Financial Settlements after divorce

In Divorce Breakup advice

Financial settlements are often a large part of the divorce process. They can also be a confusing part because they can continue even after you have legally divorced – sometimes a long time after. Therefore, it’s important to know how to secure your financial rights and stop financial claims in the future from your ex-spouse.

Do I have to reach a financial settlement before I divorce?

In short: no. Perhaps the most important thing to stress is that if you have already divorced without reaching a financial settlement, it is not too late to do so! It is usually advised you reach a financial settlement and get a financial order from a court at the time of divorce, but don’t worry - you can still do this after you are divorced. However, it is advisable you seek out financial separation from your partner as quickly as possible after decree absolute. Without it, you may have claims against you in the future from your ex-spouse.

Decree Nisi and Decree Absolute

If you are already going through the divorce process, you are probably already familiar with these terms.

A Decree Nisi is a court order given when it sees no reason why a divorce cannot go ahead. If your spouse does not agree to the divorce, you can still apply for a Decree nisi. However, you will have to go to a court hearing. A judge will then decide whether you should be granted a Decree Nisi.

A Decree Absolute is a court’s final order which legally ends a marriage. You will need to wait for 43 days (6 weeks and a day) after you have received a Decree Nisi before you can apply for a Decree Absolute. This document means that you and your ex-partner are free to remarry.

Crucially, a Decree Absolute does not end your financial obligations to your ex-spouse. Unless you have a financial order in place, financial obligations to your spouse have not technically ended after divorce.

Financial Orders: Can you divorce without a financial order?

Even if you have agreed between you and your partner that you are now financially separated, unless you have a court order, this can come back to bite you. Without a court order like a Clean Break Order or a Consent Order, your ex-spouse could still claim money against you. In theory, you can divorce without a financial order, but in practice, often it is wise not to.

Take a recent famous case: ‘Wyatt vs Vince 2016’. Mr Vince and Ms Wyatt had divorced 19 years before, though the relationship had broken down 31 years ago. They did not get a financial order, so did not halt the financial obligations to each other. After their divorce, Mr Vince started building up a business - a business which is now worth tens of millions. In 2016, Ms Wyatt claimed money against Mr Vince, which she was able to do because there was no financial order in place. Mr Vince, therefore, had to pay out £300,000 to his ex-wife 19 years after their divorce.  Although this is obviously a rare example, it stresses the importance of seeking a financial order.

Clean Break

A Divorce Clean Break Order makes sure all financial ties are severed. Even if you do not have any assets that need severing at the time of divorce, it is still worth getting a Clean Break Order. This ensures you are legally and financially separate. Your ex-spouse will not be able to make any financial claims against you in the future. A court will always push for a clean break if there are no children in the marriage.

Consent Order

A Divorce Consent Order is like a Clean Break Order but details the assets you currently own. It also formally shows the court how these assets will be divided. These include your savings, pensions, and other assets you own such as property. This makes sure that an ex-spouse cannot make any financial claims against you in the future.

However, a Consent Order is not necessarily a ‘clean break’. It is simply an agreement on how to split finances between divorcing partners. A Consent Order also includes things like Deferred Clean Breaks under its remit. A Deferred Clean Break is when a court rules that a clean break will happen only after a certain event takes place. These events include things like your children finishing school or an ex-spouse finding employment.

Are Clean Breaks and Consent Orders always possible?

Clean Breaks are not always possible in the light of a divorce, although often desirable. Spousal Maintenance and/or Child Maintenance are often needed to balance out payments after the marriage. These aim to ensure both parties will be able to cope financially in the aftermath of the divorce. They also ensure that any children will be financially secure in the household that they live in.

Spousal maintenance, however, can also be paid in a lump sum as part of a Clean Break. This means that if you don’t have any children at the time of divorce, a Clean Break could still be a good option for you. Child maintenance payments cannot be paid in a lump sum.

Do I need to go to court to get a financial order?

Technically, you will need to apply to the courts to get a financial order, but this doesn’t mean you have to physically go to court. If you and your partner can come to an amicable agreement, this can often be the easiest and cheapest option. You can do this either on your own, through mediation, or collaborative law. However, it is often advisable that you hire a solicitor.

After you have come to an agreement, you will need to apply to the court with a Consent Order, detailing what your plan for a financial break is. The court will then consider whether the Consent Order is fair for both parties. If it is, they will issue the order reflecting the couple’s demands, either a Clean Break Order or otherwise.

Financial Remedy

However, if you and your partner cannot agree on a financial settlement, you will need to physically go to court. This process is called Financial Remedy and deals with all aspects of the financial settlement. You will need to fill in two important forms during this process:

Form A: This form starts your application to the court for financial remedy. When issued, this starts the process of the courts requesting full disclosure of your finances. It also sets in motion a preliminary directions hearing, ‘the First Appointment’. The form will ask you if you have attended mediation, as the law now requires you to have attended at least one mediation session before going to court.

Form E: A required financial statement signed by you and exchanged with your spouse before the First Appointment. This is a very detailed form. The courts, however, need to know your entire financial situation before they make any decision on how finances should be split.

Should I reach a financial settlement before or after divorce?

As previously mentioned, financial matters of the divorce are different from the divorce itself. This means that the court will rarely consider the reasons for the divorce (e.g. adultery) when coming to a decision on financial matters.

Solicitors will usually advise a client to sort their finances before applying for a Decree Absolute. This is generally so that couples can have a real ‘clean break’ after a divorce without still wrangling over financial issues. The court can also then process both the divorce papers and the financial separation at the same time.

Sometimes though, sorting out financial arrangements in the heat of divorce has unforeseen consequences. It may sometimes be easier to take a step back and look at your finances once you have divorced. It is always worth speaking to your solicitor before making financial decisions.

 Here at The Law Superstore, we’re here to help you through what can be a very difficult time. By providing quotes from local divorce solicitors, we’ll be able to help you find the perfect solicitor to suit your needs.

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