There are many ways of reaching a divorce settlement agreement, and whichever method of negotiation you choose, we will work with you to ensure we have clarity of both yours and your partner’s financial positions, together with all the information we need to understand your ongoing commitments. We find that this transparency from the outset makes discussions quicker, and easier, to undertake.
Of course, issuing Court proceedings is sometimes unavoidable in order to reach a divorce financial settlement, and if this is the route that you need to take, we will guide you through it, explaining the process as we go along.
How are finances sorted in a divorce?
There is nothing to prevent couples reaching a financial agreement themselves. Ideally, this agreement should be incorporated into a Consent Order so that the Court can approve it and it will then become binding. Without the Court approval to any agreement reached, there is a risk that either party could change their mind without any repercussions. This can be devastating if one spouse is relying on an income or capital payment from the other. Additionally, without a Court order it is not possible for there to be a pension sharing order.
The Family Court – unlike many other Courts – have considerable discretion in determining whether a proposed agreement is fair or not. If there is insufficient evidence to support the agreement reached and the Court therefore deem it to be unfair to either one or both of the parties, then it can refuse to make the order. This can cause significant problems. Our advice would always be to seek legal advice on the content of any agreement, even if you have reached it amicably between you. This does not mean that you will instantly be forced into litigation. It does mean though that the lawyers will test any agreement (on paper) and look at the available assets and the needs of the family.
Divorce settlement process
There are several ways that a divorce financial settlement can be achieved, but primarily the main routes taken are discussions between the parties directly, negotiations through solicitors, some form of alternative dispute resolution or applying to the court for a Judge to decide the outcome. It is possible for a settlement to be reached using some or all of the above mentioned options. For example, discussions can take place in order to reach agreement on the division of the majority of the assets, thereby narrowing down the issues that a Judge needs to look at.
Whichever route is taken, both spouses will need to provide full and frank financial disclosure (usually in the form of a financial statement) so that both parties and their legal representatives have a complete picture of the matrimonial finances and informed decisions can be made.
How much does a divorce settlement cost?
There is no one size fits all. How much it will all cost very much depends on the complexity of the assets to be divided and how each party conducts themselves. It is important to note that the costs of sorting out finances are separate to the costs incurred in when dealing with the actual divorce.
How are things divided in a divorce?
The Court must apply the statutory criteria set out in Section 25 of the Matrimonial Causes Act 1973 in order to arrive at a fair outcome. In summary, these are:
- The ages of you and your partner / spouse;
- The earning capacity of each of you;
- What property there is;
- How much capital there is in bank accounts / savings / investments etc.;
- The standard of living you had during your marriage;
- Current and future living expenses;
- The role you played in the marriage – e.g. were you the primary wage earner, or did you stay at home to look after the children
When applying this criterion, the Court is looking at what the needs of the parties are in terms of housing income and pension and also the needs of any dependent children. A departure from equality can be ordered if the needs of one party dictate a different outcome, or if the Court accepts that certain assets should be treated as non-marital and the needs of the parties are met.
The Court’s first consideration is always given to the children of the family to ensure that they are adequately housed and there is enough income for both parents to meet their day to day needs.
Matrimonial assets refer to anything that has been accrued or obtained within the course of a marriage. The most common matrimonial asset is the family home. However, other assets can include (but are not limited to) additional properties, pension provision, vehicles, savings, investments, or interests in businesses.
Non-matrimonial assets refer to anything that was accrued or obtained outside of the marriage – i.e. the period prior to the marriage and/or the time that has passed since separation. Non-matrimonial assets can include (but are not limited to) pension provision, properties or investments and can also apply to inherited assets in some circumstances.
Whilst this may be a starting point for the party with the non-matrimonial assets, it is by no means a foregone conclusion. Just because an asset was obtained outside of the marriage, it is not necessarily exempt from being included in the overall settlement. All of the assets need to be looked at as a whole in order to determine what is fair and reasonable – and what meets the needs of the parties and any relevant children. That is not to say that non-matrimonial assets can’t be ring-fenced (i.e. excluded from any discussions), but this needs to be considered on a case by case basis. Ultimately if the parties are in agreement then they can agree what they like within reason and subject to the Court approving any agreement, but the criteria in s25 of the Matrimonial Causes Act 1973 do need to be taken into account. Within the context of agreement it can be agreed that one party will keep the majority of the matrimonial assets in order for the other party to keep any non-matrimonial assets that they have in their name.
It is not unusual for one party to move out of the family home, if for no other reason than to alleviate any tension that has arisen between them and make day-to-day living more bearable for all concerned.
However, it cannot be expected that one party will move out. It may not be cost effective for them to do so as it may not be possible, financially, to run two households. Additionally, whether the family home is rented or owned, is in both names or one name only, you may have a right to live and stay there.
