Financial settlements

We do not have community of property in our jurisdiction. By being married, a person does not automatically acquire an interest in their spouse’s assets or vice versa. Neither do we have a codified system for the division of assets and income on divorce as some jurisdictions do. The system in England and Wales is discretionary.

The law in England and Wales sets out certain criteria which must be taken into account when formulating a financial settlement. How those criteria are applied varies according to the circumstances of each case and upon the development of case law. The court must balance the criteria in assessing the claims of each spouse.

In cases where the family’s resources do not satisfy both spouses needs, then the needs of the economically weaker spouse (often the parent with whom the children are going to live) is usually given priority in terms of the allocation of resources. This is what is called a needs approach.

However, in the case of long marriages where there is a surplus of assets, the courts have recently moved away from the needs approach towards a proposition of equal division based on contribution. This approach has developed out of an important case called White and has been developed further in more recent cases.

Upon the granting of a decree of divorce, nullity or judicial separation, the court has the power to make various orders for a spouse which can include the following:-

   -Periodical payments (maintenance or alimony)
   -Secured provision (maintenance that is charged against an asset)
   -Lump sum (a cash payment)
   -Transfer of property (where legal ownership of an asset is taken away from one spouse and transferred to the other)
   -(except upon decree of judicial separation) pension attachment and pension sharing (see Pensions)

Most divorce settlements comprise three main elements; periodical payments, capital orders (lump sum and/or transfer of property) and long term security (pension attachment and pension sharing orders, provision of life insurance cover). In some cases, all three elements are bound together in a one off settlement. This is commonly referred to as a “clean break”. However, clean break settlements are normally only appropriate where there is not an established culture of dependency (for example a short, childless marriage involving a young couple) or where the couple’s resources exceed their needs (as in White)

In order to assess what might be a fair settlement, it is necessary first to identify and value each spouse’s assets (see Investigation of Assets). It is only when the assets have been ascertained and their values agreed, that it is possible to reach a settlement.

Most cases are settled by negotiation between the couple and their lawyers. Some are settled with the help of mediators. Only a few are resolved by trial in front of a Judge. However, it is normal to issue court proceedings about finances to make use of the court procedure. This allows the couple to have the court’s assistance in structuring the negotiations and the exchange of relevant information and valuations. Even when the parties agree, a short hearing is sometimes necessary to ask the court to approve the settlement and make a court order in the agreed terms.