There are several ways a financial settlement can be finalised during a divorce. The first option is for the couple to reach an agreement on how they will divide their shared assets. If you reach an agreement, the next step is to formalise the settlement in a legally binding consent order approved by the court. This process typically does not involve a court hearing or your presence in court. You will need a family lawyer to draft the consent order and submit it for court approval.
If you are unable to reach an agreement or have concerns about fairness in the settlement negotiations with your partner, you may choose to involve a family law solicitor for legal advice and representation. Your solicitor will assess your legal position, review all financial details relevant to your case, and work towards reaching a settlement. They will communicate with your spouse or their legal representatives, and if an agreement is reached, they will prepare a consent order.
Involving the courts
Sometimes, even with the assistance of family lawyers, couples are unable to reach an agreement on financial matters such as asset division or ongoing maintenance payments during a divorce. In such situations, you can apply to the court and request a judge to examine the details and make a decision on your behalf. This process is referred to as applying for a financial order. Reasons for seeking a financial order may include disputes over:
- the amount of a lump-sum payment
- property ownership
- regular maintenance payments for children or living expenses
- division of pension benefits
However, pursuing a financial settlement through court can be expensive. Costs often exceed £10,000, particularly if the case progresses to a third and final hearing. We strongly advise clients to explore alternatives and avoid court proceedings whenever possible, as the outcome determined by a judge may not be satisfactory to either party.
Financial disclosure
It’s crucial to keep in mind that both you and your partner are obligated to provide full disclosure of your financial details right from the outset, as you owe this duty to the court. Only with a complete view of the facts can a judge make an informed ruling. The court will thoroughly assess all aspects of the situation, with particular focus on the welfare of any children resulting from the marriage, including how they will be financially supported.
Factors considered to reach a conclusion will include:
- Income and earning potential of each party
- Property ownership
- Pension entitlements
- Financial commitments and obligations
- Current standard of living
Starting a financial case
To initiate the process, one party must formally apply to the court by completing a form known as Form A. Your solicitor can assist with this form, which notifies the court of your intention to set a timetable for the case and, if necessary, have a judge determine the financial division in case of disagreement. Upon submission of Form A to the court, a fee will be required.
Subsequently, the court will outline to both parties the necessary documents and deadlines. These will include a comprehensive 26-page financial disclosure statement (Form E), along with supporting documents such as a year’s worth of bank statements, tax records, and credit card statements—essentially any financial records. While this process may seem detailed and intrusive to some, it is essential, from the court’s perspective, to obtain a complete understanding of the couple’s financial circumstances.
Court hearings
Securing a financial order through court proceedings typically involves up to three hearings, which can be quite formal and intimidating. However, contrary to what you might see in films, courtrooms for these hearings are often more like large offices, with the judge presiding at the front and both parties accompanied by their legal representatives.
During the first hearing, the judge will request brief details from both sides to confirm the nature of the case. Subsequently, the judge will issue an Order for Directions, specifying the necessary steps and deadlines. This may involve tasks like property valuation or the submission of additional documents. The judge will also address any questions raised regarding disclosure by either party.
The second hearing, known as the Financial Dispute Resolution (FDR) hearing, is typically scheduled eight to 12 weeks after the first hearing. Here, the judge will listen to arguments from both sides to understand their positions before providing insights on potential settlements. For instance, the judge might suggest an equal split of assets or order the sale of a property. Following this hearing, parties are often encouraged to negotiate outside the courtroom based on the judge’s feedback. If terms are agreed upon, these will be presented to the court for a consent order.
If no agreement is reached, the matter proceeds to a final hearing, which can last a full day. Both parties will provide evidence under oath and may be cross-examined by the opposing party’s lawyer. Ultimately, the judge will issue a final order dictating how the finances should be divided based on the evidence presented. It’s important to note that this decision might not align with either party’s desires and can conclude a lengthy and emotionally challenging court process.
While we strive to prepare clients for court proceedings, we strongly advocate for reaching settlements outside of court whenever feasible to minimise emotional stress and uncertainty.
What is the role of my solicitor?
If you have engaged a family lawyer to handle your financial case, their role involves providing legal advice, negotiating with the opposing party, preparing court documents, and ensuring you are well-prepared and represented during court hearings. This may also include arranging for a suitable barrister to present your case before the judge.
Alternatively, instead of retaining a family lawyer for full representation, as described above, you may opt for ad hoc legal assistance at key stages of the process. In this scenario, the lawyer will provide advice but will not officially represent you, meaning they won’t be listed on the court record and cannot draft or respond to correspondence on your behalf or attend hearings.
Some individuals opt to prepare for their financial case and represent themselves in court. These individuals are referred to as self-represented litigants or litigants in person.
How does the judge decide the split of assets?
Family lawyers are frequently asked this question, and there is no straightforward answer as judges must carefully consider all pertinent information unique to each case. Factors taken into account include the duration of the marriage, the age and earning capacity of both parties, the established standard of living, the roles each spouse played in the marriage (such as breadwinner or primary carer), as well as the level of assets and anticipated living expenses.
Furthermore, judges often refer to precedents from previous cases to justify their decisions. For instance, an important case in 2000 introduced the concept of the “yardstick of equality,” suggesting an initial inclination towards equal asset distribution. However, this case also illustrated that fairness and equality can differ, particularly in situations where one spouse is the primary earner and the other is the primary carer. In such cases, a simple 50:50 asset split may not be equitable.
When children are involved, the judge prioritises their housing needs and ensures that the primary carer is financially capable of supporting them. Judges have discretion to “offset” assets, meaning the primary carer might receive less of one asset (like pension benefits) while receiving a larger portion of the family home’s equity, for example.
In some instances, the court may direct the higher-earning party to make regular maintenance payments to the other party, as outlined in a maintenance order. These payments may have specified end dates or conditions (e.g., upon the recipient’s remarriage).
While judges consider input from the couple and their representatives to understand the case’s circumstances, their ultimate role is to adjudicate a fair settlement.
Clean-break orders
A clean break order is a binding decision by a judge that prevents either party from making any future financial claims, whether during their lifetime or after their death. This means that neither party can seek additional financial support or make claims on the other’s estate in the future. Clean break orders come into effect once all other terms of the order have been fulfiled, such as the sale of a house and division of proceeds, sharing of pensions, etc.
The court is obligated to consider a clean break in every case, aiming to sever all financial ties after divorce to promote closure and prevent future claims.
However, achieving a clean break is not always feasible. The most common obstacle is when one party, often the wife, requires ongoing financial support, known as spousal maintenance. This need may arise if the wife is the primary carer for children and is unable to work full-time for a period of time. In cases where sufficient funds are available, it may be possible to “capitalise” the spousal maintenance claim. This involves calculating the total amount of spousal maintenance owed over a specific period and paying it as a lump sum. This approach can be appealing to both parties: the recipient is protected from changes in the paying party’s financial situation (such as job loss or death), while the paying party gains the assurance that their future earnings remain theirs alone.
