West Midlands

When a marriage or civil partnership ends, obtaining a divorce does not automatically resolve the couple’s financial arrangements. A separate financial settlement is usually required to determine what will happen to property, savings, pensions, debts, business interests and income. Our divorce and family law solicitors advise clients in Birmingham, across the Midlands, London and throughout England and Wales on negotiated financial settlements, consent orders and contested financial remedy proceedings. Understanding how financial settlements work, what the court considers when deciding what is fair and why an agreement should be made legally binding can help protect your financial position following separation. Are Divorce and Financial Settlements Separate? Yes. The legal process that ends a marriage or civil partnership is separate from the process used to resolve financial claims. A couple may obtain a Final Order ending their marriage while their financial claims against one another remain unresolved. The Final Order does not, by itself, determine what should happen to the family home, pensions, savings or other assets. Unless financial claims are dismissed by a court-approved order, either former spouse may potentially make a financial claim in the future. Although delay and events occurring after separation may affect how the court approaches a later claim, there is no general automatic deadline after which all financial claims disappear. There can also be additional consequences where a person remarries before issuing certain financial claims arising from an earlier marriage. This is sometimes known as the “remarriage trap”. It is therefore important to obtain specialist family law advice before applying for the Final Order or entering a new marriage. What Does a Divorce Financial Settlement Cover? A divorce financial settlement may address the full range of assets, income, liabilities and financial resources available to either party. Depending on the circumstances, this can include: The family home, including whether it should be sold, transferred to one spouse or retained for a periodOther residential or investment propertiesSavings, investments and bank accountsPensionsBusiness interests, company shares and partnershipsTrust interests and other financial resourcesMortgages, loans, credit cards and other liabilitiesLump-sum paymentsSpousal maintenancePersonal belongings and other valuable assets Child maintenance is generally dealt with separately, either through a voluntary agreement or the Child Maintenance Service. However, the Family Court retains powers to deal with child maintenance in certain defined circumstances. How Does the Court Decide What Is Fair? There is no automatic rule that all assets must be divided equally in every divorce. The court must consider all the circumstances of the case, giving first consideration to the welfare of any child of the family who is under the age of 18. Under section 25 of the Matrimonial Causes Act 1973, the court considers factors including: Each party’s income, earning capacity, property and other financial resourcesTheir present and foreseeable financial needs, obligations and responsibilitiesThe standard of living enjoyed by the family during the marriageThe age of each party and the length of the marriageAny physical or mental disabilityThe contributions made by each party, including caring for the home and childrenConduct, where it would be inequitable for the court to disregard itThe value of any benefit a party will lose because of the divorce, including pension benefits The court’s objective is to reach a fair outcome. In many cases, the parties’ housing and income needs and the needs of their children will be particularly important. Fairness does not necessarily mean that every asset will be divided equally or that each person will retain only the assets held in their own name. Matrimonial and Non-Matrimonial Assets The court may distinguish between matrimonial and non-matrimonial assets when considering an appropriate settlement. Matrimonial assets commonly include property and wealth acquired during the marriage through the parties’ joint efforts. Non-matrimonial assets may include property owned before the marriage or assets received by one party through an inheritance or gift. However, an asset will not necessarily be excluded simply because it was acquired before the marriage or inherited. The court may take it into account where, for example: It has been used for the benefit of the familyIt has become mixed with matrimonial propertyThe family’s needs cannot be met without using itThe length and circumstances of the marriage make it fair to include it Specialist advice is particularly important where a case involves inherited wealth, pre-marital property, trusts or significant business assets. How Can You Reach a Financial Settlement? There is no single route to resolving financial matters on divorce. The right approach will depend on the complexity of the finances, the relationship between the parties and whether both parties are willing to provide full financial disclosure and negotiate constructively. Solicitor Negotiations Many couples reach an agreement through negotiations conducted by their family law solicitors. Each party will usually provide financial disclosure before proposals are exchanged. This may include