When it comes to the breakdown of a marriage or civil partnership, one of the most stressful aspects is sorting out your family finances. Our highly experienced family law team is on hand to advise, help and support you throughout the divorce financial settlement process.
Following the breakdown of your marriage or civil partnership and the start of your divorce or dissolution, either you or your partner can apply to the court for financial provision (also known as a financial remedy).
What is the process for a divorce settlement?
In the absence of an agreement on the division of finances, an application to the court may be necessary. When making a court order for a financial settlement, the court has the discretion to make a number of orders after taking into consideration the unique circumstances of each case including the level and type of resources available. Even once proceedings have been issued, divorce settlement by agreement between you is always an option.
The overriding objective of the court is to achieve fairness. From the beginning, the court will need to consider the needs of both parties and any child of the family. For instance, what do the parties need to set up home and financially manage alone? If needs are met and there are surplus assets, the court will consider the division of such assets in light of other factors.
You will normally be expected to attend a session with a mediator before making an application to the court for a divorce financial settlement. This is to determine whether a non-court process may assist you. If you do apply to the court, the court will impose a timetable by when various things will need to happen. You will each be required to:
- Complete a Form E which is a document setting out all your financial details; and
- Produce copies of documents, which your lawyer will explain, such as a bank or building society statements, payslips, valuations and accounts.
The court will then fix a first directions appointment (FDA) before a District Judge who will identify the issues between you and make orders such as dealing with the valuation of your assets. This will occur twelve weeks after the application is issued.
If things are not resolved at the FDA, the next stage is the Financial Dispute Resolution appointment (FDR). You will both attend this court hearing, where a District Judge, with the assistance of your solicitor, will try to help you to reach an agreement on your finances. At the FDR the Judge will usually indicate what he or she thinks would be a reasonable outcome.
If this still does not succeed, there will be a final hearing at a later date heard by a different District Judge. It will be several months before you have an appointment for a final hearing. At that hearing, you will each need to give evidence and the court will impose a divorce financial order upon you both.
Frequently Asked Questions
All the circumstances of the case to which the court must have regard are set out in statute. No one provision carries any more weight than the other. Broadly these are:
- The financial resources which each of you has (or is likely to have in the foreseeable future) including income, earning capacity and property
- The financial needs, obligations and responsibilities which each of you in the marriage/civil partnership has or is likely to have in the foreseeable future
- The standard of living enjoyed by you as a family during the marriage/civil partnership
- Your ages and duration of the marriage/civil partnership
- Any disabilities (mental or physical) suffered by either of you
- The contributions made (or likely to be made in the foreseeable future) by you both to the welfare of your family unit, including looking after the home or caring for your family unit
- The conduct of each of you, if that conduct is such that it would be unjust to disregard it
- The value of any benefit (e.g., a pension) which, as a result of the divorce/dissolution, either of you will lose the chance of acquiring
In light of all the circumstances and the level of discretion afforded to the courts, it is very difficult to predict the outcome of proceedings and advice will invariably focus on a range of options with a view to achieving a fair settlement.
Not at all, many cases are settled without the need to involve the court. During any financial proceedings, there is a duty to provide full and frank disclosure of your financial resources. Initially, we may suggest trying voluntary disclosure in the hope that we can achieve a negotiated settlement and avoid a formal application to the court. We can also help you with other alternatives such as collaborative law and mediation.
When considering a divorce financial settlement, the value of any business interest is taken into account, whether the business was started jointly, with others or by only one of you either before or during the marriage. Some of the key issues that you will need to resolve are:
- Identifying the correct value of the business and the value of the shares in that business;
- Considering the preservation of the business interest and the resulting income whilst ensuring that both of you are fairly provided for;
- How to deal fairly with the business taking into account its provenance (i.e. if it was an inherited business or jointly established);
- Any likely tax implications
This area can be fraught with difficulty so it can be helpful to appoint a forensic accountant to produce a valuation report. This will take into account the size of the shareholding, any tax issues and consider the question of liquidity. Our family solicitors can help you with this process.
The person who built up the business does not necessarily have a greater claim to the assets of the business. The family courts have a broad discretion when dealing with assets on divorce, which includes a family business. However, the value of a business cannot be realised in the same way as other assets such as bank accounts or investments. The court will try to avoid making a court order for a financial settlement that results in the sale, break up or winding up of the business as long as the business provides a source of income to both parties.
