How To Reach a Divorce Financial Settlement
Reaching a financial settlement when going through a divorce can be hard for many couples.
The divorcing couple must ascertain the full value of matrimonial assets – including property, pensions, savings, and business assets – and then decide how to divide up the resulting “matrimonial pot”.
There is no one fits all approach to splitting assets upon divorce as every couple has different circumstances.
However, on this page, we explain some of the basic rules around dividing assets as part of a divorce settlement and show you what ‘fair’ means in the eyes of the law.
What Am I Entitled To in a Divorce Settlement?
A “divorce financial settlement” describes the financial proceedings within a divorce and is the mechanism by which the court can deal with separating assets and finances in what is known as a financial order.
Agreeing to 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 approval and then made legally binding.
The financial agreement you reach can include;
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 from your spouse to end all financial ties.
What are the most common mistakes spouses make when agreeing to a divorce settlement?
- Not obtaining a financial order from the court Some divorcing couples will reach a formal arrangement regarding the division of the matrimonial pot, but will then fail to obtain a financial consent order which is approved by the court. Without an official court-approved order, even if an agreement has been written down, it will not carry any legal weight as a divorce settlement.
- Not obtaining legal advice Whenever there are substantial assets or complex financial arrangements, it is vital that both spouses obtain independent legal advice. This is particularly the case if one divorcing party is in a stronger position; legal advice helps to level the playing field and reduce the possibility of an unfair outcome.
- Short-term thinking Occasionally the divorcing parties may prioritise their short-term needs over longer-term outcomes. For example, one spouse may agree to remain living in the matrimonial home, but this deprives them of future spousal maintenance or pension sharing arrangements.
- Emotions The divorce process is often fraught with emotions that can lead to making poor choices or not demanding one’s fair entitlement to a portion of the matrimonial pot. Sometimes one spouse may feel pressured into accepting a lower valuation of the true value of assets by their ex, to avoid confrontation or being accused of greed etc.
Divorce Settlement Advice
Divorce-Online has helped 150,000 couples obtain a divorce and financial settlement since 1999.
Get in touch with us to find out what you’re entitled to and how we can help you save thousands in legal fees by avoiding solicitors.
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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.
Professionally Drafted Consent Order Service – £399
This service provides you with a solicitor-drafted financial agreement that you can submit to the court with our guidance to ensure you achieve a legally binding court order without costing you thousands.
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.
What are the implications of ignoring a financial settlement?
Failure to reach a financial settlement after a divorce can often lead to problems in both the short and long term.
Any loose ends can mean that financial negotiations continue even after the final order (‘decree absolute’) is granted 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 that drag out.
Wyatt v Vince: Case Study highlighting the potential implications
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 travelers 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 blocked by the Court of Appeal. 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 (in the event she was awarded £300,000).
Divorce Settlement Advice
Divorce-Online has helped 150,000 couples obtain a divorce and financial settlement since 1999.
Get in touch with us to find out what you’re entitled to and how we can help you save thousands in legal fees by avoiding solicitors.
Contact Us
Give us a ring to speak to a member of our team for reliable answers. Or you can fill out our contact form and we’ll ring you back.
01793 384 029
Our phone lines are open Mon-Fri, 9am-5pm
Frequently Asked Questions
What is a typical fair divorce settlement?
On divorce, the aim is to divide the assets fairly. Fairness does not necessarily mean an equal division of assets. It simply means that the parties must be left in the position of equal standing irrespective of the roles of breadwinner and homemaker.
A range of aspects need to be taken into consideration, such as length of marriage, future needs, earning potential, standard of living and so on.
How do I make my financial settlement legally binding?
To make any financial agreement legally binding, you must apply to the court to approve it. Without the approval of the court, your agreement is not recognised in law.
The court in this case would have no powers to enforce your agreement if one party fails to carry out what has been agreed.
To make your financial settlement legally binding, you need to have a solicitor draft you a financial consent order and submit it to the court for approval.
What is classed as matrimonial and non-matrimonial assets?
Matrimonial assets are assets that you have built up or acquired during the period of marriage, these typically include;
- Property
- Pensions
- Savings
- Personal belongings
- Cash in the bank
- Vehicles
Non-matrimonial assets are usually treated differently from 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.
You can go some way to protecting your assets before getting married if you have a prenuptial agreement drawn up for you by a legal professional to safeguard your assets.
Do I need legal advice before agreeing to a divorce settlement?
Seeking professional legal advice is always recommended when it comes to your money and assets.
Knowing exactly what you’re entitled to can ensure that you achieve a fair outcome for both parties. However, it is not required in law to obtain legal advice.
The majority of couples seeking a divorce will come to an agreement amicably and present their financial agreement to the Judge without legal advice.
Can spousal behaviour change what you’re entitled to?
Financial misconduct such as excessive gambling, unjustified lavish spending, or placing assets beyond the reach of one of the spouses – often falls under the umbrella term of ‘unreasonable behaviour’.
However, this type of behaviour does not necessarily mean that you are entitled to more in a divorce settlement.
Courts are generally more likely to consider financial misconduct than personal misconduct when it comes to the divorce financial settlement.
These cases, however, are still rare rather than the norm.
Can we negotiate a divorce settlement ourselves without solicitors?
Many divorcing couples can negotiate a divorce settlement on their own, without the need for solicitors. If parties can come to an agreement on the division of all money and assets, they can use an online consent order service to make it legally binding.
If there are significant assets involved or complex finances, or if the former spouses are no longer on speaking terms, lawyers will need to get involved.
But in the case of amicable parties with straightforward finances, they will be able to follow a DIY approach.
Is it possible to protect assets during a divorce?
Assets that were ringfenced before marriage and reinforced by a prenuptial agreement might potentially be excluded from the matrimonial pot.
However, most assets will form part of the matrimonial pot.
Steps should not be taken to hide or dispose of any assets which could otherwise be included in the matrimonial pot; doing so can lead to penalties being applied by the court.
Why do I need to bother thinking about my finances?
It is vital that both divorcing parties settle their financial situation as part of the divorce procedure.
As well as clarifying matters and meeting any immediate needs such as maintenance payments, a financial settlement will prevent future claims which may arise even many years later.
It also legally binds both parties to stick to any financial undertakings, such as an agreement to sell the marital home and split any equity.
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