Financial Settlement

Matrimonial assets and divorce

On divorce or separation all of your assets and those of your spouse are regarded as matrimonial assets and are in the melting pot when looking at what is a reasonable financial settlement for both of you.

It therefore does not matter in whose name they have been purchased, e.g. if the matrimonial home is in just one of the spouse's names — it is still a matrimonial asset.

Similarly debts are treated as matrimonial liabilities, although if debts have been accumulated by one party purely for their own purposes e.g. a large gambling debt, then this may be regarded as a debt of that individual and not a matrimonial debt.

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Amicable Agreements

If the relationship between the spouses has remained amicable, then a settlement may be agreed upon without having to turn to the courts. If negotiating a settlement in this manner, you will need to consider the following points:

• the well-being of any children
• any outstanding debts or liabilities that you or your former spouse might have
• the value of any property owned, whether joint or individually
• assets held by either party
• financial obligations and responsibilities of each party
• pension arrangements
• comparative earnings and earning potential of the spouses
• physical or mental disabilities
• contributions made to the marriage by either party, financial or otherwise

Settlements can be negotiated between the spouses with or without the help of solicitors, although approval from the court is still required. If the parties arrive at an amicable agreement, a Consent Order can be drawn up by a solicitor, which merely needs to be rubber stamped by a judge. The court needs to be satisfied that the agreement is reasonable and that both parties understand what they have signed. If this is not the case, the judge may summon the couple to court to discuss the agreement.

Court Orders

Alternatively an order will be imposed by the court if no agreement can be reached. When coming to a final Order the court will simply try to be fair to both parties and there are a number of factors which they take into account (see Section 25 of the Matrimonial Causes Act 1973).

These include:

• duration of the marriage
• the age of the couple
• contributions during the marriage
• pensions and loss of widow's benefits
• the financial resources of each spouse
• the needs of each spouse

It is usually worth making a list of all the assets, debts, liabilities, income etc of you both and then speaking with a solicitor, so that you can negotiate from a position of strength and knowledge. It is always best to come to an agreement amicably if possible, especially for the benefit of any children that may be involved. If you need to speak with a specialist family solicitor, check out our free Find a Solicitor service for a free consultation with a reasonably-priced expert in your area.

Severing a joint tenancy

One important step that you should take whilst sorting out your finances is to sever the joint tenancy that you probably have on your property. If you bought your property together as husband and wife you are almost certainly joint tenants. This means that if either of you die, then your share in the property automatically passes to the other spouse. If you are getting divorced this is probably not what you want to happen. For more details about severing a joint tenancy click here.

If the property is owned in the name of only one of the parties then the non-owner should register a caution against dealings on the property to prevent it being disposed of without the other party knowing and agreeing.

Types of Court Orders

The court can make a number of different types of order in divorce proceedings.

The court can make orders for:

• maintenance for the husband or wife
• maintenance for children
• a lump sum for the husband or wife
• a 'property adjustment' or 'transfer of property' order
• sharing or claiming on the other's pension fund — this could involve having a share of the fund now so that you get a pension fund of your own, or having a payment out of it.

‘Clean Break’

A clean break cuts all financial ties between a couple. This means that neither is liable to make any payments to the other and they are free to become financially independent.

Maintenance for the husband or wife (or spousal maintenance)

The husband is ordered to pay a sum of money to the wife periodically, or vice versa (husband to wife is much more common). The length of time for which the maintenance is paid can vary – it can be for a fixed period, for the rest of their lives. The recipient will relinquish their right to the maintenance if they remarry (but not if they merely cohabit with their new partner). This sort of maintenance is ordered if the less well-off of the parties is unable to support his/herself financially. The actual sum of money to be paid depends on factors such as the needs and earning ability of the recipient and is calculated on a case-by-case basis.

Lump Sum

Similarly to spousal maintenance, money can be ordered to be paid from one spouse to other in one payment, i.e. a lump sum. The advantage of this is that it gives the couple a ‘clean break’, allowing them to become financially dependent and enabling them to draw a line under their time together.

Maintenance for the children

One of the most emotional aspects of a divorce is often the fate of the children. Child maintenance can be arranged privately between the divorced couple, or the CSA can be enlisted to formulate an arrangement. For comprehensive information on child maintenance see our section devoted to Children and the CSA.

Transfer of property order

All types of property can be ordered to be sold or transferred by the court. This most commonly applies to the family home. The court also has the authority the decree how the proceeds should be divided after a sale of property.

Pensions

Courts also have the power to divide pension policies between the two parties, and this is usually the option which they prefer, although there are other ways that pensions may be handled after divorce. The wife may be given a larger share of the marital assets to compensate or ‘offset’ her loss of interest in her husband’s person. Alternatively the wife could be awarded a lump sum to offset any loss of other specific benefits tied in with the husband’s pension.

Pensions are a complicated area of divorce law, and we would advise you to consult a solicitor for further information on your specific predicament. To find an affordable expert family law solicitor in your area, use our free Find a Solicitor service.

How to sort out the financial aspects of divorce

Once divorce proceedings have been filed, either you or your husband or wife can file a form at the court saying that you want to put in a financial application. Both of you will then have to fill in a long form ('Form E') with all your financial details. You have to exchange these with each other at the same time. The court will then fix an appointment to check that all the evidence has been filed, and there will be a session at court to see if you can reach an agreement.

Forms and information leaflets are available from the Court Service website.