Divorce or the dissolution of your civil partnership can be far from straightforward, especially when a property is involved. Property is often the largest financial asset to be dealt with. Various different orders can be made by the court to determine how property will be dealt with. The order made regarding your property will depend entirely on your particular circumstances.
- Order for sale
The court can order the sale of a property with the proceeds of the sale divided between you in accordance with any agreement that has been reached between you or in such proportions as the court decides according to your specific needs, earning capacities and mortgage raising abilities. If you are in the fortunate position of there being sufficient equity in the property that allows both of you to suitably rehouse, then this is likely to be the most favourable option.
- Transfer of ownership
Sometimes there simply is not enough equity in the sale of the home to be divided and provide both of you with the means to purchase an adequate home. This is especially true if you have children. In this instance, it may be more appropriate for one of you to stay in the property with the children.
If you remain in the property, then it may be the case that the home is transferred into your sole name. A lump sum payment will often be required from the other person as compensation for the loss of their interest.
- Mesher Order
Sometimes it is helpful for both of you to maintain your interest in the family home, for instance, if there are insufficient assets to give the non-resident person compensation for the loss of their interest. If this is the case, then it is possible to put in place what is known as a “Mesher Order”. A Mesher Order means that the home will remain in the joint ownership of both of you, but only one of you will have the right to occupy the property. This will usually be the parent who has care of the children. This arrangement will continue until a trigger event is reached e.g. once the youngest child turns 18, or if the person who is living in the house gets re-married, at this point the house can be sold and the proceeds divided between you both in the proportions agreed at the time the order was made. A similar arrangement can arise where there is a deferred charge with certain triggers determining when the charge has to be redeemed. This is more likely to happen where the home is transferred to one of you and assumes that the other person can be released from their mortgage covenants. Nowadays this can be quite difficult to achieve.
If there is insufficient equity to enable both of you to re-house straight away, the order made will be dependent on a number of factors, such as:
- Your individual mortgage raising capacities
- The earning capacities of you both
- Other assets involved
- Whether there are children involved who need to be re-housed
We understand just how complex financial claims surrounding property can be. This is why we offer supportive advice and guidance through every step of the process. If you are dealing with divorce or the dissolution of a civil partnership, and want to get your financial affairs in order, then let us help you.
A lump sum payment order is an order that requires you to pay a lump sum of money to the other party. This could be for your ex-spouse’s benefit or for the benefit of your child or children.
Lump sum orders are available on divorce (same-sex or heterosexual) and on the dissolution of a civil partnership. These orders can provide a useful tool on the breakdown of a marriage or civil partnership to give you a share of a large capital asset owned by your ex-spouse, or to compensate you for your interest in, for example, the family home and in business assets where liquidity can be an immediate issue.
Every case is different and how the payment is made is usually specific to the needs of those involved. The payment could be made in instalments or in one lump sum. If payment is to be made by instalments, then these are variable and can be ordered to be secured. How the payments are secured will depend upon your individual case. Other factors will be considered such as which other assets are available against which the lump sum can be secured, e.g. against a property owned by the person paying.
The lump sum order will be defined as a specific sum on a specific date. It should be noted that there are penalties for late payment of lump sums which can accrue interest, generally at the judgment rate of 8%.
After property, your pension may be the greatest value asset held by you and your spouse or civil partner. It will be taken into account when considering any divorce financial settlement. When deciding the best way to deal with pensions following your divorce or dissolution, the court can consider the following options:
- Pension sharing order
Broadly speaking, all forms of pension schemes within the UK can be the subject of a pension sharing order – whether the schemes are in payment or still accruing. However, the basic state pension cannot be shared.
If a pension sharing order is made, then the spouse or civil partner receiving the pension credit will receive a percentage of the other’s pension into a pension plan in his or her own name. Any pension benefit must be transferred into a pension scheme. Sometimes it will be possible to transfer the pension credit into a new pension plan within the existing scheme. However, more likely the pension credit will need to be paid into an entirely new scheme of the receiving person’s choice.
- Pension attachment order
If a pension attachment order is made, then it remains the pension of the person to whom it currently belongs but a proportion of the benefits are paid to the spouse or civil partner on retirement.
