How are finances settled with divorces?
The legal procedure always runs more smoothly and cheaply if the parties agree on the financial matters independently of court. However, divorce is not always amicable, and is often the complete opposite with plenty of tension and emotion, and this will in certain cases make an independent settlement impossible. This means you will need to enlist the help of lawyers and mediators to help both parties agree on the finances.
Things to be taken into consideration
The usual starting point is to presume that the assets of both parties – known as matrimonial assets, which are the assets that a couple build up during the lifetime of the marriage, and also assets that are brought in at the start of the marriage – should be split equally between them. However, if there is a legitimate reason, then this equal split can be modified. The ‘clean-break’ procedure is often the easiest, but cases are not always this simple, for example when there are children involved.
Matrimonial assets include the shared home of the former partners, joint and savings accounts, endowment policies, personal possessions (known as chattels), vehicles and pensions.
Considerations for the ratio of the financial split should include the welfare of the children, the present state of finances for each individual, any future resources, the financial requirements of each party, the former standard of living for each party, the length of the marriage, the age of each partner, and any medical conditions, physical or mental disabilities of each partner.
While fault can often be the grounds for divorce, the fault of either party is, for the vast majority of the time, not taken into consideration when deciding the financial split. Courts have the power to order periodic payments for spouses, lump sum amounts, periodic payments for children, or a pension sharing order.
Before the process of financial negotiation starts, each party is required to disclose their financial situation. They also need to include their current plans and objectives, and the most important aspects of their future plans. Since the financial negotiations are separate from the legal divorce proceedings, there is no set time limit for the negotiations to occur. To ensure that each party remains truthful to the agreed financial plan, an application for a Consent Order should be made once an agreement has been reached.
The agreements made vary from case to case, and there are no set rules, but important matters for consideration include the selling or maintaining of the family home, the payments for spouses and children, the division of pensions, and the amendment to current wills.
Joint accounts can be problematic, and interim financial orders should be applied for until final settlement has been achieved. Sole home ownership means that the other party should register their interest in the property with the Land Registry, which ensures the house is not sold without the consent of both parties.