Divorce financial settlements explained
When you legally end your marriage or civil partnership, your money matters with your ex won’t automatically be resolved. Many people believe when they get divorced, any ties they had to their ex will have been severed. Unfortunately this is not the case.
Although the marriage will have ended and either person can legally marry someone else, the law in England and Wales stipulates that the couple still have a financial commitment to each other.
Unless you take steps to resolve your financial matters with your ex, one person could make a financial claim against the other, even years after getting divorced.
So, it’s very important to resolve your finances at the same time as your divorce or civil partnership dissolution, to avoid potential issues in the future.
You may have already discussed this with your spouse or you may have already divided the matrimonial money and property between you. But without a formal agreement in place, either you or your spouse could make a claim in the future for financial provision.
Your financial agreement should be formalised in a court order, only then is the agreement binding, and if one person defaults on any part of the agreement, steps can be taken to enforce the court order.
Also, if in the future, you come into an inheritance your ex could make a claim against those funds at any time, unless you have a divorce financial order from the court in place.
In most cases, it is not necessary for the couple to attend court to put a financial order in place. The court generally reviews the agreement and considers whether it is fair for both people. The court always retains the power to approve the financial order or not. The court has to ensure that it is fair and reasonable, taking into account all the circumstances of your case.
A financial order drafted by a divorce solicitor can be more likely to meet the court’s criteria than one made without professional guidance.
Clean break orders and consent orders explained
You can consider family mediation, or our divorce solicitors can help guide you through the process and negotiate a divorce financial settlement agreement on your behalf.
We don’t have any assets to divide – do I still need a financial order?
Yes, it’s still important to get a financial order even if you don’t have any assets. If you acquire money in the future, then without a financial order, your spouse could claim for financial provision later on. They could be entitled to a share of assets you’ve acquired since the divorce, even after many years. By this time, you could have significantly more to lose.
With a financial order, you can sever the financial ties between you and prevent your spouse from making a future claim.
What will the court consider?
Each financial case is dealt with on an individual basis, with the welfare of any minor children always the main consideration.
The court will also consider whether one spouse has been financially dependent on the other and how they will meet their living expenses. This could be through spousal maintenance payments or a lump sum payment, depending on the circumstances.
Once the financial order has been drafted and agreed, it will be sent to the Court for review by a Judge. If the Judge thinks the agreement is fair and protects the welfare of any children involved, they will grant the order.
The court will consider:
When applying the above factors the courts first priority is to meet both people’s needs. If these needs can be met, the court will consider more complex arguments about how financial and property assets were acquired, and if they should be treated as matrimonial property or not.
If there’s a need for one person to receive ongoing maintenance payments, this can be covered in a financial order. The court would probably implement these for a fixed term or until a certain event (such as moving in with a new partner) rather than for life.
Clean break orders and consent orders explained
Divorce financial orders sever the financial commitment between you and your ex, meaning neither person can make a claim in the future.
A financial order can stipulate what happens to the matrimonial assets and debts after divorce. This will usually apply once the marriage has legally ended.
A financial order can include, but is not limited to:
There are two types of financial order in divorce; a clean break order and a consent order.
A clean break order is for couples getting divorced who don’t have assets to divide, but want to end their financial committment to each other. The clean break order makes it clear that neither person will make a financial claim against the other in the future. This also extends to wills and the ability to contest a will. Without a clean break order an ex-spouse could challenge a will that’s made after the divorce.
A consent order is exactly the same as a clean break order, except it’s for couples who have financial assets to divide at the time. The couple can either agree the contents of the consent order or, if they disagree, they can ask the court to decide how the assets should be divided. A consent order will list the couple’s assets, including any pensions, and show how these will be divided. It will also include a paragraph that prohibits either person from making a financial claim against the other in the future.
A consent order is made up of three main sections:
Does the length of the marriage affect a clean break order or consent order?
The court looks differently at short marriages and long marriages. If the couple didn’t live together before the marriage and were together for less than five years, the court may consider this to be a short marriage. The court would consider a long marriage to be one where the couple lived together for some time before the marriage or have been married for more than five years.
In a short marriage, the court might decide that each person should leave the marriage with what they brought into it. To do this, each person would need to gather provide financial records outlining their assets when they married. Each person would also need to sign an agreement that they forego any entitlement to their ex-spouse’s pension.
How long does it take to resolve money matters in divorce?
This depends on a number of factors for example, whether you have been able to reach an agreement in family mediation or whether financial proceedings are contested through the courts.
As a general rule court proceedings can take 12-18 months whereas negotiated settlements can be reached relatively quickly.
