Financial settlements reached by divorcing couples are binding – but what if they are based on assumptions that are fundamentally undermined by subsequent events? A judge addressed that issue in the case of a wife who succumbed to cancer just six months after reaching settlement terms with her husband.

Following their divorce, the couple finalised a settlement whereby their capital assets were split roughly equally. An agreed pension sharing order (PSO) was made under which she received just over half of his occupational pension, which was worth over £1 million. She was unaware at the time that she had terminal cancer.

By her will, she left death benefits arising from her share of the husband’s pension to her adult children, who were estranged from the husband. Following the wife’s death, the husband applied to set aside the PSO in its entirety on the basis that the income it was designed to provide the wife was no longer required. The children, acting as executors of their mother’s estate, unsurprisingly resisted the application.

Ruling on the matter, the judge found that the principal purpose of the PSO was to ensure that both husband and wife, who were in their sixties, had sufficient incomes during their retirement. That was their intention and, had it been known at the time that the wife had only months to live, the same pension share would not have been agreed. On that basis the PSO had to be set aside.

The wife’s financial need for a pension income no longer existed. However, the judge ruled that the pension also represented a capital asset of which she had earned a share during the parties’ 38-year marriage. He directed that 25 per cent of the pension should pass into her estate for the benefit of the children. The remainder would meet the husband’s income needs. That, the judge found, represented a fair outcome.

We asked Senior Associate Solicitor Stuart Barton for expert insight on this case:

“This case illustrates that life is unpredictable and assumptions made at the time when a settlement is reached, may well prove to be misplaced. It is always important when considering settlement terms that parties consider the worst-case and ‘what if’ scenarios that may arise in the event of death on the part of either party. Whilst there is sadly no crystal ball available, having a full understanding upon the implications of unexpected events either during or following a divorce can be invaluable”.