Finances on divorce FAQs
What is the best way to deal with financial issues?
It is almost always best to negotiate an agreement dividing matrimonial assets on divorce. This avoids contested proceedings at court and the associated extra stress, uncertainty and costs.
However, only the court can dismiss claims between spouses arising from a marriage. Consequently, a court order is required to achieve finality. A negotiated settlement should be turned into an agreed form of order (a “consent order”) for submission to the court for approval.
The law is the same whether you and your spouse are negotiating or a contested application is issued at court, so the following guidance as to the law applies in both situations.
What is the best way to negotiate?
The best way to negotiate will depend on the needs and wishes of you and your spouse. There are several ways, including the following:
- Seeking agreement between yourselves and then having solicitors co-operate in drawing up a consent order.
- Negotiation of financial matters between solicitors with a view to agreeing on the terms of a consent order.
- Mediation, in which a neutral mediator assists you and your spouse to reach agreement between yourselves. Where mediation concerns finances, we recommend that an experienced solicitor should act as a mediator and that you have the benefit of legal advice during the process.
- Collaborative family law. This involves a series of meetings attended by you, your spouse and solicitors for each of you, at which everyone works together to reach agreement.
- You and your spouse agree to be legally bound by the decision of an independent Arbitrator, usually, a senior lawyer or former judge, who considers representations made on behalf of each spouse and make a decision.
- Private financial dispute resolution. This is similar to arbitration, but the outcome is an “indication”. It is not legally binding but serves as the basis for negotiating an agreement.
- Court proceedings. Although we try to avoid contested proceedings they are sometimes necessary.
We can advise as to suitable ways to negotiate for your circumstances. Not all of the above processes will be suitable for every divorcing couple.
You can find out more at: resolution.org.uk/looking-for-help/splitting-up/your-process-options-for-divorce-and-dissolution/.
Will the court endorse any agreement that my spouse and I reach?
If a settlement of financial matters is agreed it is usually endorsed by the court unless the agreement seems not to put the interests of any children first or is unduly favourable towards the financially stronger party. The court will sometimes ask for an explanation if it thinks that the drafting of the proposed consent order or the intentions of the parties are unclear.
Are contested court proceedings regarding finances ever necessary?
In some cases issuing proceedings at court becomes a necessity. We will advise you if this applies to your case. Even if an application is issued the court will encourage negotiations and agreement. We will endeavour to apply this in our approach to your case.
My spouse may try to put their assets beyond my reach – what can I do?
If the property in which you and your spouse live (or lived) together is owned by your spouse alone, your Home Rights can be registered against it – this protects your interest by warning off any person that it might be sold or transferred to.
If there is real risk that your spouse will try to put any other property beyond the reach of the curt, for example by moving ownership overseas or transferring it to someone else, the court can make orders to prevent this. This a situation in which it might be necessary to apply to the court for orders before trying to negotiate a resolution.
Do I have to tell my spouse about all of my assets and income?
Yes: It is absolutely essential that both you and your spouse fully and frankly disclose your financial positions to each other and to the court. It is impossible to negotiate unless you know about all the assets you are negotiating over, and the court will not make an order. This disclosure can be given on a voluntary basis without issuing proceedings and we can advise you on how to do so.
Which assets and income are available for division?
All assets including pensions, whether owned jointly or individually by the divorcing spouses, are potentially available for division, as is all income received by either spouse – but that does not mean that it is always appropriate for the settlement and court order to divide all the assets and income.
An exception may apply if either spouse owned a particular asset prior to marriage (or co-habitation), or if they inherited or were gifted it, especially if their marriage was of short duration. These may not be regarded as matrimonial assets but will usually still be taken into account when considering the overall resources available to their owner.
What orders can the court make?
Orders can be made relating to any matrimonial asset or income, including:
- To transfer assets from one spouse to the other.
- To order that one spouse pays the other a lump sum.
