In England and Wales, you can divorce without reaching a financial settlement. This is because the legal process of divorce is a separate matter from reaching a financial settlement. Divorce simply ends the marriage, whereas a financial settlement is about deciding how your marital assets will be divided between you and your ex-spouse. With that said, divorcing without a divorce settlement is usually not recommended by divorce lawyers in the UK due to the legal implications of both parties remaining financially tied to one another and, therefore, being able to make future claims on assets. Reaching a financial settlement during the divorce process gives you both financial certainty, whether in the form of a clean break or ongoing spousal maintenance.
Contact our divorce solicitors to understand your options and implications during the divorce process. Our team will carefully review the details of your circumstances and provide guidance on the best course of action to protect your financial interests and the well-being of your children.
Risks of getting a divorce without a financial settlement
The risks of divorcing without reaching a divorce financial settlement can be summarised as follows:
- On-going financial ties (i.e. no ‘clean break’)
- Complications for future relationships
- Ex-spouse remains entitled to pension and benefits
- Taxation
- Lose right to financial claim due to remarriage
- Vulnerability to changes in financial conditions
On-going financial ties
Not reaching a final agreement on your finances following divorce may mean that you continue to be financially tied to your ex-partner. Many divorcing couples prefer to have a financial clean-break, or at least an agreement on spousal maintenance, giving them financial certainty in the knowledge that their ex-partner has no further financial claim against them.
Complications for future relationships
It is always preferable to tie up any financial disputes and agreements relating to a previous marriage before entering into a new relationship. The risk is that without a financial settlement, the new partner may become unnecessarily caught up in financial disputes from their partner’s previous marriage. Reaching a clean break ensures that the new relationship can be based on financial certainty and is not affected by future claims by an ex-wife or husband.
Ex-spouse remains entitled to pension and benefits
Without a divorce financial settlement, there may be nothing to stop your ex-partner from making a claim against your pension and benefits in the future. Clean break orders can avoid this scenario by removing any entitlement to the pension/s of the other party.
Potential taxation
Completing asset transfers between spouses outside of a financial settlement may attract certain taxes. Including the transfer of marital assets within a divorce financial settlement between spouses means that stamp duty and capital gains tax exemptions apply.
Lose right to financial claim due to remarriage
Getting remarried means that you lose your right to make a financial claim from your ex-spouse; this is often referred to as the ‘remarriage trap’. If you plan to remarry after your divorce, it is always recommended to delay this until your divorce financial settlement has been finalised by the court.
Vulnerability to changes in financial conditions
It is preferable to reach a divorce financial settlement as soon as possible during the divorce settlement so that any agreement is based on the current circumstances of both individuals. Not reaching a financial settlement or delaying this process until after you are divorced can make it harder to reach an agreement and/or deal with financial claims that arise in the future. This may happen, for example, if one spouse is less wealthy relative to their previous financial position immediately after divorce.
When can you apply for a divorce financial settlement?
Divorce financial settlement applications should be submitted after you receive your Conditional Order and typically before the issuing of the Final Order. Although there is no fixed deadline for reaching a divorce financial settlement, delaying it until after the Final Order can lead to complications, including the risk of future claims.
Remember, the point of entering into a financial settlement with your ex-partner is to allow both parties to move forward independently with certainty regarding the division of your marital finances. The longer you leave reaching a settlement, the greater the chance of financial uncertainty and disagreement.
An experienced divorce solicitor can guide you through every stage of reaching a financial settlement, including providing assistance in accurately valuing assets such as property, investments, pensions, and business interests. In cases involving high-value assets, international properties, family trusts, or complex business structures, a divorce lawyer’s expertise is crucial for navigating these complexities. Contact our divorce lawyers for more information.