In family law, determining what you are entitled to in a divorce settlement is complex and varies based on individual circumstances. While a 50/50 split is often a starting point for dividing assets, many factors influence the final settlement. These factors include the duration of the marriage, earning capacity, and future needs.
Most couples have multiple assets to consider, and how each asset is treated depends on specific circumstances. Options such as pension sharing, equity transfer, or dividing proceeds from asset sales require careful consideration.
Given the intricacies of financial matters in divorce, seeking expert legal advice early is crucial. Understanding your entitlements from the outset can lead to a fair settlement and reduce conflict resulting from unrealistic expectations.
For personalised advice on reaching a divorce financial settlement, please contact us for a complimentary 30-minute consultation with a knowledgeable local family lawyer.
To learn more about divorce settlements, including factors affecting calculations, the treatment of homes and businesses, and the benefits of working with an experienced divorce lawyer, please continue reading.
What is a divorce settlement?
The terms “divorce settlement” and “divorce financial settlement” can be used interchangeably, referring to the division of financial assets (like the family home, pensions, and savings) during divorce. These matters can be resolved amicably by the separating couple and formalised in a consent order, avoiding the need for court involvement. However, if agreement cannot be reached through negotiation, mediation, or arbitration, court proceedings may be necessary. In such cases, a judge will decide on the asset division, which will be confirmed in a court order. The court process of dividing assets is sometimes referred to as ‘financial remedy’ proceedings.
What to consider before agreeing to a divorce settlement
Before reaching a fair financial settlement, all aspects of your finances must be carefully considered. This includes capital assets and debts, which encompass properties, shares, savings, and any individual or joint debt.
Additionally, pension valuations are crucial and often overlooked. Pensions can be the second-most valuable asset after the family home. Both parties’ incomes and any business interests must also be taken into account.
If you’re seeking court judgement on a divorce settlement, you’ll need to complete a Form E financial disclosure document. This is often the best way to gather all the necessary information for reaching a fair settlement and understanding what you’re entitled to.
What is a fair divorce settlement?
Before finalising a divorce settlement, it’s crucial to accurately assess the true value of all assets belonging to both parties. Historically, pensions have been significantly underestimated, and the value of a property must be considered net of any outstanding mortgage.
Determining the true value can be challenging, but it’s essential for achieving a fair divorce settlement.
It’s important to recognise that not all assets are equivalent—money tied up in property differs from liquid cash, and investments may fluctuate in value. Pensions, though valuable, are not immediately accessible and may have restrictions on withdrawal.
Rather than focusing solely on individual assets, it’s essential to consider the overall financial picture—the total value of marital assets. When dividing assets, fairness is key. This concept can be complex without the guidance of an experienced professional familiar with offsetting different asset types.
In many cases, equalising pensions after a long marriage may be appropriate, but this doesn’t necessarily mean the same treatment should apply to property division. It’s vital to evaluate the holistic financial situation, not just individual components.
If you find yourself in this situation, obtain valuations for your assets and consult with a specialist family lawyer. Paying attention to details, especially regarding pension valuations and appropriate types of valuation, is crucial.
How is a divorce settlement calculated?
The starting point involves understanding your priorities—while you might not achieve everything you desire, it’s crucial to outline your financial needs for your lawyer’s consideration.
Individuals in their 50s and 60s might prioritise retirement planning, whereas a young mother’s primary concern could be securing housing. These priorities will guide how assets are distributed. For instance, the young mother may prefer to receive her share of assets as equity in the home rather than as a portion of a pension.
If asset division reaches the court, several factors are considered. These same factors should inform voluntary agreements for divorce financial settlements. Key issues to address include:
- What assets there are
- Whether these are matrimonial or non-matrimonial assets
- Each person’s current and realistic future earning capacity
- Each person’s needs
- The needs of any children
- The age of the separating couple
- The length of the marriage
- The contributions each person made during the marriage (both financial and non-financial, e.g., child care)
- The standard of living enjoyed by the couple during the marriage
How are money and assets split in a divorce?
As previously mentioned, the division of money and assets in divorce hinges on individual circumstances, with a crucial determinant being whether assets are classified as ‘matrimonial’ or ‘non-matrimonial’.
