Financial Settlements

Divorce is not just the end of a marriage; it is also the disentanglement of two lives that have been financially intertwined. At MCR Solicitors, we understand that securing a fair financial settlement is essential to your ability to move forward with confidence and stability. Our experienced family law solicitors help clients throughout Manchester achieve financial outcomes that protect their interests and provide for their future.

Many people are surprised to learn that obtaining a divorce does not automatically divide matrimonial assets or end financial obligations between spouses. Without a proper financial order, your former spouse could make a financial claim against you years, or even decades, after your divorce. That is why it is so important to address finances properly during divorce proceedings.

What is a Financial Settlement?

A financial settlement is the agreement or court order that determines how assets and liabilities are divided when a marriage ends. It addresses everything from the family home to pensions, savings, and ongoing maintenance.

Financial settlements can be reached through:

• Negotiation - Through solicitors, reaching agreement without court involvement
• Mediation - With a neutral mediator helping you both find common ground
• Collaborative law - Where both parties and their solicitors commit to reaching agreement without going to court
• Court proceedings - When agreement cannot be reached, asking a judge to decide

However the agreement is reached, it should be made into a legally binding court order to provide certainty and finality for both parties.

What Assets Are Included in a Financial Settlement?

The court has wide powers to divide matrimonial assets. Everything acquired during the marriage is potentially included:

The Family Home

For most couples, the family home is the most valuable and emotionally significant asset. Options include:

• One spouse buying out the other's share
• Selling the property and dividing the proceeds
• Transferring the property to one spouse (often offset against other assets)
• Delaying sale until a future event, such as children finishing education (Mesher order)

Pensions

Pensions are often the second largest asset after the family home, yet they are frequently overlooked. All pensions can be considered, including:

• Workplace pensions (defined benefit and defined contribution)
• Private pensions and SIPPs
• The State Pension (in terms of National Insurance contributions)

Valuing pensions, particularly defined benefit schemes, often requires expert actuarial advice. We work with pension specialists to ensure pensions are properly valued and fairly divided.

Savings and Investments

All savings and investments are included:

• Bank and building society accounts
• ISAs and premium bonds
• Shares and investment portfolios
• Cryptocurrency
• Bonds and other securities

Business Interests

If either spouse owns a business or has shares in a company, these need to be valued and considered. Business assets can be complex, and we may need to instruct forensic accountants to provide accurate valuations.

Debts

Debts are also part of the matrimonial pot, including:

• Mortgages
• Personal loans
• Credit cards
• Hire purchase agreements
• Tax liabilities

Generally, joint debts will be shared, though the court has discretion to allocate debts fairly based on all the circumstances.

Other Assets

• Vehicles
• Valuables such as jewellery and art
• Inheritance (depending on circumstances)
• Future income or bonuses
• Insurance policies with surrender value

How Are Assets Divided?

Contrary to popular belief, there is no automatic 50/50 split in English law. The court aims for a fair outcome based on all the circumstances of the case. Key factors considered (under Section 25 of the Matrimonial Causes Act 1973) include:

The Welfare of Children

This is the first consideration. The court will ensure that children are properly provided for, which often means the parent with primary care of children needs suitable housing.

Income and Earning Capacity

Both current income and future earning potential are considered. If one spouse has sacrificed their career to raise children, this will be taken into account.

Financial Needs and Obligations

Each party's reasonable needs, including housing, living expenses, and responsibilities to any new partners or children.

Standard of Living

The standard of living enjoyed during the marriage, though this may need to reduce when one household becomes two.

Age and Duration of Marriage

Longer marriages typically result in more equal sharing. Short marriages may see each party leaving with what they brought in.

Contributions

Both financial contributions (earnings, inheritance) and non-financial contributions (homemaking, childcare) are recognised equally.

Conduct

Conduct is only relevant in exceptional circumstances where it would be inequitable to disregard it. Day-to-day behaviour during the marriage is not usually relevant.

Loss of Benefits

Including loss of pension benefits or widow's benefits that would have accrued if the marriage had continued.

Types of Financial Orders

The court can make various types of orders to achieve a fair division:

Consent Orders

When you and your spouse reach agreement on finances, this agreement can be made into a consent order. The court will check the agreement is fair before approving it. A consent order is legally binding and enforceable.

Clean Break Orders

A clean break order ends the financial ties between spouses completely and permanently. Neither party can make any further claims against the other. Clean breaks are generally preferred as they provide finality and allow both parties to move on independently.

