums just don't add up. As Bross explains: "When the husband is a high earner or there's plenty of money in the pot it's relatively easy for them. However, it's difficult for women when there is less to play with. Sacrifices have to be made, such as moving house to downsize or retraining to go back to work and bring in an income." The conflicts we've seen in high-profile court cases - such as Charman versus Charman, where insurance tycoon John Charman was ordered to pay his ex-wife, Beverly, £48 million, 34% of their £131 million fortune - occur when there is a huge surplus in the pot after the essential needs of each spouse have been met.

A fairer split

The Charman versus Charman judgment made headlines because it reflected the trend towards granting women a bigger share in divorce settlements in recognition of their role in helping generate wealth, even when they don't go out to work.

Back on planet earth, where couples have substantially less money in the pot, the courts will still take into account the fact that a woman has supported her husband, as well as a whole range of other factors. For all divorce cases, multi-million pound or otherwise, these will include whether there are children involved, the length of the marriage, the standard of living enjoyed and whether one partner has given up work or has another partner.

What won't be taken into account, says Ann Thomas, a family law solicitor at Boodle Hatfield in London, is the fact that one partner has an affair or has walked out, or that they have been a 'bad' husband or wife. "It's not the job of the court to find out why your marriage failed," she explains. "The only conduct that the court is interested in is conduct that has a financial consequence. So if one partner has gambled away £100,000, they will be held financially responsible for this sum."

A divorce settlement cannot be based on the simple principle that women are entitled to half of this and half of that. No single asset is treated in isolation. Everything, including property, pensions, savings, investments and income is taken into account. "From this collective pool of money, the court's priority is to meet each party's needs - which are primarily housing and day-to-day living - and in the common scenario where the wife has given up work and retains majority custody of the children, her needs are often greater," says Bradley.

In one case, the husband may pay his ex-wife maintenance for life, while in others the court will assess the wife's earning potential and determine if, when and how she can start bringing in her own income. "Generally, the court's aim is to reduce the couple's financial dependency on each other," explains Martin Karran, a divorce lawyer at Manchester-based law practice Turner Parkinson.

The welfare of children is always the court's primary concern, so maintenance is its first and foremost priority. Under Child Support Agency (CSA) guidelines, the spouse moving out of the family home must pay 15% of net income for the first child, 20% for two children and 25% for three or more.

A roof over your head

The next issue is housing. The court aims for as much parity as possible for spouses and where there isn't enough capital in the pot to buy two mortgage-free houses, a decision needs to be made about who will take on the borrowing, says Karran. "Where the husband is earning and the wife is not, it's natural that she would remain in the family home with the children and he would take out a mortgage, as she would be unable to."

All assets are thrown into the pot together, and when an equal split of the pot doesn't provide for everyone adequately, the need for property, income (maintenance) and pension provision are often offset against each other. For example, if the wife takes the property, she may receive a smaller maintenance payment from her husband because he will have a mortgage or rent to pay.

Pensions are as valuable assets as property, yet, when choosing what to take in a settlement, women often plump for the house. "If you have young children, keeping a roof over their heads - preferably the same roof, without having to move - seems more important because claiming a pension seems a long way off," says James Maguire, family law partner at solicitors DWF in Manchester. "But it's important not to ignore your husband's pension, because it can be very valuable."

Your husband's pension is particularly important if you split up in your 40s or 50s and have little or no provision of your own. "It's tempting to cling onto bricks and mortar, but they won't provide an income when your ex-husband retires," warns Maguire. He adds that women should ask for more than 50%. "Remember that women have a longer life expectancy than men, so splitting it 50/50 will not provide an equal income."

Splitting businesses

If your husband owns a business, it is likely to bring substantial sums to the settlement pot. Where a husband is a director of a private business, he will often try to play down the value of his shares or the salary and benefits he receives from it, warns Maguire.

"However, wives are well within their rights to see the accounts and seek a business valuation," he adds. Maguire cites a case he dealt with earlier this year. "Kevin, who was a director of a paper manufacturing business and owned 51% of the shares, had been married to Gill for 25 years," he explains. "The standard of living had been good during the marriage, and Gill had been responsible for raising their two children and supporting Kevin in his work. Historically, the business had done well, but on divorce Kevin complained that it was struggling and told Gill that it wasn't worth anything. Gill didn't believe him - especially as Kevin's lavish lifestyle hadn't visibly changed."

Maguire says that because it had been a long marriage and Gill had made an equal contribution to the business, she was within her rights to seek a business valuation. "As Gill expected, the business valuation showed Kevin's share to be worth much more than he claimed - it was in fact valued at £1.2 million net of tax," says Maguire.

"However, as in this case, trying to force your husband to sell his shares immediately may not be in the interests of either parties, as forced sales usually result in a lower share price. There are other ways to extract value from a business, and it's worth talking these through your lawyer," adds Maguire.

New loves, new challenges

When one partner remarries or moves in with another person, a further shift in financial arrangements may be necessary. If the wife remarries, all maintenance (except to the children) stops. However, if the husband remarries, he still has a maintenance
responsibility to his ex.

"Many women worry if their ex-husband moves in with a new partner. But it can often have a positive effect," says Bross. Even though the ex-husband's new partner won't be expected to pay anything herself, her income will be added to the ex-husband's, who could be deemed to have more money to pay to his ex-wife. On the other hand, if the ex-wife moves in with a new partner, the ex-husband still has to pay maintenance.

"It wouldn't make sense to sever the ex-wife's maintenance, in case the new relationship breaks down and she's left high and dry," explains Maguire. "However, if the new partner is very wealthy and she doesn't need the maintenance, the ex-husband will have a good case for stopping his payments."

Divorce is always going to be an unpleasant experience. You've made a commitment to spend the rest of your lives together, and it's saddening to break that promise. However, understanding how the process works, what you could be entitled to and how to get your finances back on track will help make divorce as painless as possible for all involved.