Financial Settlements
Sorting Out Finances After Divorce
Ending the marriage and resolving the finances are separate legal processes. A Final Order in the divorce does not, by itself, decide what happens to the family home, pensions, savings, debts or other financial claims between former spouses.
Those issues can be resolved by agreement or, if agreement cannot be reached, through financial remedy proceedings. The eventual terms can then be recorded in a financial order approved by the court.
What can be included in a financial settlement?
The financial position is considered as a whole rather than looking only at assets held jointly. Relevant property can include the family home and other property, bank accounts, savings, investments, pensions, business interests, liabilities and the income available to each person.
Assets held in one person's sole name can still be relevant. The significance of a particular asset depends on the circumstances, including how and when it was acquired, the family's needs and the overall resources available.
Is everything automatically divided 50/50?
There is no rule requiring every divorce settlement to divide each asset equally. Equality can be an important reference point in some cases, but the court's task is to reach a fair outcome after considering the circumstances specified by law.
Those circumstances include each person's income, earning capacity and financial resources, their needs and responsibilities, the standard of living during the marriage, the ages of the parties, the length of the marriage, any relevant disability, contributions to the welfare of the family and certain benefits that may be lost as a result of the divorce.
The needs of children can also have a significant effect on how available resources are used, particularly where decisions have to be made about housing.
Financial disclosure
A financial settlement should be based on a proper understanding of each person's financial position. This means providing information about assets, liabilities, income and pensions rather than negotiating from estimates or incomplete information.
In contested financial remedy proceedings, detailed financial disclosure is normally provided using Form E, supported by documents such as bank statements, property information, pension valuations, payslips, tax information and evidence of liabilities.
The exact documents required depend on the finances involved. Cases involving companies, trusts, investments or more complex pension arrangements can require additional information.
Reaching an agreement without a final hearing
Court proceedings are not required simply because a couple is divorcing. Many financial settlements are negotiated directly between solicitors, through mediation or by another form of dispute resolution.
Even after financial remedy proceedings have begun, an agreement can still be reached before a judge has to make the final decision.
Making an agreement legally binding
Reaching an agreement between yourselves does not necessarily bring all financial claims arising from the marriage to an end. The agreed terms will usually need to be drafted into a consent order and submitted to the court for approval.
The court does not simply register whatever has been agreed. A judge considers the proposed order and the financial information supplied before deciding if it should be approved.
Once approved and effective, the order records the legal obligations between the parties and can provide finality for the claims covered by it.
Clean break financial orders
A clean break means that future financial claims between former spouses are dismissed to the extent provided by the order. It is not the same thing as simply separating finances informally.
A clean break may be appropriate immediately in some cases. In others, continuing obligations such as spousal maintenance may mean that a complete immediate clean break is not appropriate.
Pensions after divorce
Pensions can represent a substantial part of the overall matrimonial finances and should not be overlooked simply because they cannot be accessed immediately.
Depending on the circumstances, a settlement can involve a pension sharing order or another arrangement that takes pension rights into account alongside property, savings and other resources.
Pension arrangements can be technically complex, particularly where there are defined benefit schemes, public-sector pensions or substantial pension funds.
Spousal maintenance
Spousal maintenance is separate from child maintenance. It can arise where one former spouse has an income need and the other has the ability to meet some or all of that need.
Maintenance is not automatically payable in every divorce. Its amount and duration depend on the financial circumstances and the structure of the overall settlement.
If you cannot agree a financial settlement
An application can be made for the court to determine financial claims. A contested application for a financial order is started using Form A.
Financial remedy proceedings ordinarily include a First Appointment, followed by a Financial Dispute Resolution hearing, commonly called an FDR. The FDR is intended to help the parties reach an agreement after disclosure has been considered.
If the case still cannot be resolved, it can proceed to a final hearing where a judge hears the evidence and decides what financial orders should be made.
When should finances be dealt with during the divorce?
Financial arrangements and the divorce often progress alongside each other, but they have separate procedural stages. The timing of the Final Order in the divorce can matter where financial issues remain unresolved, particularly in relation to pensions and other financial rights.
If finances have not been resolved, it is sensible to consider their position before applying for the Final Order rather than assuming that completion of the divorce also completes the financial settlement.
Court fees for financial orders
The current HM Courts & Tribunals Service fee for an application for a financial order other than by consent is £321.
If an agreement has already been reached and an application is being made for a financial order by consent, the current court fee is £62.
These are court fees and are separate from solicitors' legal fees. Help with Fees may be available to some applicants depending on their financial circumstances.
Financial settlement solicitors in Cheltenham
Pembridge Solicitors advises clients in Cheltenham on financial arrangements following divorce and separation, from reviewing an agreement already reached to negotiating disputed assets or dealing with financial remedy proceedings.
We can consider the assets and liabilities involved, advise on financial disclosure, negotiate proposed terms and prepare or respond to court applications where proceedings are necessary.
Appointments can be arranged through our Cheltenham office, with remote advice available for clients elsewhere in Gloucestershire.