Divorce Financial Settlement – What Is It and Who Gets What?

There is no one-fits-all approach to splitting assets upon divorce as every couple has different circumstances.

This being said, there is a set of principles you can follow to ensure the divorce agreement you reach is deemed fair by a Judge.

In this article, you’ll learn what a judge takes into consideration when reviewing your financial agreement and how the process works for couples who are in agreement and those who are not.

What is a Divorce Financial Settlement?

A financial settlement, also known as a divorce settlement, refers to the crucial stage in the divorce process where the allocation of assets and financial agreements, such as ongoing support, are determined and officially documented as a legally binding financial order.

While some divorce settlements can be mutually agreed upon without involving the Courts, they are essential in ensuring a fair and amicable resolution to the division of financial responsibilities and resources.

A financial settlement divorce refers to a couple who have asked the court to approve their mutually agreed financial agreement, which brings an end to all future financial claims for both parties after divorce.

How is a divorce settlement calculated?

One of the most common questions we receive daily is, ‘What is a wife entitled to in a divorce settlement’. This actually becomes more common the longer the marriage, for example, 10 years or 25 years.

For more information on divorce entitlements, you can our guide on what am I entitled to in a divorce. This will help you understand how a court decides what is a fair divorce settlement.

First, you need to be aware that a Judge uses the guidelines set out in Section 25 of the Matrimonial Causes Act 1973 to calculate who gets what in a divorce settlement.

The starting point of 50/50 isn’t usually where couples end up for various reasons.

Both parties need to give full financial disclosure to establish what the overall pot looks like before you can agree to a division of assets.

There are a number of factors to consider, but the court shall in particular have regard to the following matters:

• Are the financial needs of your former spouse accounted for?
• Does one spouse have a bigger future earnings potential (earning capacity)?
• Will both parties be able to maintain their current standard of living?
• Does one person have large debts, such as a credit card overdraft?

The two most practical things to work out first are any childcare arrangements and deciding what to do with the family home.

There are many options when it comes to splitting the family home, which can have a bearing on the division of other assets, such as pensions and child maintenance.

How are money and assets split in a divorce?

Before looking at how money & assets may be split in a divorce settlement, you need to know the difference between assets.

Matrimonial assets

Assets that you have built up or acquired during the period of marriage are known as matrimonial assets.

These typically include property, pensions, savings, personal belongings, and cash in the bank.

These assets will always be added to the overall ‘pot’ and will need to be split fairly. Bear in mind that fair doesn’t necessarily mean 50/50 of everything.

Non-matrimonial assets

Non-matrimonial assets are financial assets that were acquired before entering into the marriage, for example, property, pensions, businesses, etc.

These assets are usually treated differently from matrimonial assets, however, they aren’t necessarily excluded from a divorce settlement.

For example, if an inheritance has been used during the marriage to purchase a car or house, this asset would now be classed as a marital asset.

There are various ways of splitting your assets, such as lump-sum payments to one spouse, offsetting a pension against other assets of the same value, and agreements on maintenance payments for both a spouse and children.

Scenario 1) Both parties agree to a financial settlement

If your relationship with your spouse is amicable, you haven’t been married for long or your financial affairs are not that complicated, in England and Wales both parties can come up with their own agreement.

You can choose to work out the assets, money, and property issues yourself without involving a lawyer, regardless of whether you’re divorcing or ending a civil partnership.

Coming to an agreement between you helps avoid going to court and can save you a lot of time and money.

To make the agreement you’ve reached legally binding, however, you need to use the services of a qualified professional.

If you decide to agree to a financial statement, you need to get a solicitor to draft you a financial consent order, which will then be approved by the court.

The financial order states the division of financial assets such as property, money, savings, investments, and so on, and can also include clauses for any child or spousal maintenance.

Scenario 2) Applying to the court for a financial settlement if there’s no agreement

Sometimes, even involving a mediator may not solve the issue.

When negotiations are difficult, you and your ex-spouse have a complicated financial situation or your ex-partner refuses to even discuss finances, you may consider applying to the court to get a financial settlement.

In certain circumstances, you may be better off applying to the court to make a financial settlement, for example;

• If you or your partner own a business
• If one party is financially dependent on the other
• If you have depends (children)
• If one party is against agreeing to a settlement
• If one party has significantly more assets than the other

In a nutshell, if both parties can’t reach an agreement, they need to go to court and have a judge issue them with a financial order.

However, you need to show to the court that you have attended a mediation meeting (unless there has been domestic abuse or social services are involved in which case you can go straight to court).

The deadlines for applying for a financial order are the same: before applying for the final legal document but after you’ve started the paperwork to divorce or end your civil partnership.

To apply for a financial order to the court, you will need to send two copies of the form to the court dealing with your paperwork (but keep one copy for yourself).

The application itself costs £255 and you may need to attend several court appointments and court hearings. This process could take anywhere between 6 and 12 months.

Can you get divorced without reaching a financial settlement?

Whilst it is entirely possible to get a divorce or dissolve a civil partnership without reaching a financial settlement, it is generally not recommended by family law professionals.

Most people are simply not aware that legally ending the marriage or civil partnership does not prevent either party from making financial claims in the future, even years after the divorce.

Read more: Decree Absolute Ends Marriage, But Not Financial Commitments

There have been high-profile cases where former spouses have returned to court after being divorced for over 20 years and being successful in receiving financial provisions because they didn’t get a divorce financial agreement approved by the court.

When should I agree to a financial settlement and why?

Once you know that divorce is the inevitable option, it’s important to discuss how any held money or assets are to be divided.

Solicitors will usually advise their clients to sort out their finances before applying for the final order (‘decree absolute’).

This could be for many reasons, but it’s usually for one of the following two reasons;

1.If you can arrange your finances at the same time as going through a divorce, you can have a ‘clean break’ following your divorce. Both parties can move on with their lives, knowing that neither party can not make any future claims.

2.Sometimes, if you deal with your divorce first without sorting out your finances, it can impair your entitlement to certain assets such as pensions. Pensions can only be transferred to a spouse, which you would no longer be, so it’s worth speaking with your solicitor first before applying for the decree absolute.

If you have had a short marriage and there are no joint assets together (property, savings, pensions for example), it’s still important to obtain a clean break order from your spouse to end all financial ties.

Financial settlement after divorce time limits

There is no specific time limit set by law for reaching a financial settlement after divorce.

The timeframe for reaching a settlement can vary depending on the complexity of the case and the willingness of both parties to cooperate and negotiate.

It’s important to know also that there is no time limit on financial claims after divorce either, which is why it’s vital to ask the court to approve a divorce financial order alongside your divorce proceedings.

If the court hasn’t dismissed a spouse’s financial claims by approving a court order, either party can make a claim in the future, providing that they have not remarried.

How Divorce-Online Can Help

Reaching a divorce settlement is never easy. Legal advice for couples with wealth is always advised.

If you’re handling your own divorce, or plan to in the near future, you should consider our online consent order services.

Reaching an agreement is part of the process but without having it professionally drawn up into a legal document, it, unfortunately, means nothing.

Please do not attempt to do this yourself. If you’re worried about legal costs, our low-cost services from £399 can help you save thousands in legal fees whilst providing you with certainty.