Financial Settlements in Divorce: A Short Guide


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Financial settlements in divorce

Financial settlements in divorce represent one of the most critical aspects of a marital breakdown. They determine how assets and finances will be divided between parties, ensuring both individuals can move forward with clarity and security.

In England and Wales, these settlements are governed by a robust legal framework, primarily the Matrimonial Causes Act 1973, ensuring fairness and equity in the division of assets, pension arrangements, and ongoing financial support.

Understanding financial settlements in divorce proceedings

A financial settlement in a divorce is a legally binding agreement that outlines how the couple’s financial assets, debts and assets will be split in a divorce. The primary goal is to ensure that the division is fair and equitable, taking into account the needs of both parties and any children involved. The financial divorce settlement can include various components such as:

  • Property: The division or sale of the family home and any other real estate owned.
  • Savings and investments: How bank accounts, stocks, and other investments are distributed.
  • Pensions: Splitting or sharing pension entitlements, often a significant asset.
  • Ongoing financial support: Arrangements for maintenance payments, both for any children and sometimes for a spouse.

Understanding these components is crucial for anyone going through the breakdown of a marriage or civil partnership, as they form the basis of one’s financial stability post-divorce. Given the complexities involved, it’s advisable to seek legal guidance to navigate the settlement process effectively.

Legal framework in England and Wales

The legal framework for financial settlements in divorce cases in England and Wales is established under Section 25 of the Matrimonial Causes Act 1973. This Act provides the court with the authority to make orders regarding the division of assets, maintenance payments, and pension sharing or splitting.

The primary objective of the court is to ensure that the financial settlement is equitable, taking into account the circumstances and needs of both parties and any children of the family.

The court has a wide discretion in deciding how matrimonial assets should be divided, but it follows a set of statutory criteria to guide its decisions.

These include the current and future financial needs of each spouse, the standard of living enjoyed by the family prior to the breakdown of the marriage, the age of each party, the duration of the marriage, and any physical or mental disability of either spouse. The welfare of minor children is also a paramount consideration.

The role of the court is not to punish either party but to seek a fair resolution that enables both spouses to move on with their lives as independently as possible.

This framework ensures that each case is evaluated on its own merits, with the aim of achieving a just outcome for all involved.

Factors considered in financial settlements

When determining a financial agreement, the court considers several key factors to ensure that the decision is fair and meets the needs of all parties involved, especially any children. These factors include:

  • The welfare of any children: The court prioritises the needs of the children, including their housing, education, and general welfare.
  • Financial resources and needs: The court assesses the current and future financial resources of each spouse, including their earning capacity, savings, and investments.
  • Standard of living: The lifestyle enjoyed by the family prior to the breakdown of the marriage is considered, aiming to ensure that neither party experiences a disproportionate drop in living standards.
  • Duration of the marriage and age of the parties: Longer marriages may see a more equal division of assets, while the age of the parties can influence maintenance orders and pension sharing.
  • Contributions to the family: This includes not only financial contributions but also non-financial contributions, such as childcare and homemaking.
  • Future earnings: Future earnings are often considered in divorce financial settlements, especially when determining spousal maintenance orders or the division of assets that are expected to increase in value.
  • Physical or mental disability: Any disability of either spouse is taken into account, potentially impacting maintenance orders and asset division.

These criteria ensure a comprehensive review of each party’s circumstances, striving for an equitable outcome that reflects the contributions and needs of both spouses.

The process of reaching a settlement

Reaching a financial settlement in the divorce process involves several steps. This is designed to facilitate a fair and amicable agreement between the parties:

Initial considerations: Both parties disclose their financial situations through a detailed and honest financial disclosure. This includes income, assets, debts, and expenses.

Negotiation methods: Couples can choose different paths to negotiate their settlement:

  • Mediation: A neutral third party helps the couple reach an agreement.
  • Collaborative law: Each party hires a solicitor, and all parties work together outside of court to negotiate a settlement.
  • Court hearings: If agreement cannot be reached, the court will decide the settlement based on the matrimonial law principles and the factors listed in the previous section.

Finalising the Agreement: Once an agreement is reached, it is formalised in a consent order, which is reviewed and approved by the court.

For those seeking a complete financial separation, a clean break order can be issued, severing all financial ties between the spouses.

This process encourages cooperation and fairness, allowing both parties to contribute to the final agreement, ensuring it meets their needs and circumstances.

Common challenges and solutions

Navigating financial settlements in divorce can present several challenges, including disputes over asset valuation, ensuring fair arrangements for children, and adjusting to changes in financial circumstances post-divorce. Addressing these challenges often requires:

  • Transparent financial disclosure to ensure all assets are fairly valued and considered.
  • Expert advice from financial advisors, particularly for complex assets like pensions or international property.
  • Flexibility and negotiation to reach agreements that consider the welfare of children and the financial independence of both parties.
  • Court intervention as a last resort, where a judge can make a binding decision based on the legal framework and principles.

Finding solutions to these challenges is crucial for achieving a settlement that is fair, sustainable, and minimises conflict, ensuring both parties can move forward positively post-divorce.

How can ARC Costs assist?

If you require legal advice or assistance with divorce proceedings, ARC Costs maintain a panel of family law solicitors. We can also assist in the recovery and negotiation of legal costs following divorce proceedings.

Our team of highly skilled Law Costs Draftsmen and Costs Lawyers can also assist legal representatives in recovering their legal aid fees, or in securing inter-partes costs after any such order has been made. Our team regularly assists in all types of costs claims, including divorce legal costs disputes. Our client base ranging from law firms to Litigants in Person, both privately funded and funded by the Legal Aid Agency. In inter-partes disputes, we can assist both paying parties and receiving parties.

If a divorce Costs Order had been made in your favour, we can assist you in recovering the costs owed to you. Equally, if a Costs Order has been made against you, we can assist in disputing legal costs and minimising your costs liability.

We can further assist in recovering costs from the Legal Aid Agency in privately funded cases. Using our expert costing service, we help clients maximise their recovered legal costs whilst providing expert legal advice and minimising the risk of rejected claims from the Legal Aid Agency, to ensure you maintain your KPIs.

We regularly use the CCMS system to submit legal aid costs claims and deal with all the administration on behalf of our clients and to free up the time of fee earners, thereby ensuring you can recover your maximum legal aid fees in an expeditious and efficient manner.

To find out more about how we can provide you with assistance, please contact us at 01204 397302 or email our team of experts at Alternatively, please use our free chat facility to speak to an expert directly.

We may receive payments from third party solicitors on our panel to whom we may refer your claim. We will never charge you for any referrals made to our panel of third parties.


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