Divorce Financial Settlement – What Am I Entitled To?
Finances are more often than not a sore spot for any couple when going through a divorce.
Sorting out money, property, pensions and children can be an even more daunting task when you don’t know where to start or what you’re entitled to.
It’s important to know that in England and Wales, the act of divorce itself doesn’t put an end to the financial relationship between you and your partner.
To separate your finances, you need to reach a financial settlement and turn that into a court order that is different from the divorce itself.
What is a divorce financial settlement?
A divorce financial settlement is a term the court use to describe financial proceedings within a divorce.
It is the mechanism by which the court can deal with separating assets and finances in what is known as a consent order.
Obtaining a financial settlement when you’re separating from your partner is important because outstanding financial claims may come back to disrupt your lives even years after your divorce has been finalised.
In England and Wales, even when you’re divorced, you still retain the ability to make financial claims against your ex and vice versa, and there’s no time limit for making these.
The only way to prevent this from happening is by having a solicitor draft you a consent order, which will document your financial agreement. This will be submitted to the court for them to approve and make legally binding.
The financial agreement you reach can include;
- Property divisions
- Money, shares, savings and investments
- Division of debt and pensions
- Lump-sum payments
- Children / spousal maintenance
- Personal Belongings, e.g. pets, cars
There are two different approaches to obtaining a divorce settlement, which will be determined by the relationship you have with your ex-partner and they are as follows…
Scenario A) Both parties agreeing 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; Our Consent Order Service can help you.
If you decide to go down this route, make sure you and your ex-partner agree on child maintenance, which can be done at the same time or separately from the financial settlement.
If you decide to agree to a financial statement, you need to get a solicitor to draft a 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 arrangements for child or spouse maintenance.
Scenario B) 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.
If you or your partner own a business, if one is financially dependent on the other or you have dependents (children), if one is against the divorce or dissolution or has a medical problem or disability that affects their ability to earn an income, or one has significantly more assets than the other, this may be a sign that you’re better off applying for a financial settlement to the court.
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 court 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.
The financial settlement can cover any financial issues such as lump-sum payments, property ownership, regular maintenance payments to help with living expenses or children, or a share of your partner’s pension payments.
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.
How quickly the financial settlement is issued depends on a variety of factors but it could take anywhere between 6 and 12 months.
What are matrimonial assets and non-matrimonial assets?
Matrimonial assets are assets that you have built up or acquired during the period of marriage, these typically include;
- Personal belongings
- Cash in the bank
Non-matrimonial assets are usually treated differently to those built up or acquired during the period of marriage, 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.
Assets that you bring into the marriage can include savings, property, pensions and businesses for example.
The sensible thing to do if you have valuable assets before entering a marriage is to have a prenuptial agreement drawn up to save-guard your money and assets following a divorce.
Are matrimonial assets usually split 50/50 in a divorce?
The judge has the final decision on how your assets will be split regardless of the financial agreement you’ve reached.
The division of assets depends on how long you’ve been married or in a civil partnership for as well as other factors such as:
- You and your partner’s ages
- Your ability to earn
- Property and money
- Standard of living and living expenses
- Role in the marriage (e.g. were you the primary breadwinner or the stay-at-home-parent) and so on.
The court strives to decide what the fairest way to divide the assets is, but arrangements regarding the children (in terms of housing and child maintenance) have the highest priority.
We’ve heard about 80/20 and 70/30 divorce splits before, but in our experience, the best way to achieve a fair division of assets is to start with a 50/50 split and work from there to ensure both parties are in agreement.
Knowing what you are entitled to in a divorce settlement should be your first priority when considering dealing with your assets and money following a divorce.
When does a divorce settlement need to be reached?
The divorce process for most of us is quite long and slow. There is no set time by which you are legally required to reach a financial settlement.
Solicitors will usually advise their clients to sort out their finances before applying for the 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 either 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.
Questions About Divorce or Financial Agreements?
Our friendly team are waiting to help answer your questions on divorce and financial settlements.
Financial Orders: Can you get a divorce without a financial order?
Many couples will obtain a quick divorce without making any formal arrangements regarding their finances.
Sometimes this is because they are parting ways amicably and do not wish to enter protracted negotiations about money – and sometimes the financial affairs are so simple and straightforward that it seems like there is nothing to fight over (eg if there are virtually no assets to divide).
The official legal process – obtaining a decree nisi and eventually a decree absolute – does not mandate that the divorcing couple obtain a financial settlement at any point.
And deciding on arrangements regarding any young children from the marriage (eg. which parent they live with and how often they visit the other parent etc.) will generally take a front seat, often leaving financial affairs as more of an afterthought.
It’s advisable to arrange your finances before your partner or you have remarried as it can become more contentious when new partners enter the picture.
If you fail to apply for a financial order following a divorce then your ex-partner could still claim more money against you.
There have been several high-profile cases in recent years where ex-spouses have been awarded vast sums of money in out-of-court settlements due to their being no financial order obtained following a divorce.