- To provide that one spouse pays regular maintenance (“periodical payments”) to the other, possibly by making a capital sum available to produce an
- To split pension funds or payments between spouses.
- In certain circumstances (such as payment of school fees) to provide for regular payment payments or capital provision for the benefit of children.
Collectively, these orders are known as “financial remedies”.
What factors do we have to take into account when negotiating?
Negotiations should take place in light of the factors the court must consider when making an order. The courts have wide discretion when making orders, so it is possible to be creative when negotiating and consider more than one possible option – there is rarely an obvious and “right” answer. The aim is to arrive at a fair outcome, but there are usually different views as to what is fair.
The following factors are taken into account, with first consideration going to the welfare until the age of 18 of any child of the family:
- The income, earning capacity, property and other financial resources which each of the parties to the marriage has or is likely to have in the foreseeable future, including in the case of earning capacity any increase in that capacity which it would in the opinion of the court be reasonable to expect a party to the marriage to take steps to acquire.
- The financial needs, obligations and responsibilities which each of the parties to the marriage has or is likely to have in the foreseeable future.
- The standard of living enjoyed by the family before the breakdown of the marriage.
- The age of each party and the duration of the marriage.
- Any physical or mental disability of either of the parties to the marriage.
- The contributions which each of the parties has made or is likely in the foreseeable future to make to the welfare of the family, including any contribution by looking after the home or caring for the family.
- The conduct of each of the parties if that conduct is such that it would in the opinion of the court be inequitable to disregard it.
- The value to each of the parties to the marriage of any benefit (for example a pension) which, by reason of the dissolution or annulment of the marriage that party will lose the chance of acquiring.
These factors are set out in Section 25 of the Matrimonial Causes Act 1973.
Do we have to split our assets or income down the middle?
“Equal sharing” of assets and income is only a “yardstick” when considering whether any particular division of assets is fair. In most cases, there are circumstances demanding a different outcome.
Equal division will not be appropriate if it will not provide sufficient resources to meet the needs of children, especially their housing needs.
If there are sufficient resources after the needs of both spouses and children are met, assets left are met may be divided according to “sharing” principles, though even a 50/50 division may not be appropriate.
I think that my spouse is to blame for the breakdown of our marriage. Can this be taken into account?
Bad conduct by your spouse will only rarely and in the most extreme circumstances be a factor in deciding how to divide matrimonial finances.
Does the person who issued the divorce petition have any financial advantage?
There is no advantage in being the person who initiates divorce proceedings.
I stayed at home throughout the marriage to look after our children, while my spouse earned all or most of the money coming into the household. Is this taken into account?
Yes, it is. The law says that non-financial contributions to a marriage count for as much as financial ones and should be treated equally.
I gave up my career to look after our children – can I be compensated for this?
It is possible to be compensated if you have given up a career to make a non-financial contribution to your family life, but it is only likely that this will be taken into account if there are sufficient resources left after meeting the needs of both spouses and children.
Am I entitled to maintenance from my spouse?
This depends on your circumstances. If your children and you can be provided for from the capital available, maintenance may not be appropriate, but in many cases this is not possible and maintenance will have to be paid. Even then, continuing payment of maintenance may be the only way to fairly divide the financial resources available between spouses.
There has to be money available for which maintenance to be paid from. There is no point in agreeing to or the court ordering the payment of maintenance if the resources are not there.
The law provides that spouses should take reasonable steps to maximise the resources available from their own earnings. If you are looking after children maintenance may only be appropriate until they are old enough for you to return to full-time work. Maintenance might be paid to assist you to retrain for a new job.
Maintenance for a spouse is separate from child support, which is dealt with below.
Can I make claim against my spouse’s pension?
It is possible to obtain a pension sharing order to split a pension fund into two. Other orders are available to deal with pensions, but pension sharing is by far the most common.
The law relating to pensions and the calculation of their value so that an order can be made is very complex. Legal advice, possibly also involving a pensions consultant, is essential if the division of pensions is envisaged, or if pension entitlements might be offset when dividing other assets.
