Case study: Consent order on divorce

A consent order is a financial contract between the 2 divorcing parties that sets out the financial obligations arising from their marriage. The contact is legally binding and enforceable.

I am working with a client who was awarded a consent order several years ago as part of her divorce negotiation which required her ex husband to pay her a sum of money each year up until a certain age.

The consent order required this to be by way of an annuity. For more information about how an annuity works see What on earth is an annuity

For various reasons which seemed solid at the time the ex husband did not set up an annuity. Instead he purchased a portfolio for the ex wife in her name of guaranteed fixed rate bonds with several building societies. These bonds provided less than the level of income required by the consent order but the ex husband made up the shortfall from his funds.

However, things have changed in the intervening years and certain of these bonds are no longer paying interest. The ex husband is making good the shortfall but this means my client is totally reliant on her ex husband each month to provide the level of funds she requires- and indeed the level of funds she is entitled to under the terms of her divorce.

Although she agreed to the arrangement at the time she did not foresee the problems which could arise. In fairness it was 2004, several years before the financial problems when base rate was standing at 4%. No one could have foreseen at that stage that base rate could fall to 0.5% and financial institutions could fail.

What was missed by the family solicitors at the time of the divorce was that the purchase of the bonds as an alternative to providing an annuity required an amendment to the Consent Order. This was not actioned at the time and now my client is being asked to sign the variation order.

Her new family solicitor has recommended she takes financial advice. Although my client agreed to this variation at day 1 she is not happy with it now. As a result, I am working with her to see what action can now be taken so that she can receive the necessary sum without the need for recourse to the ex husband on an ongoing basis.

Her ex husband has always made good the shortfall but there is an issue that if he dies she has no claim on his estate and will suffer a loss. She doesn’t want to cause any upset with her ex husband who she still gets on with but is quite sensibly looking to protect her own position.

I am in the process of preparing a report for her looking at her options and advising which option is the most suitable based on her specific circumstances.

If you are going through a divorce and need help with your financial negotiations please call me on 01932 698150 for a confidential chat.

photo credit: Flickr/Dr John Bullas