Reaching a financial settlement when you divorce
If you are going through a divorce or separation you will need to come to an agreement about your marital finances. You can do this with, or without the help of a family law solicitor, although you may wish to take advice on your options.
Often there will be immediate financial concerns which need to be addressed. A discussion with a family lawyer at Woolley & Co will help put your mind at ease.
There are several ways you can achieve a financial settlement when you divorce, and the route chosen will determine how long the process takes.
If there are no assets to divide
Even where you have no or very few matrimonial assets to divide it is important to draw a line under the relationship, legally. You do this by obtaining a Clean Break Consent Order. This will prevent either party from making a claim against the other at some time in the future, and protects things like a lottery win or future inheritance.
If you agree
If you and your spouse have agreed how to divide your finances, you can have a Consent Order draw up by a solicitor. This is a legally binding document that will record what you have agreed. It may include a clean break, which will ensure neither party can make any claims against the other in the future.
If you agree the consent order will often be processed alongside the divorce itself and therefore take around 3 – 6 months, depending on current court backlogs.
If you do not agree
If, initially you cannot agree on how to divide your finances, or you wish to make sure any settlement is fair you should always take advice from a specialist family lawyer.
A family law solicitor can help in several ways:
- By helping you understand what you might be entitled to, by way of spousal maintenance for example.
- By ensuring you have full disclosure from your spouse, before any settlement is agreed.
- By negotiating on your behalf with your spouse directly, or with their solicitors.
- By advising you through mediation, which is another way you might try to reach agreement with your spouse, and then drawing up a consent order.
- By preparing your case for court, if necessary, to demonstrate to a Judge the financial settlement that you need.
What is the starting point in deciding what is a fair divorce settlement?
The starting point for a financial settlement is normally a 50/50 split of all the marital assets. However, there are several factors which must be considered, and which might mean a move away from a 50/50 division. The following will all be considered:
- the age of the parties
- length of the marriage
- the current and future earning capacity of each party
- any childcare arrangements
- contributions made during the marriage, both financial and otherwise
- standard of living and ongoing living expenses
- the property and assets available to be split (including things like pensions, businesses, savings and investments
A 50/50 split may not be advisable depending on whether a party needs income or capital to move on with their life. If one party will take on more of the childcare duties this might influence the division of assets too. If a judge is called upon to decide, they will look at all of the circumstances and consider all of the matrimonial assets.
What more should I consider in reaching a divorce settlement?
It is common to have concerns about issues such as:
- How the family home is dealt with on divorce, who will live in the family home or whether it will need to be sold to divide the assets. This will depend on the circumstances in each case. An initial discussion with a family lawyer at Woolley & Co will help clarify your position.
- Whether you are entitled to spousal maintenance. This depends principally on the recipient’s needs, own income and ability to earn income as well as what the payer can afford to pay.
- How each parties pensions will be dealt with on divorce. Pensions can be complex and confusing but are often one of the largest assets to consider in divorce, it is therefore essential to obtain the correct information and take advice on the options for pension sharing and offsetting.
- What will happen to savings, investments and debts. Perhaps surprisingly all are considered as part of the matrimonial pot. Serious debt and bankruptcy can have serious implications for the financial settlement on divorce, and legal advice should always be sought in circumstances where the bankruptcy of one of the parties is a real or possible risk.
There are questions you should ask yourself before agreeing a financial settlement too:
- Have all the finances really been considered?
When considering a financial settlement with a client we break things down into three types of claims. The capital claims, which mean any properties you own, any shares or policies you have and any savings. Make sure you have thought about all of the capital you or your ex may have.Then there is the issue of pension value and this includes any private pensions and the state pension which can have an added value. Many people are surprised to realise that a pension can be even more valuable than a property, so don’t underestimate the importance of looking carefully into this area.Finally, we consider income which include any income from employment but from all sources including rental income or investment income.
- Does the proposed split address your financial needs?
Does the settlement address your housing needs? Does it consider what you will need in terms of expenditure per month? Does it address your future needs in retirement, whenever that might be, even if still a long way off?
- Does the settlement meet the needs of any children of the relationship?
If you have children make sure you have thought about how much it costs to look after them both now and in the future, as they get older. Also, think about the cost of them continuing to study once they leave school and how they will support themselves.
- Have you seen ALL of the financial information from your ex and is it accurate or is anything being hidden from you?
Make sure your ex has provided you with full details of their finances and ideally don’t just take their word for it, ask for documents in support. You want to be sure of the value of any properties by getting an independent valuation. You will need to know the balances of any bank and savings accounts and the value of any pensions. You also want to know about any debts so that they don’t come out of the woodwork at a later stage and give you a nasty surprise. Make sure that the documents you do see make sense and the figures add up.In most cases we encourage clients to go through a process of disclosure. You can do this voluntarily or, if you are asking the courts to make a decision on your finances, it will be a prerequisite. You do this by completing a Form E – we have a useful video talking you through what’s required in the Form E here.
- Does it give you a good long-term solution?
Lastly, ask yourself whether in the long run you will be able to manage. Does the divorce settlement cover unexpected eventualities that can arise in life, such as big expenses? Don’t make the mistake of having jam today, lump sum of a £10,000 may seem like a lot of money, but not if it will be your only income or asset.
Call Woolley & Co, family law solicitors on 0800 321 3832 for advice on reaching a divorce financial settlement, or complete our online form.
Maintenance on death
Woolley & Co can assist if your spouse dies before financial matters in divorce are included. We can also advise on claims for financial support when a spouse or partner has died without making proper provision for you.
Common questions about financial settlements on divorce
Can I get a divorce without a financial settlement?
Yes, you can get a decree absolute before a financial settlement has been reached. However, it is usually advisable to get a financial settlement as part of the divorce process as this is the surest way of securing a fair settlement. It is always advisable to get a financial settlement before you or your partner remarry as the needs of the parties will change at this point. It is important to speak to your lawyer if you plan to remarry or live with a new partner as they will be able to advise how this will affect your financial settlement.
Do the grounds for divorce affect any settlement?
Not really. The main way the grounds might affect a financial settlement is the length of time it takes to reach an agreement (for example if you use the grounds of 5 years separation). The behaviour of the other party (for example their adultery) will have no material impact on the financial settlement.
Getting legal advice on your divorce settlement
You should always consider taking legal advice about what types of financial settlements are appropriate and enforceable even if you believe you will be able to agree matters with your partner. You need to know that decisions you make about how to share various financial assets, including property, pensions, savings and investments won’t have a negative impact upon you that perhaps you had not anticipated.
For advice on agreeing a fair divorce settlement or help to make the settlement legally binding contact Woolley & Co on 0800 3213832.