The final order (previously known as the decree absolute) is the legal document that ends your marriage, but it does not end the financial ties that exist between you and your ex-spouse. This article explains what a financial divorce settlement is and helps you decide if you need one.
A consent order is a court-approved document that takes your financial divorce settlement and makes it legally binding by a court. The agreement describes how you and your spouse will divide your assets and wealth after divorce and removes the risk of any future claims.
Do you need to make a financial divorce settlement?
It is absolutely possible to get divorced without agreeing on any financial arrangements. However, it is not recommended. Without a financial agreement in place, it’s possible for one spouse to make a claim against the other many years after the divorce is finalised.
I know it’s hard to believe, but your ex could make a claim against you if you win the lottery, come into an inheritance or launch a successful business.
How to work out a financial divorce settlement
Unfortunately, the law does not define a formula for dividing assets. It is up to a divorcing couple to agree on the settlement. But whatever you decide must be considered fair by the courts. The courts take into consideration income, future earning abilities, and assets, as well as financial needs and responsibilities.
If you have complicated finances, such as multiple businesses or investments, or if you think your spouse is hiding something or disposing of assets, then you might need to seek the advice of a financial advisor or lawyer.
That said, most people’s finances are relatively straightforward, and they can easily find out what assets and debts they have. In this case, the most sensible option is to agree on the financial split with your spouse and get your divorce financial settlement written into a financial consent order for a court to approve.
The starting point in any financial divorce settlement is a 50/50 split of all assets acquired during your time together. However, if one of you has a greater need, for example, to house and take care of the children, or if they earn a lot less, then the division may need to reflect that.
Step 1: Get a clear picture of your financial situation
The starting point to agreeing on a financial divorce settlement is to get a clear picture of your financial situation by preparing the following information:
- List all your assets (your house, a car, savings, etc.) and debts (loans, credit cards, store cards)
- Ask your pension provider to give you the value of your pension pots.
- Work out any incoming revenue from employment, benefits and investments.
- Find out if you are eligible for any benefits or tax credits.
- Prepare a monthly budget that shows all incomings and outgoings.
Step 2: Make a decision on your finances
Now that you have collected all of your information, you can start to work out the financial aspects of your separation, such as:
- How will you split any equity in the family home?
- Will you share any of the pensions?
- Will one parent pay child maintenance?
- Where will you both live, and what are your living costs likely to be?
- Will you return to work to support yourself if you’re not currently working?
- What expenses can you cut back on or negotiate better deals with suppliers?
- How will you share and, or consolidate debt?
These are some, but not all, of the issues you should address when finalising your financial divorce settlement. Every settlement is unique to your circumstances. If you can reach a financial agreement with your spouse, you can save a lot of money by using an online divorce company to convert your agreement into a court-approved consent order.
What if we can’t reach an agreement over our divorce settlement?
A financial divorce settlement is easier to achieve if you can keep the divorce amicable or if you have very few assets to divide. But, in some cases, your financial divorce settlement may become disputed, and you may need help agreeing, either through mediation or using a divorce solicitor.
If you cannot resolve your dispute, you can take your spouse to court, for a judge will decide. The court route is painfully long and expensive (tens of thousands of pounds), so carefully consider the costs versus benefits before using this option. Rarely will the financial benefit of fighting in a court outweigh the financial cost.
Getting a financial consent order
Once you’ve agreed on your financial divorce settlement, you need it to be made legally binding by a court so neither of you can change your mind and ask for more. A financial divorce settlement is made legally binding by applying to the court for a consent order.
There are two types of financial divorce orders – a consent order and a clean break order.
What is a Consent Order, and who is it for?
Consent orders are for couples wishing to divide assets and make their financial divorce settlement legally binding. Once you’ve agreed to your financial settlement, you need it written into a consent order and sent to the court for approval. If the judge considers it to be fair, they will approve it. Once approved, neither spouse can make a financial claim against the other, and the details of the agreement, for example, selling the former family home and splitting the proceeds, become legally binding and enforceable by the court.
What is a Clean Break Order, and who is it for?
A clean break order is the simplest type of consent order. It is for couples without children under 18 years old who want to cut any financial ties following divorce but don’t have any assets to divide.
Many couples think that because they don’t currently have any assets, they don’t need a financial clean-break consent order. However, you are at risk from a financial claim should you come into money in the future. Without a clean break consent order in place as part of your divorce financial settlement, your ex is within their legal right to make a claim at any point in the future.
As with a consent order, a clean break order must be agreed, drafted and then sent to a court for a judge’s approval.
Frequently Asked Questions
Which financial divorce settlement do I need? A consent order or a clean break order?
You only need one of these, and it depends on your assets. If you don’t have children or any assets to share, you need a clean break order; otherwise, you need a consent order.
We’ve agreed on our financial split – how do we get our financial divorce settlement written for a judge to approve?
You have two choices. You can use an online divorce service such as Easy Online Divorce, where a clean break order is £299 and a consent order is £499 (£599 for a pension sharing consent order). A high street solicitor will charge somewhere in the region of £1000 for a simple, clean break to £3,000+ for a consent order.
A judge approves the final settlement, so the decision on which service you use comes down to how amicable you can keep the negotiations with your spouse.
In addition to these fees, the court charges £53 to cover their staff costs.
Does spousal behaviour affect how much money I will get?
Unreasonable behaviour does not impact financial divorce settlements except in rare circumstances, such as murder or gambling addiction. The blame for the relationship breakdown and the division of assets has always been separate issues. And now the no-fault divorce law has removed all reasons behind the divorce and replaced them with a simple statement that the marriage has irretrievably broken down.
The agreement you reach on your finances should look at other facts like future earning potential and fairness. The starting point is a 50-50 split, but often an unequal division is fairer to ensure both spouses can continue with their lives in relative financial security.
When should I start working out my financial divorce settlement?
You should start thinking about your financial settlement as soon as you’ve started your divorce, if not before. It can take a while to collect all of your financial information. If you have a public sector pension (e.g. the NHS, teachers, police, etc.), it often takes around three months for them to calculate the value of your pension. Even if you aren’t planning on sharing pensions, you must provide full disclosure of your total finances for the judge to decide whether your agreement is fair.
When should I apply for a financial consent order?
You can ask the court to approve a consent order (or clean break) once you’ve started your divorce and have received your conditional order (previously known as a decree nisi). As mentioned above, getting your financial disclosure information can take several months, so it’s a good idea to start negotiating with your spouse as early as possible to allow the online divorce provider or high street solicitor time to draft your consent order so that they can submit it to the court for approval as soon as you receive your conditional order.