information concerning income, property, mortgages, bank accounts, pensions, businesses and liabilities. Where both parties provide transparent disclosure and negotiate constructively, a settlement can often be reached without contested court proceedings. This may reduce delay, expense and stress. Once terms have been agreed, they should normally be incorporated into a consent order and submitted to the court for approval. Family Mediation Family mediation involves an independent and professionally trained mediator helping the parties identify the issues, exchange relevant financial information and explore possible solutions. The mediator does not impose a decision and cannot provide independent legal advice to either party. Each person should obtain their own legal advice alongside the mediation process. Mediation may not be safe or appropriate in every case, particularly where there are safeguarding concerns, domestic abuse, coercive or controlling behaviour, or a serious imbalance of power. A mediator should assess suitability and consider whether appropriate safeguards can be put in place. Any proposals reached through mediation are not automatically legally binding. A solicitor should review the proposed settlement and prepare a consent order for consideration by the court. Collaborative Law Collaborative law allows each party to instruct a collaboratively trained solicitor and work towards an agreement through a series of joint meetings. The parties and their solicitors commit to trying to resolve matters without contested court proceedings. This process can be helpful where both individuals want a structured and cooperative approach while receiving legal advice throughout. Private Financial Dispute Resolution A private Financial Dispute Resolution hearing, often called a private FDR, involves appointing an experienced family lawyer or retired judge to evaluate the case and give an indication of the likely outcome. A private FDR can offer greater flexibility over timing and may help parties resolve complex financial disputes without waiting for a court-listed FDR hearing. Court Proceedings Where an agreement cannot be reached or one party refuses to provide proper financial disclosure, it may be necessary to apply to the Family Court for a financial remedy order. An application is usually made using Form A. The court then sets a timetable requiring both parties to provide detailed financial disclosure, usually through Form E. The main stages commonly include: First Appointment At the First Appointment, the court identifies the issues in dispute, considers what further evidence or disclosure is required and gives directions for the future conduct of the case. Directions might include property valuations, pension reports, business valuations, mortgage capacity evidence or replies to questionnaires. Financial Dispute Resolution Hearing The Financial Dispute Resolution hearing, commonly known as the FDR, is a settlement-focused hearing. The judge considers the parties’ positions and provides an indication of the outcome they believe would be fair. The judge does not normally make a final decision at the FDR, but encourages both parties to negotiate. Many financial remedy cases settle at or shortly after the FDR. Final HearingWhere no settlement is reached, the case proceeds to a Final Hearing. Both parties may give evidence and be questioned. After considering the evidence, legal submissions and the statutory factors, the judge will decide the outcome and make a binding financial order. Full and Frank Financial Disclosure Both parties are expected to provide full and frank disclosure of their financial circumstances.Disclosure may include: Bank and savings account statementsProperty valuations and mortgage statementsPayslips, tax returns and accountsPension valuationsCompany accounts and business recordsInvestment and shareholding informationDetails of liabilitiesEvidence of trusts, inheritances or other resources A person must not conceal, transfer or undervalue assets to prevent them from being considered. Where disclosure is incomplete or misleading, the court can order further disclosure, draw adverse inferences, make costs orders and, in appropriate cases, revisit an order obtained without honest disclosure. Making an Agreement Legally Binding: The Consent Order An informal agreement reached directly, through solicitors or in mediation is not automatically enforceable as a financial order. To make the terms legally binding, the agreement should usually be recorded in a consent order. This document sets out how the parties have agreed to deal with their financial claims. The parties will normally also complete a Form D81, which provides the court with a summary of their financial circumstances before and after the proposed settlement. A judge will review the documents and decide whether the proposed arrangements appear fair. The judge may approve the order, request further information or raise questions about the proposed terms. The court can generally approve a financial consent order after the Conditional Order has been made. Depending on the type of provision, the order may not take effect until the Final Order has brought the marriage to an end. It is sensible to obtain legal advice before applying for the Final Order, particularly where pensions, inheritance rights or property transfers remain unresolved. What