A divorce financial settlement is an arrangement under which a couple’s assets and financial affairs are separated upon divorce.
On a divorce, nullity, judicial separation and dissolution of civil partnership, the court has power to make an order for financial settlement. The court does not have power to make a capital order or a final financial order until either Decree Nisi (pre 6 April 2022 divorce applications) or Conditional Order (post 6 April 2022) has been pronounced, but can make an order for interim maintenance with effect from the date of the divorce application. See our Spousal Maintenance page for more information.
It is important to ensure that your divorce financial settlement is recorded in an order of the court. Otherwise financial claims could be brought against you, even years after your divorce, as there is no time limit on making these claims. It is only with a binding court order setting out the arrangements and dismissing each party’s claims that you can be certain to achieve finality between you and your spouse.
The court order can be obtained either by consent, either by negotiation between solicitors, mediation or the collaborative process, or following a contested trial.
If you and your spouse are in agreement, then the court should be able to make your court order at the same time as the decree nisi, though it will not take effect until the decree absolute. This process normally takes between 6 and 8 months from start to finish, as court lead times are currently longer than they used to be. However, if you are not in agreement, and particularly if your spouse is not willing to disclose their financial position, then it can take much longer; up to 12 to 18 months or more.
Full and frank disclosure
In order to assess what might be a fair settlement, it is necessary first to identify and value each spouse’s assets (see Investigating hidden assets) and income. It is only when the assets and income have been ascertained and their values agreed, that it is possible for the couple to reach a settlement or for the court to make an informed decision.
The court has power to make orders for a spouse including:
• Periodical payments (maintenance or alimony)
• Secured provision (maintenance that is charged against an asset)
• Lump sum (a cash payment)
• Transfer of property (where one legal ownership of an asset is taken away from one spouse and transferred to the other)
• (except upon decree of judicial separation) a pension attachment and a pension sharing order (see Pensions).
Agreed child maintenance orders, school fees orders and/or top up orders where there is a maximum Child Maintenance Service assessment. See our Child Maintenance or child support page for more information.
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 & Wales is discretionary.
The law in England & 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 when assessing the claims of each spouse.
The needs approach
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 the needs approach.
The presumption of equality
In the case of long marriages, where there is a surplus of assets, the courts have moved away from the needs approach toward a proposition of equal division based on contribution. This approach emerged out of an important case called White and has since been developed further in more recent cases. A court can diverge from equality by reference to the needs approach.
Most divorce settlements comprise three main elements; periodical payments (maintenance or alimony), capital orders (lump sum and/or transfer of property) and long term security (pension attachment and pension sharing orders, provision of life insurance).
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 isn’t an established culture of dependence (for example a short, childless marriage involving a young couple) or, in high net worth cases, where the couple’s resources exceed their needs.
Most cases are settled by negotiation between the couple and their lawyers. Some are settled by trial in front of a judge. However, it is normal to issue court proceeding 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.
Why do I need a solicitor and why Dawson Cornwell?
If you don’t have a solicitor to give you advice, you may be disadvantaged because you won’t know what provision you are entitled to expect and mistakes could be made in the drafting of your court order, leaving you potentially exposed to further dispute.
Dawson Cornwell has a strong track record in achieving negotiated settlements for clients and doing so cost effectively. No two settlements are the same and assessing what may be the right solution for an individual client is a combination of legal expertise, judgment, and strategy. We can also provide you with skilled litigation expertise if you have to push your claim for financial remedies through the court system.