What Is a Divorce Financial Settlement?
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.
If you can reach an agreement between you without hiring solicitors, this can help save you money and avoid unnecessary acrimony.
What Am I Entitled To in a Divorce Settlement? Who Gets What?
A divorce financial settlement is one of the terms Courts 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
Let’s look at the two different approaches you can take to obtain a divorce settlement through the court.
The approach most suitable for you will be determined by the relationship you have with your ex-partner.
Scenario 1) 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 for £399.
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.
Professionally Drafted Consent Order Service – £399
This service provides you with a solicitor-drafted financial agreement that we manage through court for you, to ensure that your order is granted by the courts and therefore becomes legally binding 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 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.
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 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.
If you have had a short marriage and there are no joint assets together (property, savings, pensions for example), achieving a clean break from your spouse is still important.
What about time limits? You can submit an application for a financial order any time after a judge has granted the decree nisi (interim order) in divorce proceedings.
The benefit of applying to the court at this stage is that it ensures that the agreement you have reached becomes legally binding on both parties upon the issuing of the decree absolute.
Even though there is no time limit to submit an application for a financial settlement, there can be specific legal implications of waiting to apply until after the decree absolute is granted.
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.
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.
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 that drag out.
Even though many couples split up on good terms, once they get new partners this can lead to rifts occurring and disputes arising about finances that 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.
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 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 (in the event she was 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.
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 £399 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.
View Our Consent Order Service for £399
You don’t need to spend thousands hiring local solicitors if you have agreed to obtain a clean break following a divorce. We provide a fixed-fee service to help you secure your finances without breaking the bank on solicitors’ fees!