What is a Financial Divorce Settlement? And Do I Need One?
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.
Although its not recommended, it’s entirely possible to get divorced without agreeing any of the financial arrangements. Without such an arrangement in place, your or your spouse could make a claim against the other, many years after your divorce is finalised. Meaning that your spouse could make a claim against a future lottery win, or the hard work of growing a successful business.
To remove all financial ties and risks of future claims, you need to apply to the court for a financial divorce order. A financial divorce order is a legally binding agreement on how you and your partner will divide your assets and wealth when your marriage ends that prevents any future claims.
If you have complicated finances such as multiple properties and businesses, or if you think your spouse is hiding something or disposing of assets, then you should seek the advice of a lawyer.
However, for most people, their finances are relatively straightforward – some debt and some assets. In this case, the most sensible option is to agree on the financial split with your spouse and get it written up into financial divorce order for a court to approve.
How do you 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 they agree 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.
The starting point in any financial settlement is a 50/50 split. 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.
Get a clear picture of your financial situation
The starting point is to get a clear picture of your financial situation by preparing the following information:
- List of all your assets (a 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.
Now that you have this 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 negotiating better deals with suppliers?
- How will you share and, or consolidate debt?
These are some, but not all of issues that need to be addressed 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 money by using an online divorce company to manage the financial consent on an execution-only basis.
This is easier if you can keep the divorce amicable or you have very few assets to divide.
In some cases, the financial divorce settlement will be disputed, and a couple may need help agreeing, either through mediation or using a divorce solicitor.
If you cannot resolve your dispute then you can take it to be heard in the courts and a judge will make the final decision. The court route painfully is long and expensive (tens of thousands), so take careful consideration of the costs versus benefits before using this option.
Getting a financial divorce order
Once the financial divorce settlement has been agreed and finalised, the agreement needs making legally binding. This is done by applying to the court for a financial order.
There are two type of financial divorce orders – a consent order and a clean break order.
Consent orders are for couples who have assets to divide and who want to make their financial divorce settlement legally binding. Once you have agreed your financial settlement, either informally or with the help of mediators or divorce lawyers, a consent order is drafted and sent to the court for approval. If the judge considers it to be fair, the consent order will be approved. From this point neither spouse can make a financial claim against the other.
Clean break orders are for couples who don’t have any assets to divide, but who still want to cut any financial ties following divorce.
Many couples think that because they don’t currently have any assets, there is no point in getting a financial order. But this is a risky approach because there is always the possibility that you will acquire money in the future. And if you do, your ex is within their legal rights to make a financial claim. As with a consent order, a clean break order must be drafted and then sent to a court to be approved by a judge.
Frequently asked questions
Which financial divorce settlement do I need? A consent order or a clean break order?
You do not need both a consent order and a clean break order. Only one will be suitable for you, depending upon the assets you currently own. If you don’t have any assets to divide, you will use a clean break order, and if you do have assets, you will use a consent order.
Our divorce is amicable, and we have agreed on the financial split, how do we get our financial divorce settlement written for a judge to approve?
You can either get help from an online divorce service such as Easy Online Divorce who charge from £179 to £279, or from a solicitor who will cost in the region of £600-£1,500. The court decides and approves the final settlement, so the decision on which service to use will come down to the complexity of your situation, and how amicable you can keep the negotiations with your spouse.
In addition to these fees, the court charges £50 to cover their staff costs.
Will I get less money if I agree to Adultery?
It’s a common misconception that when Adultery (or certain unreasonable behaviours) has taken place that they are entitled to more or less within the financial divorce agreement. This is not correct, except in rare circumstances, such as murder or gambling addiction. The grounds for the divorce and who was to blame for its breakdown and the division of assets are treated as separate issues.
The agreement you reach on your finances should look at other facts, such as future earning potential and fairness. The starting point is a 50-50 split, but in reality, an unequal division may be needed to ensure both spouses can continue with their lives in relative financial security.
When should I apply for a financial divorce settlement?
You can only apply for a consent order once you have started the divorce process and got to the decree nisi stage. In some cases, it can take 6 months for the court to seal an order so start negotiating with your spouse as early as possible and submit your financial order to the court as soon as your decree nisi is pronounced.
If you would like to learn more and discuss the best financial divorce order for your situation call us on 0204 530 8101 or email us at email@example.com.