Financial Settlements

During the divorce process it can often be the negotiations surrounding finances that cause the most difficulty. Where both parties are able to negotiate amicably it is possible to reach a settlement without a Court hearing. Unfortunately on many occasions couples are unable to agree the split of finances between themselves and they require Court proceedings to settle matters.

Factors Affecting the Financial Settlement

• requirements of any children from the marriage
• duration of the marriage
• age of the couple
• value of any property, or other assets, owned by the couple, either jointly or individually
• financial obligations, responsibilities and debts of each party
• earnings and earnings potential of each party
• contributions during the marriage
• the pension position of each party
• the future financial needs of each party
• the weight afforded to the financial aspects by any pre-nuptial agreement

Agreed Financial Settlements

As stated above where a couple are still on amicable terms a settlement may be mutually agreed without the need for a Court hearing. A lawyer would draw-up a Consent Order detailing the agreement and approved by both parties which is then sent to the Court to be agreed by a Judge.

If the Judge is not certain that both parties fully understand what they have agreed and/or does not consider the agreement to be reasonable, the parties may have to attend Court.

Once the Consent Order has been signed by the Judge no further financial claims can be brought by either party.

Disputed Financial Arrangements

Quite often it is not possible for both parties to agree an amicable financial settlement. In these cases it is necessary to have a Court hearing to decide the split of the property and assets. These are known as ancillary relief hearings.

An application is made to the Court who then issue a timetable to both parties requiring them to file certain documentation. The most important of these is the Form E. This is a detailed financial statement which needs to be completed by both parties and requires the disclosure of certain financial records such as bank statements and tax records.

This leads to the first Court hearing where the Judge will issue an Order for Directions which sets down the timetable for both parties. This may include for example further financial disclosure or the valuing of certain assets such as any properties. Approximately two months later the Financial Dispute Resolution Hearing (FDR) takes place.

At the FDR hearing the Judge will hear submissions from both sides’ lawyers and will then give an indication of the type of Order that they would give if the matter went to a final hearing. The Judge will then hope that both parties can come to an agreement without the need for the final hearing. Both sides then leave the courtroom with a view to reaching a settlement. If there is agreement the Judge is informed and the Consent Order is drawn-up.

If no agreement is reached the matter proceeds to a full final hearing.

At the final hearing both parties have to give evidence on oath. They are cross-examined by the other sides’ lawyer and will be questioned in detail on their financial and personal circumstances.

When all the evidence has been heard the Judge will make a final order. This settlement is then imposed on each party.

Maintenance

How much maintenance is paid, and to whom, depends upon several factors, including-:

• length of the marriage
• income of both parties
• financial needs of both parties
• age

Maintenance is usually paid monthly and can sometimes be varied by the Court at a future date if circumstances change.

Sometimes maintenance may be paid as a lump sum. This allows for each party to be financially independent of the other and is known as a "clean break". There can be no future financial applications by either party against the other.

The recipient of the maintenance loses the payment once they re-marry.

Pensions on Divorce

Pensions can be extremely complex and difficult to value. On some occasions it is necessary to utilise specialist advice from an Independent Financial Advisor or Pension Actuary.

Once valued a pension can be dealt with in a number of different ways -:

• pension sharing : the pension is divided creating a new fund for the recipient

 

• pension attachment : part of the pension upon retirement (either income or lump sum) can be diverted from one party to the recipient

 

• pension offsetting : the value of the pension fund is "offset" against another asset, such as a property.

As stated above dealing with pensions within a divorce can be very complex and expert advice will be required from a lawyer and possibly a pensions specialist.

Bankruptcy and Divorce

Bankruptcy can have a serious impact upon the financial settlement in a divorce. The assets of the bankrupt are owned instead by the Trustee and utilisation of their income is also subject to control by the Trustee. Therefore the assets to be divided are much smaller and little or no maintenance may be payable.

Such is the impact of bankruptcy that if one party fears that the other may be approaching bankruptcy they should seek to expedite financial matters within the divorce in an attempt to have the appropriate Court orders in place before bankruptcy occurs.

 

For further advice on financial settlements within a divorce please contact Clare Ellison (clareellison@hhlegal.co.uk) or Sinead Connolly(sineadconnolly@hhlegal.co.uk) on 0800 371 407.