What happens with the finances on divorce?
The end of a relationship or marriage can be an extremely emotional and stressful time. It may be difficult for you to make decisions to ensure that you protect the future for you and your family. Sorting out money is, for most couples, the most daunting part of separation and divorce.
The financial issues related to divorce settlements that need to be resolved include where you (and any children) will live after the separation, how your capital assets are to be divided, the provision of maintenance and dealing with long-term funds like pensions.
An important point to remember, is that Separating means that the income and capital assets that supported one household will now have to stretch to support two. Both parties have to be prepared to accept that the lifestyle they were accustomed to will inevitably change, unless the assets to your marriage are substantial.
One common misconception by parties separating is that the reason for the divorce may make a difference to how the financial settlement is worked out. This is very rarely the case. In general, any financial settlement should be fair, and should give priority to the welfare and needs of any children. If your partner has committed adultery or behaved unreasonably, this will not affect the financial aspect of your divorce.
What options are available to me in resolving the finances?
When considering how to resolve the finances, we appreciate it can open up a minefield of questions. Firstly, you must be aware that you can agree a settlement at any time before or after you divorce, although it is advisable to do so before either partner remarries. If your ex-spouse is intending to remarry in the near future and no financial agreement has been reached between you, you should to take urgent legal advice before this takes place.
Whenever you decide to resolve your finances, the law gives a framework for you to work within. It enables you to understand the principles to be applied to your negotiations and you can then use these to construct a financial deal between you. You can reach an agreement directly between yourselves, attend Mediation, negotiate via a Family Lawyer or seek the assistance of the Court.
It is always preferable to try and reach an agreement out of the Court but if one of you wants too much, or is not prepared to agree something that is fair and reasonable or refuses to deal with matters altogether, then you can go to court.
The starting point can be what each of you thinks is fair. If you can agree on that yourselves or via mediation or with your Family Lawyer’s assistance, you will not need to ask the court to impose a decision on you. If you do end up asking the court to decide, each case will be looked at individually. Judges have a very wide discretion and can make a number of orders, but the aim is still to come up with something that is as fair and reasonable as possible, with the interests of your children being a priority.
Consideration will be given to the financial resources that you have, including the value of your home, your mortgage raising capacity, your incomes, your savings, your liabilities and your pensions. The courts will also look at the needs of both of you and your children. If you decide to negotiate a settlement with the assistance of a Mediator or Solicitor, the first step (if suitable) will be for the parties to enter into voluntary financial disclosure. You are both entitled to full and frank disclosure from the other and this can highly assist you in achieving settlement.
Some people often feel that it is unnecessary to pry into their spouses’ financial circumstances and others believe they know one another and their financial positions. If you are satisfied that you are aware of the others financial position and are happy with the agreement you have reached, you can simply proceed to a Consent Order without disclosure. This is a matter for you to decide but the risk is that once a Consent Order is approved by the court, the agreement is final which can prove difficult if after the divorce more assets are uncovered.
It is for this reason that disclosure can be extremely important for both parties because if you clearly set out your financial positions, this shows the court that you were both fully aware of the assets held by the other at the time the agreement was reached and avoid any nasty attempts to vary/amend the Order at a later stage on the argument of ‘non-disclosure’.
If an agreement is then reached between you, a Consent Order will be prepared, approved by you both and your solicitors (if represented) and finally lodged with the court for the District Judges approval. It is therefore essential to consider at the outset, voluntary disclosure between the couple in order to achieve an amicable settlement.
Finally, it is nearly always sensible to have your financial agreement made into a court order even if you reach an agreement between you directly without involving any third parties. This makes sure it is legally binding and enforceable. Even if you have no marital assets, it is worthwhile having the court make an order so that neither of you can make claims against the other in the future. If this does not happen, it is possible for your ex spouse to make a claim against you, even years after the divorce. This might happen if you got an inheritance, or if your finances improved for some other reason.
Whatever size assets, it is worth taking legal advice to make sure that your interests are being protected. We can also advise you the best way of structuring and drafting an agreement. Watson Thomas Solicitors part of Stowe Family Law offer a free callback on all family matters and if you have concerns about resolving the finances following your separation or divorce, then please do get in contact to arrange a callback by submitting your details.
By Rachel Watson, Watson Thomas Solicitors in Fleet Hampshire
