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Toby YerburghPartner - Head of Family Law
Financial settlement is the point in the divorce process when the parties agree on the division of assets and other financial arrangements such as ongoing support. In England and Wales, getting divorced does not stop you from making financial claims against your ex in the future, or them from you. By recording a financial settlement, you sever your capital and pension ties to each other and ensure that you both have the necessary stability for your post-divorce life.
What is covered in a financial settlement?
Each situation is unique and will be treated as such by the Courts. However, the agreement typically will contain a division of the assets you own, including the family home, other property, cash, savings, pensions, investments, vehicles, life insurance and business interests.
You also need to consider the division of any debts, loans and overdrafts and organise maintenance payments for your children and/or spouse.
How is a financial settlement decided?
When making a financial settlement, the starting point is to separate matrimonial assets and non-matrimonial assets.
Matrimonial assets are those acquired during your marriage or civil partnership. When dividing these assets, the Court will aim to be “fair and equitable.” However, it’s not always a 50-50 split and the Court will consider various factors to decide what is fair, including:
- Each partner’s earning capacity and personal assets
- Current and future needs
- Contributions to the marriage, both financially and emotionally
- Length of marriage
- How old you both are
- Standard of living before the break-up
For example, the Court might award one spouse a bigger share if they are financially less well-off because they gave up their career to care for children.
Non-matrimonial assets are those you acquired before the marriage or after you separated. They include things like an inheritance or a business you started before you were together. Non-matrimonial assets are usually not shared the same way as matrimonial assets although meeting the parties’ needs will always be the Court’s first concern. Non-marital assets can be protected by a prenuptial or postnuptial agreement if one is in place.
What are the options for reaching a financial settlement?
In many cases, couples come to an amicable agreement between themselves. However, your agreement will not be legally binding until a Court approves it. To do this, your solicitor will record the terms you have agreed in a Consent Order and have it reviewed by a judge. This can be done any time after the Conditional Order (the first part of the divorce process) has been made.
If the Court thinks your arrangements are unfair, they could refuse to make the order. Although this is unlikely if you have both had the benefit of legal advice.
If you cannot agree, you can apply to the court for a Financial Order. This is where a judge reviews your finances and makes a decision on what each of you should get. Before you go ahead with any legal proceedings, you must attend a MIAM (Mediation Information Assessment Meeting) and this may encourage you both to explore a settlement with the help of a mediator. You probably will have to attend court several times for hearings, so the process may take much longer (and be considerably more expensive) than if you had come to an amicable agreement.
With so much to consider, it’s important to have specialist support on your side. Our family lawyers use their decades of experience to get you the best outcome possible. We are renowned for our work with complex divorce cases where there’s a substantial amount of money involved, both onshore and offshore. Get in touch today to speak to a member of our team.
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