Is a Clean Break Order? A clean break order dismisses the parties’ rights to make specified financial claims against one another in the future. Where a full clean break is achieved, neither former spouse can generally return later to seek further capital or income provision covered by the dismissal. A clean break may not be immediately appropriate where one party requires spousal maintenance. The court can instead make maintenance payable for a fixed or potentially extendable period, sometimes with a clean break taking effect at the end of that term. Even where no money or property is changing hands, a clean break consent order may still be required to dismiss future claims. Simply obtaining a divorce does not create a financial clean break. What Happens If You Divorce Without a Financial Settlement? Divorcing without obtaining a financial order can leave both parties exposed to uncertainty.An informal agreement, even one recorded in writing, does not provide the same protection or enforceability as a court-approved order. Without an order: Financial claims may remain openAn agreed property transfer or payment may be difficult to enforceOne party may later seek a different outcomeFuture financial developments may complicate any later proceedingsPension claims and benefits may remain unresolved The court will consider the circumstances existing at the time of any future application, including the length of delay and the parties’ financial conduct following separation. Assets acquired after separation are not automatically shared, but unresolved claims can create avoidable risk and expense.Obtaining a properly drafted financial order provides clarity about which claims have been resolved and which, if any, remain open. Pensions and Divorce Pensions can be among the most valuable assets in a marriage, sometimes exceeding the equity in the family home. A pension should not be ignored simply because it will not be available until retirement. The court considers pension rights as part of the parties’ overall financial resources. The main ways of addressing pensions include:Pension Sharing OrderA pension sharing order transfers a specified percentage of one party’s pension rights into a pension arrangement for the other party. This provides the receiving spouse with pension rights in their own name and can help create greater independence following divorce. Pension Offsetting Pension offsetting allows one party to retain more pension provision while the other receives a larger share of non-pension assets, such as the equity in the family home. Care is required because a pension and an immediately available capital asset do not have the same characteristics or value. Pension Attachment OrderA pension attachment order directs part of a future pension income, lump sum or death benefit to be paid to the former spouse when the pension becomes payable. This approach is used less frequently than pension sharing because it may not provide the same degree of independence and certainty. Complex cases may require advice from a pension actuary or Pension on Divorce Expert. This may be particularly important where there are defined benefit pensions, public-sector schemes, armed forces pensions, overseas pensions or significant differences in the parties’ ages. Business Assets and Divorce A business interest can be considered as part of a divorce financial settlement, regardless of whether the company is owned by one spouse or both. The court may consider: The value of the businessThe income it generatesThe owner’s present and future earning capacityWhether company funds are availableAny tax consequences of extracting or transferring valueThe impact of an order on employees, shareholders and ongoing operations The court does not necessarily require a business to be sold or divided. Where possible, it may seek an outcome that preserves the business while ensuring that the other party receives a fair settlement. Company accounts, tax returns and an independent expert valuation may be required in more complex cases. Do You Need a Divorce Financial Settlement Solicitor? Legal advice can be valuable even where you and your former spouse believe you have reached an agreement.A specialist divorce finance solicitor can: Explain the financial claims available to each partyAdvise whether the proposed division is fairIdentify missing financial disclosureNegotiate on your behalfAdvise on property, pensions, maintenance and business interestsDraft a consent order and Form D81Represent you in financial remedy proceedingsHelp protect you against future financial claims Early advice can also prevent decisions being made during the divorce process that may unintentionally affect your financial or pension position. Speak to a Divorce Financial Settlement Solicitor If you need advice about dividing property, savings, pensions, businesses or debts following divorce, our specialist family law solicitors can help. Duncan Lewis advises clients on divorce financial settlements in Birmingham, across the West Midlands and wider Midlands region, London and throughout England and Wales. Whether you need assistance negotiating an agreement, preparing a consent order, obtaining financial disclosure or pursuing a financial remedy application through the Family Court, contact Duncan Lewis today to speak with a specialist divorce and family law solicitor.