Offsetting is where you may receive a lump sum of cash or a larger share of a property in return for not making a claim (or having a smaller claim) against your spouse or civil partner’s pension. This is most likely in cases where the overall pension is small – which makes a pension sharing order expensive/disproportionate, or where one of you has a more pressing need for other assets, such as a home.
It is necessary on divorce or dissolution for everyone to provide an updated valuation of all of their pension arrangements. This is called a CE (cash equivalent) value.
Where a pension is not in payment, then the member is entitled to one free valuation per year. If the pension is in payment then it may be that a fee is payable to obtain an updated CE value.
We understand that pensions in the case of divorce can be a complicated matter and you may have questions and worries that you would like to discuss. Please contact us for more information.
Maintenance (also referred to as periodical payments) is paid for the benefit of spouses (male or female) and is termed spousal maintenance and child maintenance (for the benefit of a child of the family). Maintenance orders are available on divorce (same-sex or heterosexual) and on the dissolution of a civil partnership.
Following your divorce or dissolution, you may agree or the court may order you to support your ex-spouse. You will either agree with the amount and duration of spousal maintenance that you are required to pay or the court will decide. Spousal maintenance will end automatically on the remarriage of your ex-partner or either of your deaths. Alternatively, payment of spousal maintenance may only be for a term (a number of years following which the obligation ceases unless it is capable of extension).
The court will consider a number of factors when deciding whether to make a spousal maintenance order. These include:
- The needs of both of you
- Your respective earning capacities
- Your age
- Your standard of living
- The duration of your marriage/civil partnership
There is no set formula and it is up to the court to determine the amount of maintenance based on the recipient’s reasonable needs.
Maintenance is always variable, either upwards or downwards, and can be linked to the Retail Prices Index (RPI) and Consumer Prices Index (CPI). If the payee becomes unreliable then maintenance can be enforced through an attachment of earnings order. Another option, if the payee comes into capital resources in the future, is to render a clean break following a capitalisation of your maintenance claim. This is a more affordable and attractive outcome. The court is obliged to consider a clean break (see further below). More often than not, it is just not an affordable option or may not be desirable at the time, but it could be a future possibility.
Unlike spousal maintenance where payment is dependent on a number of factors (and so may or may not be payable, depending on the circumstances of the case), an absent parent has an automatic obligation to maintain their children through the payment of child maintenance. As with spousal maintenance, child maintenance is normally paid monthly and usually until the child concerned reaches 16, or finishes full-time secondary education, whichever is later. Jurisdiction over child maintenance mainly lies with the Child Maintenance Service (CMS). However, the court does retain residuary powers including top-up orders and school fees orders. In the event that the parties cannot agree upon the amount of child maintenance to be paid, an application can be made to the CMS for a calculation of how much the absent parent should be paying each month.
The calculation of child maintenance is formulaic. To find out more about spousal and child maintenance speak to our team of divorce financial settlement experts who can advise you on your next steps.
Sometimes during or following a relationship breakdown one party will try to hide or dispose of their assets in an attempt to minimise the resources available to them for sharing on a financial settlement. If you think this might be happening and you have already started proceedings for a divorce financial order, you can apply to the courts to prevent and recover the disposal of assets. However, the courts will need sufficient evidence that a disposal has happened or likely to happen and that an order is necessary. A vague suspicion is not enough.
If the court is satisfied that your ex-partner is intending to deal with their assets in such a way so as to defeat your claim for financial relief (by hiding or disposing of his/her assets), the court has the power to make such an order as it thinks fit in order to restrain them from doing so. Secondly, the court also has the power to set aside dispositions that have already been made where, if the disposition was set aside, different financial relief would be granted.
An injunction can offer you the security and peace of mind that you and your family are protected when a relationship breaks down. Whether you are looking to protect yourself, your home or your assets, it is important to act quickly.
Seeking legal advice early allows us to help you take the right steps to protect you and your assets. Time is critical when considering whether an application should be made for an injunction.