To get a financial settlement you need to be at the decree nisi stage of divorce proceedings – so, this can be done during or after the divorce has been finalised.
What are the implications of not obtaining a financial settlement?
Failure to reach a financial settlement can often lead to problems in both the short and long term. Any loose ends can mean that financial negotiations continue even after the decree absolute comes through and the marriage is officially at an end.
For example, if the shared matrimonial property has not been sold, this might prevent either party from obtaining a new mortgage and starting a new life, but if one party does not wish to sell up this can cause problems which drag out.
Although many couples split up on good terms, once they get new partners this can lead to rifts occurring and disputes arising about finances which were previously not in contention.
Even if everything goes smoothly and seems to be plain sailing, many years later circumstances can change and one party can make a financial claim on their ex-spouse. Without a financial settlement (and specifically a financial consent order) there is no clean break, so claims can be pursued at some point in the future.
Divorce without a financial settlement – Case Study
Wyatt v Vince: What happened where a couple did not obtain a financial settlement?
In the 2015 case of Wyatt v Vince, the Supreme Court allowed the ex-wife of a multimillionaire to pursue a financial claim against her ex-husband almost 20 years after their divorce. Dale Vince married Kathleen Wyatt in 1981 when they were both impoverished new age travellers living on state benefits.
They separated in 1984 and got divorced in 1992. Mr Vince subsequently founded green energy supplier Ecotricity which led to him accumulating an estimated wealth in excess of £100 million.
In 2010, Ms Wyatt lodged a claim for financial support which was initially blocked by the Court of Appeal. But the Supreme Court overturned this ruling, setting the precedent that there is no time limit for ex spouses to make financial claims against one another (although in the event she was only awarded £300,000).
What happens to the family home in a divorce?
The family home is usually one of the most valuable assets within a marriage, especially for marriages that have lasted a long time.
Who gets the house in a divorce is a common question we receive, but it’s one that can only be answered when looking at the overall picture of the proposed divorce settlement.
The family home will go into the ‘matrimonial pot’ and should be divided alongside all other money and assets, such as savings and pensions.
The way in which you decide to split the family home is up to you if both parties can agree and it’s fair, however, these are the different ways a property can be divided;
- Sell & Share – This is where both parties move out of the home and split the money to buy a new property (if sufficient).
- Buying Out – This involves one spouse buying the other out of the property and becoming a sole owner.
- Transfer of Value – This involves one party transferring some of the value of the property to the other person. The spouse leaving the home would not own any of the property but would keep a stake in the home value. If the house gets sold they would then receive a cut.
- Unchanged Ownership – One party will continue to live in the house, but the ownership of the property remained unchanged.
Information About Divorce Settlements
- Sorting out a financial settlement before or after decree absolute? A financial consent order can be filed after the decree absolute to seal your divorce settlement, however, it is advisable to delay applying for the decree absolute if you do not have a financial order in progress alongside your divorce proceedings.
- Is there a time limit for a financial settlement? There is no time limit for agreeing to a financial settlement or making a claim after a divorce. It could be a matter of years after the divorce is granted before a spouse makes a claim or both parties agree to apply for a financial order to make their divorce settlement legally binding.
- Does spousal behaviour affect the divorce settlement? The grounds for divorce you use to obtain a divorce have no bearing on your financial settlement. The agreement you come to regarding your finances should be based on fairness, length of the marriage, earning potential and children amongst other things. It shouldn’t involve your reason for wanting to end the marriage.
- Do we need to go to Court? In most cases, you won’t be required to visit the court to obtain your financial agreement. If you can agree on the contents of your financial settlement and the agreement is fair then the Judge will grant you the order. In some cases, the Court may ask for written information on how you came to the agreement and ask if both parties understand the contents if the agreement doesn’t seem fair on either party.
How much does a financial settlement cost?
This will depend on the complexity of the assets you need to split.
For example, if you have a family-home and maintenance payments to make that would be considered a standard agreement and can cost £299.
Whereas, if you have debts, pension pots, and business assets to divide then your agreement would be classed as more complex and would, therefore, cost more.
How can Divorce-Online help you today?
1) Save over £1,000 putting your financial agreement into a legally binding financial order through the court
Putting your financial settlement into a legally binding financial order doesn’t need to cost you thousands. Find out more about how we can help you:
- Use our online consent order service for £299 if you’ve reached an agreement – Used by 50,000 people as an affordable and more efficient option to local solicitors.
2) Free advice for couples looking to agree to a divorce settlement.
You may be confused about divorce and how it works when you’ve been separated for over 5 years. This is normal, so why not, chat to us on live chat and get the answers you need?
We provide free advice to over 1,000 people every month. We can help you too, simply call us on 01793 384029 for free information on your circumstances.
- Can My Ex Claim Money After Divorce?
- What is the difference between a clean break and a consent order?
- Find out more about sorting out your Finances, Property and Pensions.