Pension scheme administrators can only divide pension funds if there is a court order in place. Without an order you will be left relying on the goodwill of your spouse when their pension comes into payment, perhaps many years after your divorce or separation and in very different financial circumstances, and payments will end if they die before you.
Is it possible for us to go our own ways without further financial obligations to each other?
A “clean break” order can dismiss all claims between divorcing spouses, with no payment of maintenance for the benefit of either spouse. The court is obliged to consider whether a clean break is appropriate”.
If there are children under the age of 18 it is unlikely that a clean break will be ordered to take effect immediately. Instead, a deferred clean break can come into effect when the youngest child reaches 18. This will keep alive a claim for maintenance for the spouse caring for the children.
It is not possible to end a parent’s financial obligation towards their children aged under 18. Clean breaks can only take effect between spouses.
Can I agree on the division of property and other financial arrangements now, but get divorced later?
You can negotiate a separation agreement (sometimes called a “separation deed”) now and, as part of this, agree that you and your spouse will divorce at a later date.
A separation agreement must be agreed after both spouses have fully and frankly disclosed their financial positions to each other, including all assets and income. It has to be in writing as a deed, be fair to both spouses and must be entered into without any pressure being exerted by one spouse against another.
Both spouses should have independent legal advice while negotiating and certainly before signing the agreement – or at least have the opportunity to take such advice. If any of these factors are missing, the court may not be willing to enforce the agreement.
Can we agree on the payment of child support? Do we have to go to the Child Maintenance Service (CMS)?
Most separating parents agree child support payments and the CMS do not have to become involved. The courts only have limited powers to make orders for child support.
The formula used by the CMS is often the starting point for agreeing to the level of child support that the parent not living with the children will pay. Child support is based on the income of the paying parent and how often the children stay overnight with him or her. It does not take into account the resources or income available to the recipient.
An agreement set out in a financial order for child support payments falling within the jurisdiction of the CMS will be discharged if, after 12 months have passed from the order’s date, either parent applies to the CMS for an assessment of maintenance payable. Court orders can include agreements that seek to limit any benefit a parent might gain by applying for a CMS assessment, but this can be hard to agree and the court will not always approve such orders.
These circumstances fall outside the jurisdiction of the CMS, so a court order can be made:
- If a child is over 16, or over 19 and in full-time education.
- If a child or either of his or her parents is habitually resident outside the UK (even then there are a few circumstances in which the CMS has jurisdiction).
- If payment of school fees or expenses associated with training or education is required.
- If a child has a disability and requires additional maintenance.
- If the maximum child support available under the CMS system has been reached.
- If the person paying child support is a step-parent.
- If an order is needed for the person with care of the children to pay maintenance to their partner for the benefit of the children.
If an order is made when any of these circumstances apply there is no time limit on its enforceability.
Will I have to pay my spouses’ costs in resolving financial matters? Might they pay mine?
It is rare for a costs order (an order that one spouse pays toward the other’s legal costs) to be made in divorce-related financial proceedings. The court can only make such orders by agreement or if one party to financial proceedings has conducted his or her case unreasonably, for example by asking the court to make rulings on irrelevant issues or not disclosing assets.
However, paying for legal advice is a reasonable financial need and can be taken into account when the court makes a financial order. An order might divide assets so that each spouse has the resources with which to pay legal costs. Sometimes, if one spouse is financially stronger and has sufficient resources available an order can be made that they pay maintenance to their spouse if this is the only way for both of them to afford legal representation.
Sometimes agreement can be reached that the financially stronger spouse will pay towards the other’s legal costs. This ensures that each spouse has legal advice, thus smoothing the path of negotiations and can make it less likely that expensive court proceedings are required, to the benefit of both spouses.
These FAQs are general guidance as to the law only and are not intended to replace the advice given by a fully instructed specialist solicitor. Bennett Welch accepts no liability arising as a consequence of reliance on these notes as a substitute for such advice from us.
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