Can You Divorce Without Sorting Out Finances?

Couples increasingly choose to separate and divorce without having sorted out their finances, which could be attributed to the advent of a more accessible online divorce service, but there are implications for not finalising financial matters by way of a court order.
There are sometimes reasons for a couple having divorced without sorting out their financial matters. Often one party remains in the family home to care for their young children until they are ready to fly the nest, whilst the other is content for them to stay there in the meantime.

In some circumstances, one party may not have the means to release the other party from the mortgage. They may receive a modest income, but child benefits and child maintenance payments enable them to afford the mortgage payments.

Sometimes, a couple may not have significant assets and would rather avoid paying the costs involved in applying for a financial order if there is very little money in the pot.

Whilst it is possible to finalise your divorce or civil partnership dissolution without sorting out the financial arrangements, it is not usually recommended.

Simply terminating the marriage or civil partnership does not prevent either party from claiming financial provision. If you want to ensure that neither party can make any further claim against the other in life or on death, then you would need to enter a clean break consent order.

There are implications of not sorting the financial matters before divorcing or dissolving your civil partnership, which separating couples should be alive to: 

• If you remarry, you could lose some or all rights regarding any subsequent attempt to claim from your former spouse, otherwise known as the ‘remarriage trap’. It can be preferable for parties to hold off on remarrying until a financial settlement has been finalised under a sealed Court order.
• If one party to a divorce unexpectedly dies during financial negotiations and before a financial order has been made and where there has not been a decree absolute or final order, the surviving spouse will be entitled to benefits which accrue as a widow or widower. The benefits can be a substantial sum. If the divorce is finalised before then, the surviving former spouse will lose out on any such automatic spousal benefits that would have been paid.
• Other financial issues that could arise include the tax charges on the transfer of assets where exemptions exist between spouses. Any transfer of assets may attract tax charges, such as Capital Gains Tax and Stamp Duty Land Tax. In the United Kingdom, our tax regime allows certain exemptions for spouses from many tax charges. Suppose a relevant transfer is likely to form part of the divorce settlement. In that case, parties may be advised to delay their application for final order or decree absolute and to remain married, waiting until all the finances have been settled and the consent order has been approved by the court first.
• It is often the case that when the parties divorce before sorting out their finances, their circumstances will be very different when it comes to later considering how to divide assets. The court must consider the parties’ financial positions and circumstances at the time the application is made, and crucially it is not limited to what the position was at the time they separated. If one party’s finances have improved, the outcome could be significantly less favourable than if the case was settled at the point of divorce. This was most apparent in the recent case of Wyatt v Vince [2015] UKSC 14, which served as a stark reminder of the importance of having a financial order on divorce.

The financial aspects of a divorce or civil partnership dissolution can be complicated. It is, therefore, prudent to consult a family law specialist before applying for your final order.

At Myerson, our team of specialist family lawyers provide tailored advice in such matters and aims to empower and support you to reach a timely and fair settlement.