Financial arrangements

Parties to a divorce are rarely financial equals, particularly if the couple have children and one spouse has either given up work or reduced their work commitments to look after them. There is a significant difference between the rights of those who are married or in a civil partnership and those who are not. If parties have co-habited their claims are more restricted and more information can be found on our co-habitation page.

The principles guiding a financial settlement on divorce is a fair share of the assets with a clear focus on meeting each parties’ future needs. Each couple and their circumstances are unique and will inform the financial settlement.

Financial settlements

A financial settlement is a legal agreement between divorcing spouses that specifies how assets are to be divided. This will usually be recorded in a financial consent order granted by the court in proceedings for divorce. A settlement will consider the current and future assets and the financial needs of both spouses. This will be ascertained after both have provided complete and accurate details of all their assets and liabilities using the standard disclosure Form E. Sometimes specialist advice will be needed to ascertain the value of an asset and how it should be treated. These would typically be pensions; business assets and property.

Once the assets have been identified and valued, a settlement can be negotiated.

There are several factors that help to determine how much each spouse will receive, including their individual financial resources, what they need to live on, their standard of living, the length of their marriage, their age and health, their respective contributions to the marriage (financial and non-financial).

Dealing with the family home can be a particular concern, especially if there are children involved. There are several approaches that could be taken depending on the financial situation and the other assets involved. These include selling the property and splitting the equity; one spouse buying out the other; or an offset with one party to keep the house with the other party retaining equivalent assets. These options will often be dependent on the terms of the mortgage held on the property.

Pensions are an asset that needs to be considered carefully. There are many different types of pensions, and they are valued in different ways. Although pension sharing has been part of divorce negotiations for several years, many people remain unaware that pensions accrued during marriage are counted as part of the matrimonial asset pot – and are often a very valuable asset. Most pension funds are capable of being shared and there are special rules about how this is done.

However, pension sharing is not straightforward, depending on the type of pension(s) involved, and expert advice is often needed. For more information on this important topic, listen to our podcast ’ Treatment of Pensions on Divorce.’

If a settlement cannot be reached, the assistance of a third party such as a mediator or some form of dispute resolution may be required. Ultimately an application can be made for a court to decide but for most couples this will not be required.

We have a specialised team who can advise on you on all aspects of a financial settlement as outlined above. Please contact a member of the team who will be happy to explore the options open to you.