A divorce settlement, also referred to as a “financial settlement” or “financial agreement”, is an agreement between you and your ex-partner setting out how your assets will be split after divorce or dissolution. Reaching a financial agreement is part of the overall divorce process and ensures that the division of your property, assets, and money is recorded in a way that is legally binding financial order enforceable by the courts. If you can agree with your ex-partner about how to divide your marital assets, there may be no need to ask the courts to intervene. If you cannot agree, you can ask the courts to make a decision on your financial settlement in the form of a financial order.
While you can divorce without a financial settlement, even in the most amicable separation, disagreements may arise. For example, your ex-partner may later decide not to honour any financial agreement you reached, or they may disagree on the precise terms of what was agreed. Having a financial settlement in place removes any uncertainty as the terms of the agreement are captured in writing. Having a financial settlement also means that if there is any future disagreement on financial matters, it is much easier to find a resolution, which helps to preserve amicable relations for the benefit of the parties and their children.
In most cases, you will need a Conditional Order (Decree Nisi) before you can apply for a financial order from the courts. You can reach a financial settlement either during the divorce or dissolution process or afterwards. This is because there is no time limit for financial settlements following divorce or dissolution, assuming that neither party has remarried or entered into a new civil partnership.
Splitting assets in a divorce
A financial settlement can set out how any assets are to be divided following divorce or dissolution, including:
- Property (whether in the UK or overseas)
- Money and savings
- Pensions
- Investments
The settlement can also include any arrangements for maintenance payments and child maintenance payments.
Property (whether in the UK or overseas)
There is no single formula for how property should be split following divorce or dissolution. Any property owned by you or your partner before you married that you lived in together as a marital home may be considered an asset to which you both have an equal right. The courts will take into a number of factors when deciding how property should be split, including the needs of the parties and any children and the financial resources of each party.
The courts have the power to prevent (block) the sale of marital property and decide on how the proceeds of any sale should be apportioned. This may be necessary, for example, if the property is in only in the name of one person. In this case, a family law solicitor will register the interest of the other party with the Land Registry.
Pensions
You may be able to receive a share of your partner’s state pension and any private pensions they hold as part of a divorce settlement. This can be done through offsetting, whereby one party gives up an asset (e.g. property) or attachment (e.g. monthly payments) in return for a share of pensions.
Investments
Investments (e.g. shares and property) and savings may be taken into account as part of your financial settlement. It is important to bear in mind that investments and savings held before the marriage or civil partnership or that were inherited may not be included in a financial settlement.
Who gets what in a divorce settlement in the UK?
In England and Wales, the general legal principle is that all marital assets should be split equally in a divorce settlement. As such, a wife is entitled to an equal split of any financial assets in the event of divorce or dissolution.
There are several factors that will ultimately determine how divorce settlements are calculated by the courts, including the:
- Welfare of the children
- Current and future financial needs
- Standards of living before marriage breakdown
- Age and the length of your marriage
- Contribution to family welfare
- Loss of benefits
- Conduct of both parties
In the event of divorce and splitting assets in the UK, the courts will always place a high priority on the welfare of your children. How this is calculated will depend on whether the child will live mainly with one parent, or their time will be apportioned 50/50 between both parents. If your child will spend most of their time with you, the marital home may be awarded to you as part of your divorce entitlement.
When it comes to your current and future financial needs, the courts will look at a few factors:
- Your ongoing financial needs.
- The income of both parties in the foreseeable future.
- Whether it is possible to achieve a clean break. A clean break means that divorcing parties are no longer financially dependent on each other.
The courts will also endeavour to ensure that you and your ex-partner maintain the same standard of life as enjoyed during your marriage, as much as possible. In practice, depending on the financial resources available and the earning ability of each party, this is not always feasible.
Another factor that will determine how the courts divide your assets is your age and how long you were married. For example, if you have been married for 2 years, the courts may be less inclined to give you a share of pre-marital assets as part of your divorce entitlement compared to if you have been married for 20 years.
In a divorce division of assets, if you have lost certain benefits due to your divorce, the courts will also bear this in mind when working out how much you are entitled to.
The courts may also look at the conduct of both parties when determining a divorce settlement, but only in exceptional circumstances (i.e. if the conduct is sufficiently serious).
How to get a financial settlement in a divorce
There are two ways to get a financial settlement following a divorce; through the courts or outside of the course, as explained below:
Get a financial settlement without going to the court
If you and your ex-partner agree on a financial arrangement between yourselves, you will not need to ask the courts to decide for you. However, it is important to have a Consent Order drafted and have this approved by the court to make your financial settlement legally binding.
To apply for Consent Order approval, you will need to:
- Have a Consent Order drafted by a family law solicitor
- Sign your Consent Order and make two photocopies
- Complete a statement of information form1
- Complete a notice of an application for a Financial Order 2
- Send the signed forms, copies, and a payment of £53 fee to HMCTS Financial Remedy, PO Box 12746, Harlow, CM20 9QZ.
- On receipt, if the judge thinks your Consent Order is fair, it will be approved.
Going to the court for divorce financial settlement
If you and your ex-partner cannot agree on a financial arrangement between yourselves, you can ask a court to make financial decisions on your behalf. Any arrangement reached by the court will be issued in the form of a financial order. Your financial order application should be submitted to the court after you have a Conditional Order or Decree Absolute but before you receive your Final Order to Decree Nisi.
To apply for a financial order, you will need to:
- Complete a Financial Order application form3 – this should be submitted to the court handling your divorce with a fee of £275.
- Attend a Mediation Information & Assessment Meeting or MIAM – this is a mandatory step and is used to determine if mediation can help you and your ex-partner reach a financial agreement without the involvement of the courts.
- First appointment – this is a short meeting with the judge to discuss your application.
- Financial dispute resolution (FDR) appointment – the aim of this meeting is to help you reach an agreement without the need for a final hearing (you might need more than one appointment).
- Final hearing – if you are not able to agree on a financial settlement with your ex-partner, the judge will make a final decision on how to separate your finances. They will then issue a financial order.
It is important to cooperate with the court at every stage. Furthermore, engaging an experienced family law solicitor who will prepare your case and provide evidence of your financial requirements may help you win in a divorce settlement.
How long does a financial settlement take?
If you and your ex-partner can agree on a financial settlement, the process of gaining an approved Consent Order will normally only take between 2 and 4 weeks from the date of submission to the court.
If you and your ex-partner cannot agree on a financial settlement and you need to apply for a financial order, the process can take several months and perhaps more than one year. From the date of application to your first hearing, it can take between 12 and 14 weeks. There may then be a delay of several weeks or even months between each stage.
Factors that will determine how long your financial settlement will take include:
- How busy the courts are
- Whether you can reach a financial agreement outside of the court
- How quickly you provide any documents requested, including full disclosure of your financial assets and
- The complexity of your financial situation and that of your ex-partner