However, clean breaks are not always possible, particularly where:

• Children need ongoing support
• One spouse cannot meet their needs from capital alone
• There is insufficient capital to meet both parties' needs

Spousal Maintenance

Spousal maintenance (also called periodical payments) is regular ongoing payments from one spouse to the other. It may be ordered where one spouse cannot meet their reasonable needs from their own income. Maintenance can be:

• Joint lives - Continuing until death, remarriage, or further order
• Term - For a fixed period, often to allow the recipient to retrain or become financially independent

Courts increasingly favour time-limited maintenance with the goal of achieving independence.

Lump Sum Orders

A one-off payment of a specified amount from one spouse to the other. This might be used to equalise the division of assets or to capitalise maintenance.

Property Adjustment Orders

Orders transferring property from one spouse to the other, or directing that property be sold and the proceeds divided.

Pension Sharing Orders

A pension sharing order splits a pension so that the recipient receives a percentage transferred into their own pension pot. This provides a clean break in respect of pensions.

Pension Attachment Orders

Less common now, these orders direct that when pension benefits are paid, a portion goes to the other spouse. They do not provide a clean break and end on death or remarriage.

Clean Break Orders: Why They Matter

We strongly recommend seeking a clean break wherever possible. Without one:

• Either party can make a financial claim at any time in the future
• Your former spouse could claim a share of a future inheritance, lottery win, or business success
• You remain financially connected to someone you may want to move on from

Even if you have few assets now, a clean break order protects you from future claims. It provides certainty and finality, allowing you both to plan for the future with confidence.

The Financial Order Process

If you and your spouse cannot agree on finances, court proceedings may be necessary. Here is an overview of the process:

Form A Application

Financial proceedings begin with a Form A application to the court. The court fee is currently ¶œ303.

Financial Disclosure

Both parties must provide full and frank financial disclosure using Form E. This comprehensive document requires you to disclose all assets, income, liabilities, and financial needs. Non-disclosure can have serious consequences.

First Directions Appointment (FDA)

The first hearing, typically 12-16 weeks after application. The court will give directions for the case, including any further disclosure or expert evidence needed.

Financial Dispute Resolution (FDR)

A settlement hearing where a judge gives an indication of the likely outcome and encourages settlement. Most cases settle at or shortly after the FDR.

Final Hearing

If settlement is not reached, a final hearing takes place where a judge makes a binding decision after hearing evidence from both parties.

Frequently Asked Questions About Financial Settlements

Is a 50/50 split automatic?

No. While equal sharing is often the starting point for longer marriages, the court aims for a fair outcome based on all circumstances. Needs, particularly housing needs for children, often take priority over strict equality.

What if my spouse is hiding assets?

Full financial disclosure is a legal requirement. If you suspect hidden assets, we can take steps to investigate, including applications for disclosure, forensic accountancy, and tracing assets. Non-disclosure can result in settlements being set aside.

Can I protect an inheritance from divorce?

Inherited assets are not automatically excluded from division. However, the court may treat inherited assets differently, particularly if they were kept separate, recently received, or the marriage was short. A prenuptial agreement can provide protection.

What happens to the house?

There are several options: sale with proceeds divided, one spouse buying out the other, or deferred sale until children are older. The priority is ensuring suitable housing, particularly for children.

How long do I have to pay maintenance?

This depends on circumstances. Maintenance may be for a fixed term to allow the recipient to become self-sufficient, or it may continue longer where this is not possible. Courts increasingly favour limited-term maintenance.

Can I change a financial order later?

Generally, clean break orders and capital orders cannot be varied. Maintenance orders can be varied if circumstances change significantly. This is why it is so important to get the original order right.

What if we cannot agree?

If negotiation and mediation fail, court proceedings may be necessary. A judge will hear evidence and make a binding decision. This is more expensive and time-consuming than agreement, but sometimes unavoidable.

Do I need a solicitor for a financial settlement?

Financial settlements can have lifelong consequences. While not legally required, having expert legal advice helps ensure you receive a fair outcome and that the agreement is properly documented. Mistakes can be costly to rectify.

Contact Our Financial Settlement Solicitors

Protecting your financial future during divorce is essential. Our experienced team can guide you through the process, whether through negotiation, mediation, or court proceedings, to achieve the best possible outcome.

Call us today: 0161 466 1280

Visit us: First Floor, 1024 Stockport Road, Manchester M19 3WX

Do not leave your financial settlement to chance. Contact MCR Solicitors for expert advice on protecting your assets and securing your financial future.