Financial Settlement

Handling financial matters after separation

Upon divorce or separation the assets of the husband and wife are combined and considered matrimonial assets, which are then divided in such a way as to represent a fair deal for both.

There may however be some assets which were acquired before the marriage or were specifically intended for one of the individuals which do not go towards this melting pot. It is sometimes complicated to determine the status of assets.

But usually it does not matter in what name assets were bought when one of the spouses has taken care of most of the financial matters, as long as the assets were shared, like a marital home.

In a similar way both partners’ debts are treated as matrimonial liabilities, except in the case where debts have been amassed by one of the parties exclusively through their own individual activities, such as a gambling debt.

Amicable agreements

If both parties remain able to negotiate amicably after a separation then a settlement may be able to be drawn up without having to use the courts. If drawing up a settlement in this way, there are many factors you will need to take into account:

• 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

Whether a settlement is arranged independently by the spouses or with the help of a solicitor, it needs to be approved by the court. If an arrangement has been arrived at amicably without the intervention of a solicitor, a solicitor can draw up a Consent Order for a judge to inspect.

The court needs to be convinced that the agreement is reasonable and that both parties are fully aware of what they have agreed to. The couple may be invited to court to discuss the settlement if the judge does not believe this is the case.

Court orders

The court can impose an order if the spouses cannot reach an agreement. The court strives to be as fair as possible to both sides, and will take into account many factors (see Section 25 of the Matrimonial Causes Act 1973).

These include:

• duration of the marriage
• the age of the couple
• contributions during the marriage
• the financial resources of each spouse, including their income and how much they are likely to make in the future
• the needs of each spouse, including their outgoings and any special circumstances
• the needs of any children who are minors

To prepare for the meeting with your solicitor you should have a clear idea of all your matrimonial assets, debts, liabilities and so on, which you can do by making a list. This will allow you to negotiate from a strong and knowledgeable position.

Severing a joint tenancy

You will most likely have a joint tenancy on the property you were sharing with your partner, in which case it is important that it is severed when you are sorting out your finances. If your property was bought when you were married then most probably you are joint tenants, which means that if one of the partners dies, their share will pass to the other. This is not likely to be desirable if you are getting divorced.

If one of the spouses has sole ownership of the property, the other should register a caution against dealings on the property so that it cannot be disposed of without their consent.

Types of court orders

The courts are able to issue 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, or an order for sale
• sharing or claiming on the other's pension fund — this could mean being given a share of the fund now which forms a pension fund of your own, or receiving a payment from it.

Maintenance for the husband or wife (or spousal maintenance)

The husband pays a sum of money to the wife at regular intervals, or less commonly, the wife to the husband. This can either continue for a fixed amount of time or for the rest of the spouses’ lives. However, if the recipient remarries (but not if they merely cohabit with a new partner) they lose their right to the maintenance and the arrangement ends.

The purpose of this sort of maintenance is to support the less well-off half of the marriage financially. The sum payable is calculated based on a number of factors, and is decided on a strict case-by-case basis.

Lump sum

Rather than be paid in instalments, maintenance from one spouse to the other can be paid in one lump sum. The advantage of this is that it gives the couple a ‘clean break’.  A clean break settlement will sever all financial ties between a husband and wife. No payments will need to be made in either direction afterwards, leaving both parties free to be financially independent.

Maintenance for the children

The divorced couple can choose to arrange a child maintenance arrangement privately, or get the CSA to do it for them. Our Children and the CSA section has essential information and advice on child maintenance.

Transfer of property order

The court has the authority to sell or transfer any type of property (typically the family home). It also has the power to dictate how the money made from selling a property is divided.

Pensions

Courts are also authorised to make provisions for the pension policies of the divorced couples, and what they usually prefer is to divide them between the two parties.

Pension arrangements following a divorce can be a mite complicated, so it is advisable to get advice from a solicitor regarding the matter. Our Find a Solicitor service could find you the ideal legal professional.

How to sort out the financial aspects of divorce

Once the divorce process has begun, you or your husband or wife can present a form at the court stating that you wish to submit a financial application. Thereafter you will both be given a ‘Form E’ on which to give your financial details, which you must exchange once complete. You will then be given an appointment at court to check that all evidence has been filed and finalise an agreement.

Forms and information leaflets can be obtained from the Court Service website. Since divorce proceedings can drag on, if you need any extra help you may benefit from our helpful service offering unlimited legal advice over the phone.

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