Matrimonial assets are those acquired by either spouse during the marriage and are typically subject to division during financial settlements. Non-matrimonial assets, on the other hand, are those acquired before the marriage and may not be shared in the same manner. Identifying what constitutes a matrimonial asset can be complex, emphasising the importance of seeking expert advice.
Below, we outline how some of the most commonly concerning assets are typically addressed in divorce:
Who gets the house in a divorce?
The family home is often the largest asset a separating couple has. There are several ways to deal with property in a divorce settlement:
- Sell and divide the equity
- One party buys the other party out
- Remain as joint owners but with one party living in the house (often used where there are children who need a stable home) and an agreement that the house will be sold and proceeds will be split at a later date.
As mentioned previously, it’s important not to consider the house in isolation. Whatever option is chosen should be evaluated within the context of other assets and the needs of both parties.
How are pensions divided in divorce?
Following the family home, pensions are frequently the most substantial assets that a separating couple possesses. When one individual has more pension wealth than the other, this must be addressed in any settlement.
The approaches to handling pensions in divorce include:
- Pension offsetting: the person with a smaller or no pension takes a bigger share of other assets to offset their former spouse’s pension wealth.
- Pension sharing: the pension pot is split, with a lump sum being placed into a new, separate pension for the benefit of the person with a smaller or no pension.
- Pension attachment: a percentage of the income or future income from one party’s pension is paid to the other party once retirement begins on an ongoing basis. This option is rarely used as it means the divorcing couple will stay tied together financially.
How are business assets divided in a divorce?
A common inquiry pertains to whether business assets are factored into divorce settlements. If business assets are deemed to be matrimonial assets, they will indeed be included, along with any income derived from the business.
An independent valuation of the business will be necessary to ensure its accurate value is reflected in the settlement.
Various options that may be used to divide business assets include:
- Offsetting the value with other assets, i.e., giving the non-business-owning spouse a bigger share of other assets such as the house,.
- Giving the other spouse a share of the business gives them an interest in the business, which may not always be desirable.
- Selling the business and splitting the proceeds: this option is rarely used but might be worth thinking about if the business owner had been thinking about exiting the business prior to the divorce.
What to ask for in a divorce settlement
Many couples express concerns about who will retain the family home, keep the family car, and divide household furnishings during a divorce. There are no strict guidelines for these matters. Ideally, couples should attempt to reach agreements on household possessions themselves, although this process can be challenging and may require perseverance.
Failing to reach an agreement could result in taking the case to court, which is costly and diminishes the pool of assets in dispute. It is generally more advantageous to make compromises than to resort to court, where potential losses may occur and a judge’s ruling could be less favourable.
Notably, the needs of any children must be considered and prioritised during the divorce settlement discussions. Their care and requirements should be factored into the agreement.
How much will I get in a divorce settlement?
Moneyhelper.org.uk provides a divorce settlement calculator, but it relies on many assumptions. We urge caution when using such tools. In summary, don’t place too much hope or become disheartened based on the figures generated.
The best way to understand what you might receive in a divorce settlement is to consult with an experienced family lawyer. They can provide personalised advice based on your specific circumstances. A lawyer will offer an honest assessment of a likely settlement, discuss relevant factors, and guide you on how to approach achieving a fair settlement.
Can you agree to a financial settlement without a lawyer?
While it is theoretically possible to negotiate a divorce settlement without expert support, doing so is highly risky. As explained above, the division of finances in divorce is complex and involves numerous factors.
Understanding your entitlements in divorce is rarely straightforward, so seeking expert advice is crucial. Working with an experienced divorce lawyer ensures you understand your rights and can help maintain an amicable process by providing a professional perspective. In the event that court proceedings become necessary, expert support is essential to effectively present your case.
An experienced family lawyer can advise on using a consent order to make the terms of a voluntary settlement legally binding, as well as a clean break order to prevent future financial claims from your former spouse.
Contact Us
At DLS Solicitors, our experienced divorce lawyers provide specialised legal advice to assist you in navigating a streamlined and stress-free divorce process. We offer comprehensive guidance on all aspects you need to consider and help you resolve issues, such as the division of finances, effectively.
