What is a Financial Divorce Settlement? And Do I Need One?

Financial Divorce Settlements

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What is a Financial Divorce Order?

The Final Order (previously known as the decree absolute) is the legal document that ends a 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 Financial Order removes all financial ties and risks of future claims. Applied for through the court, a financial divorce order is a legally binding agreement on how you and your partner will divide your assets and wealth in divorce, which also prevents future claims.

Do I need a Financial Divorce Order?

It is absolutely possible to get divorced without agreeing any of the financial arrangements, however it is not recommended. Without financial agreements in place, it’s possible for one spouse to make a claim against the other many years after the divorce was finalised. For example, your ex could make a claim if you win the lottery, or should you become successful in 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 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.

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.

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.

What is a Consent Order?

Consent orders are for couples wishing to divide assets and make their financial divorce settlement legally binding. Once the financial settlement, has been agreed a consent order is drafted 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.

What is a Clean Break Order?

Clean break orders are for couples 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 order. However, you risk a claim should you acquire money in the future. Without a financial order as part of your divorce your ex is within their legal rights to make a claim.

As with a consent order, a clean break order must be agreed, drafted and then sent to a court for a judges 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 any assets you need a Clean Break order, otherwise, you use a Consent Order.

We’ve agreed on the financial split – how do we get our financial divorce settlement written for a judge to approve?

2 Choices: An online divorce service such as Easy Online Divorce will charge from £299 – £599.  A solicitor will charge in the region of £750 to £3,000.  The court judges and approves the final settlement, so the decision on which service you use comes down to how complex your situation is, and 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?

This is a common misconception.  Unreasonable behaviours do not impact on financial divorce agreements. (Except in rare circumstances, such as murder or gambling addiction.) The blame for the relationships breakdown and the division of assets have always been separate issues. And now the new no-fault divorce law has removed all reasons behind the divorce, replaced simply with the fact 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 apply for a financial divorce settlement?

You can apply for a Consent Order with the court only once you have started the divorce process and received a Conditional Order. Sometimes it can take a number of months to get the financial disclosure information.  So it’s a good idea to start negotiating with your spouse as early as possible, so that you can submit your financial order to the court as soon as your conditional order is granted.

Next Steps

If you would like to learn more and discuss the best financial divorce order for your situation email us or call 0204 530 8101.

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