Financial Settlements

Some frequently asked questions and guides on Financial Settlements.

Frequently asked questions

What happens if my former partner and I cannot agree on how to divide assets?

We have a professional duty to settle these out of Court if at all possible, as this is usually in the best interest of both parties and the children. We will explain to you the alternatives to Court action, such as Mediation. If you have disagreements relating to finances, you should attend a meeting to find out if Mediation is appropriate before you apply for a Court order.

In Mediation, you and your former partner will work with someone who is trained to help people sort out disagreements between themselves. We will be able to advise you on this, and help you to arrange the meeting. Mediation may be inappropriate (for example if there has been domestic violence) and if Mediation is inappropriate or unsuccessful, an application can be made to the Court for a Financial Order.

An Application is made on Form A. The matter is then listed by the Court for a First Directions Appointment which will take place after each party has provided full disclosure of their financial circumstances by completing a Financial Statement (called a Form E). Both parties are obliged to provide full and frank disclosure in this Form. It is particularly important for you to provide us with full and accurate information about your financial circumstances. A common problem and source of disagreements is where the wife or husband fails to give details of all their assets. This slows everything down and, if the matter cannot be settled out of Court, that person may have to pay Court costs.

How does the court decide how assets are divided?

The overall objective of the Court in dividing assets is to achieve fairness. The Court must consider the factors set out in Sections 23-25 of the Matrimonial Causes Act 1973. It is important to understand what a Court would regard as fair, because, even if you reach an agreement, it only becomes absolutely binding once the Court has made an order. The Court will only approve agreements that are fair.

First consideration is always given to the welfare of any child of the family who has not attained the age of eighteen.

The Matrimonial Causes Act 1973 gives the Court wide ranging powers to Order the transfer or sale of property, lump sum payments, orders in respect of Pensions, Spousal/ Civil Partner Maintenance and Clean Breaks.

The factors the Court considers are;

• the income, earning capacity, property and other financial resources which each of the parties to the marriage has or is likely to have in the foreseeable future, including in the case of earning capacity any increase in that capacity which it would in the opinion of the Court be reasonable to expect a party to the marriage to take steps to acquire;
• the financial needs, obligations and responsibilities which each of the parties to the marriage has or is likely to have in the foreseeable future;
• the standard of living enjoyed by the family before the breakdown of the marriage;
• the age of each party to the marriage and the duration of the marriage;
• any physical or mental disability of either of the parties to the marriage;
• the contributions which each of the parties has made or is likely in the foreseeable future to make to the welfare of the family, including any contribution by looking after the home or caring for the family;
• the conduct of each of the parties, if that conduct is such that it would in the opinion of the Court be inequitable to disregard it;
• in the case of proceedings for divorce or nullity of marriage, the value to each of the parties to the marriage of any benefit which, by reason of the dissolution or annulment of the marriage, that party will lose the chance of acquiring.

The Court therefore looks at the parties’ needs and once these have been met, how any remaining assets should be shared, as well as whether one party should be compensated, for example, for giving up a well-paid career to look after children.

Balancing these factors can be complicated and we can give expert advice as to how a Court would apply the law.

If you and your husband or wife cannot agree over the value of property or assets, we may suggest using an expert witness to provide an independent valuation. In financial matters, this is often a single witness approved by both partners and the Court.

The parties’ rights to claim against the estate of other on death may also need to be dismissed as part of a clean break.

What is involved in the court application?

An application for a Financial Order may involve up to 3 Court Hearings. The vast majority of applications are dealt with within 2. The first Hearing (a First Directions Appointment) and second Hearing (Financial Dispute Resolution Hearing) may be dealt with as one hearing. At the Financial Dispute Resolution, the Judge will consider the Form E’s filed by both parties and will make every effort to try to get the parties to reach an agreement in order to avoid a third and final Hearing.

If a final Hearing is necessary, it will usually involve both parties giving evidence, and possibly other witnesses, after which the Judge will make an order. Final Hearings are generally very expensive

Special considerations apply to some assets, for example businesses and pensions, and it is important that our expert advice is sought.

Will I have to pay my former partner maintenance?

Sometimes continuing maintenance for a spouse or civil partner is appropriate, which may be for the parties’ joint lives or for a fixed period. If there is to be no continuing maintenance, additional capital provision is sometimes made to reflect this on a ‘clean break’ basis. Whether such maintenance is payable depends on the factors referred to above, but particularly the needs of the party with the lower income and whether they can reasonably improve their earning capacity in the near future.

What about maintenance for the children?

Generally, if no agreement can be reached as regards maintenance for the children, the matter is dealt with the Child Maintenance Service (CMS), previously the Child Support Agency (CSA). Financial provision for children may also need to include private school fees or health insurance. If agreement is reached, it can be incorporated into a Court order.

Can my former partner and I reach agreement after an application has been made to the court?

It is always best to attempt an agreement with your former partner, rather than have an Order imposed on you both by a Judge which you may both dislike. Agreement can be reached at any time after an application has been made, and sometimes agreement is reached at the Court door. If you reach an agreement with your spouse, it is extremely important that it is properly recorded in a legally binding document, otherwise the settlement can be reopened at a later date. In a recent high profile case, the consequences of failing to properly record a financial settlement in a legally binding document were highlighted.

In this case a party was allowed to make an application for financial provision over 20 years after the divorce and 32 years after the initial separation, even though at the time of the divorce the parties had no assets. By the time that the Court came to deal with the application the parties’ financial circumstances had changed significantly.

If you are intending to divorce immediately, a Consent Order can be made within the divorce proceedings. A Consent Order needs to be approved by a judge. The proposed order is sent to the Court. It is not usually necessary to attend Court. Once a Consent Order has been made, it is final and binding and can only be set aside in very rare circumstances, for example if there has been fraud, misrepresentation, or a very significant change in the circumstances, such as the death of a party shortly after the order. This is very unusual.

We can advise you as to what should be included in a Consent Order, prepare the document for you, and take you through the process to obtain a Consent Order approved by the Court.

What if my former partner and I do not wish to divorce immediately?

Some separating couples do not wish to divorce immediately and in those circumstances, should record any financial agreement in a Separation Agreement, which records the circumstances of the parties and the agreement reached. Due to the fact that a Separation Agreement is not approved by a judge, it is not binding on the Court and in subsequent divorce proceedings the Court could decide to make a different order.

The judge would however have to decide that on the facts as they existed at the time the Court considered the case. There has to be a good reason to depart from the agreement reached at separation, for example, the agreement is manifestly unfair or was entered into without legal advice. Notwithstanding this, you should not sign a Separation Agreement without expecting to be held to its content.

It is important to remember that even though you are separated by agreement that you still remain married. This has important consequences so far as the rights to benefit under pensions or death in service payments and also the right to benefit from your spouse estate in the event of their death. It is therefore important that you consider making make a Will to reflect the change in your circumstances and also make the necessary arrangements with employers and in relation to pension schemes.

We can advise you as to what should be included in a Separation Agreement, and can prepare the document for you. The advice on this website is provided for general information only and is not intended to constitute legal advice. You should not act or rely on any of this information, but should seek legal advice on your particular circumstances. The law is always changing and affects each person differently. This information is no substitute for specific advice about you personally and we will not be liable to you if you rely on this information.

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You’re welcome to contact us for an initial chat at no charge and with no obligation. It’s an opportunity to discuss your situation, run through your options and assess the likely costs involved. Call us today on 01277 631811 or use the contact form on our site for more information on how Dadds LLP Family Law Solicitors can help you.