A divorce financial settlement is an arrangement where a couple’s assets and financial affairs are separated upon divorce or separation. There can be a lot of pressure, anxiety and frustration for all parties when faced with dividing the assets of a marriage or partnership. This can mean that the division of assets during a divorce or separation can be the most acrimonious part of any divorce. 

For some, this can mean an application to the court in requesting assistance with the financial settlement. In such cases the judge will decide on the matter, the confines of the law providing them with a wide discretion on how to split the assets and who is entitled to what. 

Reeds Family Solicitors can assist with all aspects of financial arrangements and settlements following a divorce or separation. If you would like to discuss any aspect of your situation with a legal expert, please contact us through our contact page here. Alternatively, you can phone 0333 240 7373, or email us at info@reeds.co.uk. 

What Is a Financial Settlement in a Divorce Context? 

Financial Settlement is the division of assets and financial agreements in the divorce process. This can happen during the divorce, though it can take place after the divorce has been decreed.  

A financial settlement can be agreed outside of a court. Usually both parties will enter a process of negotiation or mediation (with or without a solicitor’s assistance) until a financial agreement can be found. The length and success of this process can depend on a full and frank financial disclosure. 

How Are Assets Split During a Divorce? 

If the court is involved in the division of assets, the assets are split according to basic guidelines set out in Section 25 of the Matrimonial Causes Act 1973. If the case involves dependent children, then the Act states that the court must place the needs and welfare of the children as the most important consideration during the financial settlement. 

Section 25 of the Act sets out several areas where the court may exercise its powers; 

  1. Foreseeable Future Financial Considerations.  

The act states that the court can consider “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”.  

  1. Financial needs, obligations and responsibilities.  

Here the court is concerned with any financial concerns and obligations that either party is likely to have in the foreseeable future. This could include child care costs and the cost of rehousing each party after the divorce. 

During this part of the process, the court will request an estimated breakdown of financial concerns and outgoings from each party. 

  1. The standard of living enjoyed by the family before the breakdown of marriage. 

Where possible, the court will try to maintain the same standard of living enjoyed during the marriage for both parties. Whilst this is the ideal, it is usually not possible to make a settlement that will result in no reduction in the standard of living for either party. 

  1. The ages of each person when they entered into marriage and the duration of the marriage. 

The age of the person will impact their earnings, mortgage capacity, and their ability to achieve independence. This may become important when assessing income or deciding how pension assets will be split, especially in situations where one person is planning to retire soon. The longer the marriage the more difficult it may be to achieve independence as two single parties.

  1. Any physical or mental disabilities of either party 

This may impact a party’s income or earning capabilities as well as their accommodation and expenditure needs. If one or both party has disabilities they may be at a disadvantage when trying to live independently.

  1. The ongoing contribution each make or is likely to make to the welfare of the family. 

How assets came into the marriage is an important factor. If a party’s needs have not been met, it may not be possible to argue a party’s contribution should lead to a departure from equality.

  1. The conduct of each party 

Conduct typically refers to exceptionally serious behaviour from one or more party.  This may include violence or financial misconduct. The court may disregard conduct if there has not been a serious affect on the party.

  1. Consideration of benefits which may be lost after divorce. 

This typically relates to pensions. Private pensions made be shared, offset or attached. Government pensions cannot be shared if a marriage or civil partnership ends.

How Is Property Divided Following Divorce or Separation? 

Following a divorce or separation, property is divided with the intent of equality and fairness. This does not always mean a 50/50 split. As you can see from the considerations of the court, there may be many reasons why the financial settlement is not ‘straight down the middle’. 

For example, one party may be considered economically weaker, with their financial income and earning capacity less strong than the other party. This person may require a greater share of the financial assets in order to share the same quality of life as the other. 

In terms of physical property, the court hold powers to block or force the sale of property, and decide on how the proceeds of the sale are split between the party members. There are times a property is held in only one person’s name. This can become a difficult area. The court will evaluate fairness and equality, property division will depend on the circumstances of the marriage.

How Is a Pension Split in Divorce Proceedings? 

