Financial settlements on divorce

bicycle handle barsUntangling shared finances is a key feature of most divorces and civil partnership dissolutions. In practice, the process is separate from, but often runs in tandem with, the divorce or dissolution process itself.

Financial disclosure

Financial disclosure (designed to lay all the information on the table to create a clear picture) is an essential part of the process and usually dealt with by each party completing and then exchanging a Form E.  This is a court form which sets out detailed information about your:

  • Assets - including your home, any other properties, your savings and investments, your pensions, and any interests in businesses or trusts
  • Liabilities - including mortgages, loans, overdrafts and credit cards
  • Income
  • Outgoings

Form Es must be prepared if you make a court application for a financial order, but in practice disclosure often happens before this, because it enables you to talk about reaching a settlement (either with the help of a solicitor or a mediator).

Agreed financial settlements

Any agreement about financial issues will have to be approved by a judge to be legally binding, so it is sensible to get legal advice before applying to court. It is important to make sure that your consent order is approved before your divorce or civil partnership dissolution is finalised. Once the order is approved, this prevents any future claims by either spouse, unless allowed for in the order. 

A separation agreement is another option, used if you want to settle financial issues but are not yet able to obtain a formal consent order.  It is not legally binding like a consent order, but does carry weight with the court if there is a later dispute about finances, particularly if you both had legal advice and went through financial disclosure before it was signed.

What happens if we can't agree the finances when we separate?

If you cannot agree a financial settlement, mediation should be considered as your first option (find out more about mediation).  If you have considered or tried mediation and not reached agreement, either of you can make an application to the family court to make a decision for you.

How does the family court decide what is fair?

The court has a wide discretion and will look at the list of criteria set out in Section 25 of the Matrimonial Causes Act (these criteria apply to different-sex marriages, same-sex marriages, and same-sex civil partnerships). In Lawrence v Gallagher (2012), the Court of Appeal made clear that these principles should apply in the same way to same-sex civil partners as they do to different-sex couples although in practice there is considerable flexibility and cases involving same-sex couples often have a different flavour.  We work with many LGBT clients and can advise you on your particular situation.

The law requires the court to consider:

  • The welfare of any children (this is usually the most important consideration)
  • The financial needs, obligations and responsibilities of each partner (both now and in the foreseeable future)
  • The income, earning capacity, property and other financial resources of each partner (both now and in the foreseeable future)
  • The standard of living enjoyed by the family before the breakdown of the relationship
  • The age of each partner
  • The duration of the marriage or civil partnership
  • Any physical or mental disability of either partner
  • The contribution which each partner has made (or is likely to make in the foreseeable future) to the welfare of the family including looking after the home or caring for the family
  • The value of any anticipated benefit which either party will lose if the relationship is dissolved
  • The conduct of either party (although only if the judge considers it inequitable to disregard this).

Will my pre-nuptial agreement be taken into account?

The court is not bound by any pre-nuptial agreement which you entered into before getting married or forming your civil partnership, but can take it into account.  Find out more about pre-nuptial agreements.

The weight your agreement will be given is an evolving question, but it is clear that it stands a better chance of being given weight if it was signed sufficiently in advance of your marriage/civil partnership, and following full financial disclosure and independent legal advice for both of you. 

In the case of Radmacher v Granatino (2010) the Supreme Court said that pre-nuptial agreements could be upheld by the court, at the court's discretion. In 2014, the Law Commission recommended that pre-nuptial agreements should be made legally enforceable by UK law. It therefore seems likely that the court will take more, rather than less, account of pre-nuptial agreements in the future.

What will happen to my assets?

The family court can make orders in relation to all your various assets (as to who should own them after you are divorced).  The family court can also make orders for spousal maintenance i.e. for one partner to pay an income to the other after your divorce. Find out more about what might happen to:

Your home and any other properties

Your business assets

Your pension

Any trust or inherited assets

The court process

The court process is designed to encourage you to continue negotiating to reach your own settlement, but with the court ultimately imposing an order if settlement is not reached.  One of the benefits of making a court application is that the court process will impose a timetable for the process of resolving things, during which most cases settle.  Either of you can send a completed Form A to the family court at any stage after a divorce or dissolution petition has been issued in order to seek a financial order.  You must then go through financial disclosure if you have not already done so. 

The court will then set dates for three hearings to determine the financial application. These are:

First Directions Appointment (FDA) - This is the first hearing in court and is normally mainly procedural. The judge will assess the information already provided and will determine what is required to progress the case to settlement. The judge might order:

  • further information, for example if the financial disclosure was incomplete or if there are questions which need clarifying
  • formal valuations of assets like properties or pensions (including deciding who should conduct those valuations)
  • a timetable for any additional information to be provided in advance of the next hearing.

Financial Dispute Resolution hearing (FDR) - The court will not make an order at an FDR, but a judge will hear from each of you, your proposals for settlement, and your reasoning, and will then give an indication of what he or she might order if this were a final hearing.  This hearing is conducted on a ‘without prejudice' basis which means that the judge will not be involved in the case any further if it does not settle. This is designed to encourage open discussions in which you can lay your cards on the table without worrying that you might affect the ultimate decision if you can't agree.  Many cases settle at or shortly after this hearing.

Final Hearing - At a final hearing, a different judge will usually hear oral evidence from each of you and any relevant experts, and will consider the written evidence and legal argument which has been filed. The judge will then reach a decision and will make an order deciding how your finances should be resolved.

Have we answered your question? Would you like advice on your personal circumstances?

Email us at hello@ngalaw.co.uk or call on 020 3701 5915 and we will explain how we can help.