Divorce: Sorting Out The Finances

Divorce: Sorting Out The Finances
Divorce: Sorting Out The Finances

A divorce is a legal process that formally dissolves a marriage in the eyes of the law. It requires completing paperwork, filing it with the courts, and usually involves a financial cost.

However, divorce proceedings do not encompass the division of a couple’s assets or arrangements regarding children. These matters must be addressed separately. Many people are unaware of this fact, which might explain why some individuals choose not to obtain a Clean Break Order (or Final Order). This type of order marks the conclusion of financial matters, preventing any future claims by an ex-partner. In an effort to simplify proceedings or save money, some individuals skip this crucial step. Unfortunately, this decision could prove costly in the long run.

Why don’t people sign off on a divorce settlement?

We often encounter these reasons given for not pursuing a divorce settlement at the same time as obtaining a divorce:

  • “We have nothing worth protecting—no house, no savings, no other assets—so why should we hire a solicitor to help us?”
  • “We will sort out financial matters between ourselves—we are still amicable and don’t need someone else to tell us how to handle it.”
  • “I received a quote from a solicitor for financial matters, and I can’t afford it.”
  • “We have reached an agreement between ourselves and see no need to involve anybody else.”
  • “We’ve had enough stress going through the divorce. We plan to let matters rest for a while and revisit settling our financial affairs, perhaps when the children are older.”

However, all of these reasons can potentially lead to future financial complications for all parties involved.

Don’t delay a divorce settlement

Unfortunately, anyone assuming that matters will improve with time is mistaken. If a consent order is not agreed upon, an ex may have a claim on your assets in the future, even those acquired after your divorce. For instance, if one of you wins the lottery, inherits, or receives another windfall post-divorce without a final order dismissing claims, the other party may have a legal claim. Even defending against such actions, with the associated cost, stress, and emotional turmoil, could exceed the effort if matters had been resolved during the divorce proceedings.

You might believe a consent order is unnecessary because you’ve amicably agreed on arrangements. However, there’s no guarantee that this amicability will endure. Changing personal circumstances, encouragement from a new partner, or evolving feelings over time could lead to a change of heart or a claim. We’ve seen this scenario unfold far too often.

For parties with straightforward property or savings matters, agreements are typically simple to reach. Parties can make an agreement that dismisses all future financial claims related to their marriage. Therefore, there’s no reason to delay sorting this out; the critical step is to document it and lodge the agreement with the court. Any agreement reached between parties is not legally binding unless it’s part of a court order. Without an order, one party could retract their agreement, requiring costly efforts to prove the initial agreement’s terms.

  • Property and Tax Considerations: While many understand capital gains tax implications when selling non-primary residence properties, they may overlook time limitations. The Inland Revenue often allows only the current tax year for divorce-related transactions before assessing potential tax liability. Delaying can result in avoidable tax charges.
  • Valuing Marital Assets: Asset valuation timing is crucial. Courts demand up-to-date asset valuations when considering settlements, potentially years after separation. Outdated valuations could disadvantage one party who’s been financially contributing post-divorce, benefiting the other party. Disagreements over valuations can exacerbate issues, leading to further complications.
  • Finalising Matters: If your ex-spouse hesitates to finalise financial matters, question why. A finalised court order ensures clarity and closure. Delaying might signal unresolved issues or lingering control desires. For respondents remarrying, failing to address financial matters can result in missed opportunities for financial relief under the Matrimonial Causes Act.

Our advice is, if you’ve decided to divorce or have already divorced, ensure your financial affairs are properly managed with a court order covering shared marital assets. While there may be initial costs, the potential financial and emotional toll of unresolved agreements can be far more significant in the long run.

Avatar of DLS Solicitors by DLS Solicitors
24th April 2024
Avatar of DLS Solicitors
DLS Solicitors

Our team of professionals are based in Alderley Edge, Cheshire. We offer clear, specialist legal advice in all matters relating to Family Law, Wills, Trusts, Probate, Lasting Power of Attorney and Court of Protection.

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