Each divorce settlement is different, which means the pension split may differ case-to-case. However, as a marital asset the general starting point for a pension split in divorce settlements is 50/50. A pension may be considered as part of a financial settlement to ensure a fair agreement is reached.  

There are three options of dividing the pension during a divorce settlement: 

  1. Pension Sharing – Where a formal agreement is made to divide your pension assets at the time of divorce. The courts work out percentages and the recipient can either become a member of the pension scheme or transfer the value to an existing or new pension provider. 
  1. Offsetting the Pension – The value of the pension is ‘offset’ against other assets. So whilst one partner/spouse will receive the pension, the other may receive assets of equivalent value. For example, this can be a greater share of the property or cash to the same value. 
  1. Earmarking – No legal transfer of pension ownership happens. However when one party starts to draw pension benefits the pension, or part of it, is paid to one party. 

Other Frequently Asked Questions Regarding Financial Settlements 

Can a Divorce Be Granted Without a Financial Settlement Agreement? 

Yes, the court can progress a final order (previously called a Decree Absolute, or the final divorce decree) without a financial settlement agreement. Whilst this is possible, a financial settlement is usually a crucial aspect of a divorce.  

Reeds Solicitors recommend seeking legal advice on the financial settlement before progressing the divorce. Not having this in place can leave you open to potential future financial claims.  

Do I Need a Solicitor for a Financial Settlement in Divorce? 

Whilst it is possible to negotiate an agreement amongst you and your spouse/partner without a lawyer, it is worth seeking legal advice. A solicitor can prevent potential pitfalls, reduce the likelihood of future financial claims being made against you, and help you navigate a potentially difficult process. 

Where there are significant assets as part of the considerations, the need for a solicitor is even greater to ensure your interests are best protected. 

What Are the Results of Typical Divorce Financial Settlements? 

In the UK a divorce settlement aims at achieving a fair 50/50 split for both parties. However other circumstances and considerations may mean that one party may receive a larger portion of the assets. 

How Long After a Divorce Can You Apply for Financial Settlement? 

There is no time limit after a divorce that financial claims can be made by one spouse/partner against another, provided that they have correctly filled out their divorce petition to inform the court of their intention to deal with their financial claims. In order to protect against financial claims it is necessary to get a court order, setting out the financial settlement and dismissing each parties further claims. 

Do I Need a Court Order for a Divorce Financial Settlement? 

It is important that your divorce financial settlement is recorded in a court order. If it is not, then financial claims can be made against you in future. As there is no time limit on making financial claims as a result of a divorce, this could mean a claim is made against you years after the divorce was settled. 

A court order setting out the agreed arrangements and dismissing the other party’s further claims will ensure that further claims cannot and will not be made.  

A court order for a divorce financial settlement can be obtained: 

  • By consent of both parties. 
  • By negotiation between solicitors, meditation or a collaborative process. 
  • Or following a contested trial.  

How Long Will It Take to Get a Financial Settlement? 

This depends on whether all parties are in agreement. If you and your partner/spouse are in agreement, then the court order can be made at the same time as the decree nisi. The court order will take effect when the final order (previously called decree absolute) is made. Depending on the court lead time, this process usually takes between 6-8 months. 

If you and your spouse/partner are not in agreement, or one party is not willing to provide a full and frank disclosure of their financial position then the process will take a lot longer. This can be 12-18months or even longer. 

Full and Frank Disclosure of Assets and Financial Position 

To get a fair settlement as soon as possible, it is necessary for each person to identify and value their assets and income. Without this the court cannot make an informed decision, and it can delay the proceedings as discussed above.  

What Orders Can the Court Make? 

The court can make various orders during the course of the proceedings. They include: 

  • Periodical payments including maintenance or alimony  – alimony is now called ‘Spousal Maintenance’  
  • Secured provision 
  • Lump sum 
  • Transfer of property 
  • A pension attachment and a pension sharing order. 

What Principles Will Govern My Financial Settlement? 

The law in England & Wales governing financial settlements sets out criteria which must be taken into account. How these criteria are applied is discretionary and varies according to the circumstances of each case. 

Please contact us for advice regarding your circumstances. You can contact us through our contact page here. Alternatively you can phone 0333 240 7373, or email us at info@reeds.co.uk.