Financial Settlements in Divorce: A Guide

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Financial settlements in divorce play a pivotal role in ensuring a fair division of assets.

Family law in England and Wales offers a comprehensive framework to address the distribution of financial assets. Section 25 of the Matrimonial Causes Act 1973 plays a critical role in dictating the terms of financial settlements. It mandates the court to consider various factors such as the welfare of any children, the financial needs and responsibilities of each party, and the standard of living enjoyed by the family prior to the breakdown of the marriage.

Financial settlements in divorce

Divorce financial settlements are not merely about achieving an immediate division of wealth, but ensuring a fair and sustainable financial future for both parties.

The core principle guiding divorce settlements is the equitable distribution of assets. This doesn’t necessarily mean a 50/50 split, but rather what is considered fair given the couple’s unique circumstances.

Factors such as the length of the marriage or civil partnership, the standard of living established during this time, and each party’s contribution (financial and non-financial) and future needs are critically assessed.

How are assets split in a divorce?

Assets are split in a divorce based on the principle of fairness, taking into account the needs and contributions of both parties.

The court considers various factors, including the length of the marriage, the age and health of each spouse, their income earning capacity, property and other financial resources.

The will also consider each party’s financial needs, the standard of living during the marriage, and contributions to the family, both financial and non-financial.

The goal is to achieve a fair division of assets, which may not necessarily mean an equal split. This can include the family home, savings, investments, pensions, and other property. In cases where an agreement cannot be reached, the court has the authority to make a binding decision on the division of assets.

Types of financial settlements in divorce

Lump sum payments are a common outcome in financial settlements, offering a one-off payment to one party. This can be particularly useful in situations where ongoing financial ties are undesirable or in cases where one party wishes to retain a significant asset (like the family home) outright. Parties may obtain a “clean break” order to sever all financial ties following a lump sum payment.

The determination of lump sum payments takes into account the liquid assets available. It also considers the overall financial needs of the receiving party.

Pensions are another significant aspect of financial settlements, often representing a substantial portion of matrimonial assets. The division of pensions can be complex, requiring careful consideration of the type of pension, its value, and the most equitable way to divide it.

Options include pension sharing, where a portion of one partner’s pension is transferred to the other, or offsetting, where the value of the pension is balanced against other assets.

Investments and savings also play a crucial role in financial settlements. The valuation and division of these assets must reflect not only their current worth but also their potential for future growth or loss. This requires a nuanced understanding of financial markets and the impact of the division on each party’s financial stability.

Properties, including the family home, are often the most emotionally charged assets to divide. Decisions regarding property can significantly affect where each party and any children will live. The court’s primary consideration is ensuring that any children’s housing needs are met. This can therefore influence the division of other assets.

Understanding the intricacies of financial settlements in divorce necessitates a comprehensive evaluation of the couple’s entire financial portfolio.

Engaging in divorce proceedings and financial settlements requires careful planning, negotiation, and, often, professional legal and financial advice to fully understand the complexities involved in the divorce process.

The Process of Obtaining a Financial Settlement in Divorce

Obtaining a financial settlement in a divorce involves a multi-step process, The process is designed to ensure a fair and equitable division of matrimonial assets and financial resources between the parties.

Financial Disclosure

The first step towards obtaining a financial settlement is for both parties to provide full and frank financial disclosure. This involves exchanging detailed information about all financial assets, liabilities, income, and expenditures.

Assets to be disclosed include savings, investments, pensions, properties, and any other significant assets. Liabilities such as loans, mortgages, and credit card debts must also be declared. T

Negotiation and Mediation

Once financial disclosure is complete, the parties can start negotiating a financial settlement. Negotiations can be conducted directly between the parties, through solicitors, or with the help of a mediator.

Mediation is a voluntary process where an independent, trained professional helps the parties reach an agreement. The aim is to agree on the division of assets, spousal and child maintenance payments, and any lump sum payments in a way that is fair to both parties.

If children are involved, their needs are given primary consideration.

Applying for a Financial Order

If parties are unable to reach a financial settlement, either party can apply to the court for a financial order. The application sets the judicial process in motion, leading to a series of court hearings. However, even after applying to the court, parties are encouraged to reach an agreement at any stage to avoid the emotional and financial costs of a contested court process.

Court Hearings

The court process can involve several hearings, including a First Directions Appointment (FDA), a Financial Dispute Resolution (FDR) hearing, and a Final Hearing.

The FDA is a preliminary hearing to establish the issues in dispute and decide what further information is needed. The FDR is a crucial hearing where the judge considers all proposals and encourages the parties to settle.

If no financial agreement is reached, the process moves to a Final Hearing, where a judge examines the evidence and makes a binding decision on the financial settlement.

Consent Order

If the parties reach an agreement either through negotiation, mediation, or at any stage of the court process, they can have their agreement turned into a legally binding document. This is called a Consent Order.

The Consent Order is submitted to the court for approval. Once approved, this formalises the financial settlement, making it enforceable by law.

Final Order

If the case goes to a Final Hearing, the judge’s decision is formalised in a court order. This Final Order is legally binding and outlines the division of assets, any maintenance payments, and other financial arrangements. Once the order is made, both parties are legally obliged to comply with its terms.

How can Expert Family Law assist?

If you are planning to divorce or end your civil partnership and require advice on financial implications, contact us today. Expert Family Law will put you in touch with a divorce solicitor on our panel who can provide legal advice.

Please note that we are not a firm of solicitors. We have a panel of family law firms who we may pass your case on for a fee. Expert Family Law will not charge you, the client, for our service of passing on your case.

We ensure our panel firms have the skills and experience required to assist with your legal case. We can assure you that your case will be dealt with in a compassionate and understanding manner.

The solicitors on our panel can assist you through the process of divorce, including the application, as well as assisting you with child arrangements, financial settlements and ancillary relief following the termination of your marriage.

Each solicitor we work with is authorised and regulated by the Solicitors Regulation Authority (SRA).

Get in touch today using the form at the top of the page to determine if a divorce solicitor from our panel could help with your case.


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