For richer, for poorer ... now the economy adds to pain of divorce

The 'big split' is tough at the best of times, but the uncertain financial climate is forcing a rethink in attitudes, says Neasa MacErlean

Getting divorced during an economic downturn can be a financial nightmare. As a result, many couples have put divorce on hold in recent years – but family lawyers are now reporting an upsurge in numbers with people deciding not to wait any longer. However, unless you are very wealthy, there are major obstacles blocking a financial agreement that satisfies both parties in a divorce settlement. As a result, couples are being forced to change their attitude to divorce arrangements.

Andrew Newbury, a Manchester-based family lawyer at solicitors Pannone, says a quarter of his cases now relate to divorcing clients who first came to see him a few years ago. "People have decided that they can't put things on hold forever," he says.

Meanwhile, Bristol-based Alison Hawes, family lawyer at solicitors Irwin Mitchell, reports the same trend: "In 2009/10 they were waiting. But I've noticed a difference over the last year. People are thinking now that if they wait, they could wait forever."

In the past few years she has even had to draw up some house-sharing agreements – the type that students sometimes use to say how they share the fridge and the living room – for people who could not afford to divorce and who had to stay on in the same house.

The couples who are really suffering, says Hawes, are "the squeezed middle" – those who might have been financially secure together but who struggle to raise the money to buy each other out. From his perspective, pensions expert Robin Ellison of solicitor sPinsent Masons, agrees. Talking of cases where couples can divide one of their pensions, he says: "Instead of having one small pension for a couple, you get two small pensions."

One major change from the past is the difficulty of producing clean-break settlements. "The clean break has become a bit more of a myth, particularly where there are children," says Mairead McKeevor, St Albans-based family mediator at Harmony Mediation. "Where there are children it's almost completely impossible to have a clean break unless there are very substantial assets." Both Andrew Newbury and Alison Hawes are seeing a decline in clean breaks simply because neither party has the cash nor the ability to borrow enough money to buy the other one out.

Clean-break settlements have been the preferred solution since 1984 when courts became obliged to consider that option. Now, however, couples are having to be innovative in order to get a settlement, and that often includes keeping some kind of financial relationship continuing between them.

For instance, so-called Mesher orders – where the departing spouse, usually the husband, keeps an interest in the family home until the children reach 18, are now becoming popular. Alison Hawes is not keen on these: "The man (in most cases) retaining an interest in the house is something we have always tried to avoid. It catches up with you later: the wife ends up trying to get a mortgage in her 50s which is nigh on impossible."

But Mairead McKeever says this kind of arrangement is returning with a vengeance. Instead of the traditional set-up in which the husband retains partial ownership of the home until the youngest child is 18, a new, longer version is coming in. "A lot of people are having to look to postponing it to when the youngest child is 22 or 23," she says. "Lots of young people are very much dependent on the family these days to provide them with a home."

Where family businesses are concerned, valuations are extremely difficult to make – so a trend is developing where (in most cases) the wife becomes a shareholder in her ex-husband's business.

Looking at the pension side of the deal, Robin Ellison is concerned that wives in particular are getting short-changed. Traditional valuation methods of pension rights understate the likely true value in many cases, he says. The way this happens is explained at www.penfam.co.uk –the website that he set up with two other specialist solicitors.

Essentially, the valuation methods for final salary and other defined benefit schemes are often cautious and do not take into account all the expected future salary rises and other benefits. The real value "is usually much higher than the CETV (the 'cash equivalent transfer value' method which is most widely used), particularly for younger scheme members", according to PenFam. These pensions are particularly common in the public sector.

Individual spouses and couples can take specialist advice in order to get a fairer valuation of their defined benefit pensions. (There is less need for defined contribution pensions where the value is far simpler to work out.) But even quite decent pensions can become inadequate when divided out. Ellison says: "Once the pension is factored in, some couples will decide to stay together. The pension rights are usually worth more than the house."

Couples need to be careful to ensure they tie up all the financial issues in their divorce settlements. "They usually include a declaration that each party will not make a claim upon the other person's death," says Fay Copeland, wills specialist at London-based solicitor Wedlake Bell.

If this is missing, it could be possible for a former spouse to claim a share in their ex's estate under the Inheritance Act 1975.

One silver lining may be that divorcing couples often co-operate better with each other now than they did in the past. In April this year, a new rule came in for England and Wales requiring splitting couples to go to mediation as a way of avoiding going to court.

Andrew Newbury says the majority of divorces are more civilised nowadays. They are also using lawyers and mediators in a different way. "For divorce lawyers, the role is becoming more about giving advice at the outset than about running it day to day," he says. There is also less tit-for-tat. "I write fewer letters than I did two years ago," he says.