There is a common assumption that one party will leave while the other remains to look after the children, but you shouldn’t leave just because your spouse tells you to. Speak to a family lawyer first so that you can fully understand your situation before taking any action.
Many couples will have been separated for a substantial period of time before divorce proceedings are issued. In addition, as the courts cannot make any orders in relation to the matrimonial finances until the divorce has reached the middle stage (Decree Nisi), then it is quite possible that one party’s financial position may have improved in the intervening period, prompting arguments that any assets acquired post separation should not be shared.
Such assets may be considered as non-matrimonial, and unless there is a clear need for them to be included certainly an argument can be run that they should be excluded. However the needs of the parties and any relevant children will always be the key criteria. By needs we mean, housing, income and pension needs primarily. Further if for example a bonus accrues following separation but is based on pre separation work then it may fall into consideration.
The overriding factor is need – if both parties reasonable needs can be met using the matrimonial assets then there is a better argument for saying that any non-matrimonial assets will be excluded. If, on the other hand, the matrimonial assets are insufficient to meet both parties’ reasonable needs, then non-matrimonial assets will need to be taken into consideration. Therefore, whether the assets available at the date of separation are sufficient depends on each individual couple’s circumstances.
There are two types of maintenance – child maintenance and spousal maintenance.
Child maintenance can be agreed between the parties, or alternatively, if agreement cannot be reached, then it can be determined through the CMS.
In relation to spousal maintenance, there is no automatic right to this. Each case should be evaluated on its own circumstances. Spousal maintenance will be calculated based on the recipient’s needs, any income they receive and their earning capacity. There is no set formula for calculating spousal maintenance.
The court’s aim when dealing with matrimonial finances is to divide any assets in a way that is fair, reasonable and meets the needs of both parties. The starting point certainly for the family home is a 50/50 split, but in many cases the percentage split usually departs from this, depending on the circumstances.
There are a number of factors that need to be considered when deciding how to divide assets. These include:
- The reasonable needs of each party – for example, if one party is deemed to be in an economically weaker position, it may be decided that they need a greater percentage split than the other party;
- Childcare – if one party is the primary carer for the children, then they may be given a greater percentage of the assets in order to ensure that the children’s wellbeing is met;
- Future earning capacity – if one party’s future earning capacity is diminished, for whatever reason, it may be that they are awarded more capital.
However matrimonial assets are split, it needs to be based on the individual circumstances of the parties.
Any inheritance that has been received or that may be received in the reasonably foreseeable future isn’t automatically included in the outcome of a divorce financial settlement. However, there are certain circumstances where it may be taken into account – for example, if the matrimonial assets are not enough to provide for the reasonable needs for you and your ex (reasonable needs is different from couple to couple) then the court may turn to any non-matrimonial assets to make up any shortfall. Further it would always be something you would need to disclose.
It is also possible that any inheritance received during the marriage can change from a non-matrimonial asset to a matrimonial one, e.g. if the inheritance was used to benefit the whole family (such as money being held in a joint account, or a property being used as a holiday/second home) then the court may view it as joint property and therefore as an asset that should be divided between you and your ex.
It is unusual for any inheritance that hasn’t yet been received to be taken into account. This is because it is difficult to say when it will be received, how much it may be, or that any such assumed inheritance will be forthcoming.
When trying to reach a divorce settlement, the financial resources of both parties need to be considered. This means that business assets, such as shares in a limited company, assets owned as a sole trader, or an interest in a partnership can be considered as part of the pot that makes up the matrimonial finances.
If you owned the company prior to the marriage, it may be possible to argue that it shouldn’t be taken into consideration. However, if said company generated an income that supported you and your partner during the marriage, then it is more likely to be taken into account as a financial resource. It also may be one of the largest assets you own, along with any pension assets.
The term “needs” in relation to divorce settlements is subjective. Fundamentally, the reasonable needs of a party would be the amount needed to re-house themselves and pay for day-to-day living expenses, the needs of any children and any financial commitments. However, the amount needed to cover these needs will vary from couple to couple, taking into account the standard of living during the marriage, the parties’ wealth and earning capacity etc.
Why Hawkins Family Law?
We are a specialist law firm, focusing solely on family law matters, such as divorce and separation, and everything that comes with these life-changing events. Established in 2001, the team at Hawkins Family Law are all ‘people’ people and we are committed to producing rounded outcomes for our clients, offering expertise in whatever forum works best for you, always aiming to bring matters to a swift conclusion with minimum pain.
We work closely with our clients to provide family law advice and assistance relating to financial settlements in divorce. Our divorce settlement specialists will offer guidance as to the best way to solve your issues with your partner or ex-partner. We offer these services whether you are married or in a civil partnership.
The way in which you approach your divorce or separation is your choice, but with Hawkins Family Law you can be assured of our consistently high levels of support and guidance from our family law lawyers in Milton Keynes, Bicester & Watford.