If you are going through a divorce, it is essential to have a financial settlement order put in place. Without this, you could face a financial claim from your former partner at some point in the future. We look at how a divorce settlement is calculated and the process for obtaining a financial order.
A financial settlement after divorce is crucial to giving you the support and certainty you need going forward. It will also generally end the financial obligations you and your former spouse had towards each other unless ongoing maintenance is ordered.
In this blog, we will cover:
- What is a divorce settlement?
- What am I entitled to in a divorce settlement?
- Does the length of a marriage matter in a divorce settlement?
- How is a divorce settlement calculated?
- How long does a divorce financial settlement take?
This blog is intended for general information purposes only and should not be taken as legal advice. If you require legal advice concerning finances on divorce, please contact your local BakerLaw office or email us at enquiries@baker-law.co.uk.
What is a divorce settlement?
A divorce settlement is the way in which assets and liabilities are split during the divorce process. If you are divorcing, you will be advised to try and make a divorce settlement agreement with your former partner. If you can decide how you want to deal with your finances, the court will be asked to approve and seal this agreement, making a binding financial order.
If an agreement is not possible, the next step is usually to consider mediation. An experienced family mediator will work with you both to help you explore potential solutions. They will not impose an outcome on you, however, and any resolution will be one that you have both agreed upon.
Where an agreement cannot be reached, an application can be made to the court for a decision. The court will look at a range of factors and make a financial order, which will contain your divorce settlement.
What am I entitled to in a divorce settlement?
In calculating a divorce settlement, the court will follow the guidelines set out in section 25 of the Matrimonial Causes Act 1973 (the Act). It will also prioritise the needs of any children when making its decision.
The factors included in the Act are:
- The income, earning capacity, property and other financial resources available to each party, both at the present time and in the foreseeable future
- The financial needs, obligations and responsibilities each party has, including those they are likely to have in the foreseeable future
- The standard of living enjoyed during the marriage
- The ages of each party
- The duration of the marriage
- Any physical or mental disabilities either party has
- The contributions made by each party during the marriage, including looking after the home and raising children, which is considered of equal value to work outside of the home
- The value of any benefit that would be lost because of divorce or dissolution, such as pension benefits
Does the length of a marriage matter in a divorce settlement?
The length of a marriage is considered by the courts and can affect the amount of the settlement.
If the parties are relatively young and the marriage was short, the court is less likely to split assets contributed by one party.
Where marriage has been lengthy, and the parties are older, the court will look at the support that will be needed by each of them for the future, such as earning capacity, pension provision and housing. This could mean a more equal division of assets, regardless of where they originated. Usually, no assets are out of reach if they are needed to meet a partner’s reasonable needs.
How is a divorce settlement calculated?
Both parties need to make full financial disclosure when calculating divorce settlement. This is generally done by completing Form E, a comprehensive list of assets, liabilities and other relevant information.
The court will aim for fairness and the starting point for its calculations will be a 50:50 split. It will try and ensure that both parties’ reasonable needs are met, including housing.
Where children are involved, the court will prioritise their welfare. This could mean that the person with whom the children are living will receive a family home. There are several ways in which this could be accomplished:
- The person receiving the family home will have a lower share of other available assets, such as savings and pension provision
- The person receiving the family home will buy out the other person’s share, for example, by taking out a mortgage
- If the family home is substantial, it could be sold, and a smaller home bought for each party
- The home could be sold in the future once the children reach the age of 18, and the sale proceeds split at that point
If one party is in a weaker financial position, for example, because they have given up their career to raise children, this is likely to be considered and they could receive a larger share of the assets by way of compensation.
In some cases, spousal maintenance might be ordered. The courts prefer that the parties achieve financial independence wherever possible, so this could be for a finite period to allow someone to find a job or retrain. Occasionally, spousal maintenance may be ongoing.
Courts also have the power to share pensions on divorce. This is generally done by making a pension sharing order and splitting off a portion of a pension for the spouse without a pension or with a lesser pension provision. When they reach retirement age, this becomes their own pension to draw on as they wish.
How long does a divorce financial settlement take?
The length of time it takes to obtain a financial settlement in divorce generally depends on whether you and your former partner are able to reach an out-of-court agreement as well as agreeing on the extent of the assets to be shared.
If you decide how you want to manage your finances through negotiation or mediation, the process could be finalised within a year.
Where it is necessary to go to court, this process can take longer, particularly if the family courts are busy and experiencing backlogs. In typical divorce settlements, it can also take longer to resolve cases with a higher level of assets.
Book a free initial 30-minute consultation for advice and representation on a financial settlement in divorce
If you would like to find out more about the divorce financial settlement process, please feel free to call our family law solicitors.
For more information on the legal aspects of relationship breakdown, see our divorce solicitors page.
You can contact your local BakerLaw office or email us at enquiries@baker-law.co.uk.
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