It may also be possible, within the court’s inherent civil powers, to apply for a freezing order to restrain a party from disposing of or dealing with his/her assets. The usual purpose of a freezing order is to preserve a party’s assets until there is an outcome of the financial remedy application. The resulting judgment can then be enforced against the assets that have been frozen, e.g. against funds held in a frozen offshore bank account. Freezing orders can be obtained against assets both within the jurisdiction of England and Wales (a domestic freezing order), or against assets situated outside the jurisdiction (a worldwide freezing order – Mareva injunction). Applications such as these are by their very nature, usually made in an emergency and without notice to the other party against who you are seeking the order. They are invariably expensive.
Our specialist team of divorce settlement lawyers is experienced in dealing with emergency applications and well equipped to guide you through the process and ensure that you achieve value for money. For example, there may be alternative and more practical measures, which can be taken to achieve the same result at a fraction of the cost. In other more complicated cases, these are not possible and freezing orders are the only means of maintaining the status quo.
Traditionally trusts have been set up to protect fortunes from tax but now they are more frequently set up to keep wealth within a family and to protect it from financial claims on relationship breakdown.
The court’s function in financial proceedings is to establish the assets of the marriage then divide them between the parties in a fair way. This is much harder in cases where there are assets held in trust. The court has the power to vary the terms of both ante and postnuptial trusts and it has been known for the court to extinguish or reduce one party’s interest in a trust to make provision for the other. Each case that comes before the court will be treated on an individual basis; however, the courts are showing a tendency to treat a trust fund with less sensitivity if it is necessary to call upon that particular resource to ensure that both parties’ needs are met. Even offshore trusts are open to potential claims, as some jurisdictions will follow English court orders.
When deciding on the most appropriate jurisdiction (in England and Wales or abroad) to bring divorce (or judicial separation) proceedings, it is always important to consider where the financial matters arising out of the divorce will be determined. Jurisdiction to entertain financial applications is often dependent on the existence of divorce proceedings in a particular country or jurisdiction. Our team of friendly divorce lawyers will help to advise you about the best course of action for your case.
In England and Wales, the court retains the authority to make financial orders after a decree of divorce made overseas, as long as that decree of divorce is recognised in England and Wales.
If most of your assets from the marriage are held in another country then we can advise you whether an order made here is enforceable in that country. If an order made here would not be enforceable in that country, then it would be sensible to seek the advice of a lawyer there about your options. As members of MSI, a global alliance of lawyers and accountants, we can put you in touch with a lawyer in that country.
If you are already thinking about seeking a divorce financial order in a foreign jurisdiction then you should consider the approach the foreign court will take, such as:
- How the foreign court usually deals with financial disclosure and expert advice;
- Whether it is possible to obtain interim maintenance while the proceedings are ongoing; and
- If there is provision within that country to assist you with funding the proceedings.
We can provide you with the appropriate advice and assistance that you need in order to decide on the best jurisdiction to bring proceedings.
Before choosing where to issue divorce proceedings it is important to make sure that:
- Your decree of divorce will be recognised in all the countries that it needs to be; and
- Any financial order that you obtain will be enforceable in the area where the assets are held.
Choosing where to issue proceedings is often determined by the location of your assets and the most effective means of enforcement.
There are certain systems of mutual recognition and enforcement of financial orders between various countries across the globe, which have come about because of a number of international agreements and conventions.
A financial order made in a foreign country can often be registered as an order of the court of England and Wales provided that a convention of mutual recognition and enforcement applies, and either the paying party is resident here, or England and Wales is where the assets in question lie. Once an order is registered as an order in England and Wales, the English courts can proceed to enforce it.
The most common methods of enforcement in England and Wales are attachment of earnings orders, third party debt orders and charging orders over property.
Financial orders made in England and Wales can only be enforced in a foreign country if the laws of that country allow it and if that country has signed up to the agreements/conventions which allow mutual recognition and enforcement to take place.
Yes. It may be that you have finalised your divorce by obtaining decree absolute but you have not formalised any agreement or dealt with your claims in relation to a divorce financial settlement. Our team of family solicitors can assist you with this. It is vital that all financial claims are dealt with since these will remain live until an order is made or there is a remarriage. If you remarry then your claims against your spouse will end and if your spouse remarries then your spouse’s claims against you will end. If claims remain live, then this means that any assets you accrue following the divorce and up until the claims are dealt with are available for distribution between you as part of your divorce financial settlement.