Financial settlements after divorce: What you need to know

No one expects to face a divorce, however if it becomes a reality, it can be extremely overwhelming and confusing. Whilst the divorce can be straightforward, quite often the financial settlement upon divorce can be complicated and time consuming. Legal support from divorce solicitors can therefore be a real asset and reassurance to both parties.

When going through a divorce, even once the decree absolute / financial order has been made ending the marriage, in order to gain certainty and reassurance regarding the financial claims open to be made by both parties, it is essential to obtain a financial remedy order, also known as a consent order.

Topics to be answered in this article

What are you entitled to in a divorce?

Depending upon your financial circumstances, i.e. assets, pensions and incomes, you can make claims for:

  1. Lump Sum Orders of money to be paid from one to the other
  2. Property Adjustment Orders including transfers of property from joint names into one person’s sole name, orders for sale and the distribution of the sale proceeds
  3. Spousal Maintenance, and sometimes child periodical payments as well
  4. Pension Sharing or Pension Attachment Orders

There are various other orders the court can make in favour of either spouse. Each couples’ circumstances are unique and so it is necessary to understand particular details.

How is the financial settlement made?

Some people come to their solicitors having already agreed the terms of a financial settlement with their spouse. It is common practice though to undertake the process of exchanging financial disclosure, so that the solicitor can give fully qualified legal advice on the fairness and reasonableness of the proposal. Without exchanging the disclosure it is not possible for the solicitor to give qualified advice. If you then agree a settlement based on incomplete financial information, it may mean that you suffer financial prejudice as a consequence. 

Financial disclosure can be achieved voluntarily via solicitors, or a solicitor and the spouse acting in person without legal advice. It can also be achieved in mediation, where the documentation is exchanged, or during court proceedings. Once there is full financial disclosure and any necessary expert reports regarding the value of assets or the appropriate ways to share pensions, only then can the solicitors advise fully as to an appropriate settlement for you to seek.

The solicitors and court consider the needs, sharing and compensation principles when considering what an appropriate settlement will be. In the majority of divorces, the parties’ immediate housing and income needs are key. The needs of the children and their carers are taken into consideration as paramount.

Every couple and their divorce is different – there is no “cookie cutter” financial remedy order, even if two separate divorces seem similar on the face of it. Specialist legal advice is required in order to understand your rights and the financial settlement you can expect on divorce.

What are the time limits for a financial settlement?

In short – there is no time limit. The court does not require a divorcing couple to achieve a financial settlement. However if a financial remedy order is not obtained, it leaves you open to potential claims from your ex spouse for income, capital or pensions and any other financial support they may require at any point in the future. That does not mean to say that a spouse who applies for support will be successful, but it is a common misconception that decree absolute is the final line under a marriage, finances included. It is only on receiving a sealed financial remedy order from the court that both parties have certainty that these claims have been dealt with.

It is important to note however, that if you remarry after getting divorce, but before obtaining a financial remedy order, it restricts your claims against your former spouse to claim against their pensions only.

There are reported court cases where someone has brought a claim for financial provision against their ex spouse some twenty years or more after the decree absolute. In those twenty years, the fortunes of the other spouse had increased significantly , making them particularly well off, whereas the applicant had not feathered their nest so successfully. Without the protection of a “clean break order” it meant that the more wealthy spouse had left themselves open to claims for support, even though the divorce was decades ago and assets were initially modest at the point of divorce. See more below, under ‘Clean Break Order.’

How do children affect the financial settlement after a divorce?

In divorce and financial settlement matters, as well as in life in general, the needs of the children of the family always come first. Quite often, if one spouse is a high earner, and the other spouse is the primary carer for the children, such that the children stay with them the majority of the time allowing the other spouse to work, there is a need to structure the settlement to ensure the needs of the primary carer come first. There may be a division of the equity in the property or other capital in the primary carer’s favour which reflects the limits on their earning abilities due to childcare commitments. The higher earner can be ordered to pay spousal maintenance to the financially weaker party.

It is also possible for the more financially vulnerable spouse to retain the family home, if they are the primary carer for the children, until the children reach the age of eighteen in order to provide a stable home for them. The other spouse may find this frustrating initially, but this is often soothed by the knowledge that the children will have a stable home in which to grow up. It may be some time away, but the equity will be shared upon the children reaching those age or educational milestones, or upon the primary carer’s cohabitation of remarriage with a new partner.

The outcome in each case depends upon the individual specific circumstances of the parties. To find out more about separation and child arrangements, click here.

Can you make a settlement after the Decree Absolute?

Absolutely. The risk in waiting until after decree absolute/final order primarily relates to the loss of benefits which you may otherwise be entitled to upon someone’s death, should that person die before a settlement has been implemented. For example, if pensions are of significant value, were the spouse with the more valuable pension to die after decree absolute/final order has been made, but before a financial settlement has been approved by the courts, their pension benefits often die with them meaning that the former spouse cannot then make a claim against the pension company after the death of the policyholder. It is therefore important, where pensions are a key consideration, to delay applying for decree absolute/final order until there is a financial settlement and pension sharing order in place.

What is a Clean Break Order?

A clean break order usually refers to a financial remedy order or consent order that terminates financial claims between parties. Quite often it refers to an order that ends all claims either party can make against the other, including those of an income nature. Sometimes, there can be partial clean break orders which terminate claims of a capital and pensions nature but still provide for some ongoing maintenance from one spouse to the other. A complete clean break is achieved at a later date once any spousal maintenance order ends.  A clean break order is desirable in most cases. 

Do I need a Lawyer to help me do this?

It really does help. It is everyone’s hope to never divorce, and therefore never to have to spend money on solicitors to achieve the divorce and financial settlement. Achieving a fair financial settlement that provides you with the support to move on in life and alleviate some of your financial worries is invaluable. It might be the only chance you have to obtain financial security for the rest of your life.
The legal process in England and Wales is not straightforward, there are many grey areas that require expert interpretation. At Goughs, we advise clients from the point of separation right through to the implementation of a financial remedy order.

We offer a free initial consultation with a qualified, friendly and understanding lawyer, with no pressure or strings attached. In a consultation we take the basic facts of your case, gain an understanding of the issues faced and what is important to you. We advise you based on your specific situation of your rights, entitlements, and we also give an indication of a timescale and likely legal costs.

Please fill in our contact form here.

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Author Bio

Georgina Catlin

I have been practicing Family Law since 2016, prior to qualifying as a Solicitor in 2018. Going through a separation can be one of the worst experiences in someone’s life and I know separation can be a very daunting prospect. I feel extremely passionate and committed to ensuring that the process is made as straightforward as possible for my clients, by delivering firm and clear advice, whilst trying to achieve a swift and fair settlement.

Over the years, I have developed a strong ability to empathise with my clients and pride myself of being warm and approachable to all. Positive mental health is really important to me and I will always encourage clients to seek additional support if required.

Check out some of my recent videos, with top tips, here:

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