Our highly experienced team of divorce solicitors and legal specialists can guide you through each step of the process. We pride ourselves in providing a commercial ‘no nonsense’ approach with the aim of keeping costs proportionate to your case.
You should agree financial matters during your divorce proceedings, before the final order has been granted.
Finding hidden assets in divorce
When negotiating a financial order, each person needs to disclose all their financial assets, including property, pensions, savings, stocks and shares, investments and business interests. Only then is it be possible to come to an agreement that is fair and reasonable.
Sometimes, however, one person may not be entirely open about their financial position. There may be an attempt to conceal wealth so that it’s left out of the financial order. There are various ways in which assets may be hidden, including:
If you suspect that your ex is hiding money or financial assets from you, speak to a divorce solicitors. Each person has a duty to provide full financial disclosure during divorce proceedings. Someone who fails to do so will be breaking the rules and could be accused of fraud – a criminal offence that can carry a prison sentence.
We can review financial documents and, if we believe there are inconsistencies, can work to uncover any hidden assets. We can achieve this in different ways, such as sending a letter to your ex’s solicitor, or asking the court to issue a court order demanding that they disclose the full extent of their wealth.
Will inheritance be included in a divorce financial settlement?
Inheritance is not automatically included as part of the financial settlement in divorce, but in certain circumstances family courts can decide to include it.
For inheritance received before the marriage, an ex may be entitled to make a claim on it if they benefitted from it throughout the marriage.
If inheritance is received during the marriage and held in a joint account, the court is more likely to determine it to be joint property. This is because the inheritance could be considered to be a benefit to the family, rather than the individual.
If inheritance is received after the breakdown of the marriage, or during a short marriage, the court is more likely to exclude it from the financial settlement.
Future inheritance is also usually excluded, unless it’s expected to be large enough to make a substantial difference to the financial settlement. In extreme circumstances, the court could decide to adjourn proceedings until the inheritance has been received.
What happens to the family home in divorce?
A key consideration when you get a divorce or dissolve a civil partnership is often what should happen with the family home. You and your ex will need to decide who, if anybody, will continue living in the home, particularly if you have children. The children’s welfare is what is most important, not only for any children under 18 but also children over 18 who may be in full time education or training.
The family home may be a property that is owned by one person alone or by both of you jointly. If you own the property jointly, this could either be as joint tenants or as a tenants in common. It is important that you establish which it is and our divorce solicitors can help you with this.
Joint tenants in divorce
Under a joint tenancy it is presumed you own the property equally, but the court can vary these shares depending on the circumstances.
Property held as joint tenants automatically passes to the surviving joint tenant when the other owner dies, regardless of what is stated in your will. You can sever the joint tenancy, which would prevent your share of the property passing to your ex if you died and vice versa.
Tenants in common in divorce
As tenants in common, you each own a specific share of the property, such as 70/30 or 50/50. If you own a property as tenants in common, your share won’t automatically pass to the other joint owner if you die. Instead your share can be left to whoever you choose in your will, or it’ll be passed on under the rules of intestacy if you don’t make a will.
Who is responsible for paying the mortgage after divorce?
Everyone named on the mortgage is equally responsible for the payments. If one person doesn’t pay, the mortgage provider can ask the other person to cover it.
To avoid mortgage arrears, try and agree on how to cover the mortgage repayments, regardless of who’s staying in the home. Our Divorce Solicitors can help you with this.
Divorce options for dealing with a home you rent
If the property is rented in joint names or in your ex-partner’s name only, you may be worried that your ex might try to end the tenancy. Both people don’t need to consent to end a joint tenancy.
If your partner moves out and you stay in the property, you should consider having the property transferred into your name. Otherwise, your partner could still end the tenancy in the future.
If only your partner’s name is on the tenancy agreement, they can evict you without a Court order as long as they give you reasonable notice. This doesn’t have to be in writing and what is deemed as being ‘reasonable’ will depend on your circumstances, although normally it wouldn’t be any more that 28 days.
Alternatively, they may allow to you to stay in the property by agreeing to hand over the tenancy, which may be possible.
What if I’m the only person named on the tenancy?
If you’re the only person named on the rental agreement or the lease, you have the right to ask your partner to leave, as long as you give them reasonable notice. What is deemed ‘reasonable’ will depend on the circumstances but if they have been violent, you may be able to ask them to leave immediately.
If you want to leave the property but are happy for your partner to stay, you may be able to formally hand over the tenancy to them. However, you should get legal advice as to whether this is possible in your case.
Can I protect my right to stay in the matrimonial home?
By applying for an injunction, you can protect your right to stay in the matrimonial home and stop your partner from ending the tenancy or giving you notice to quit.
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