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What happens financially when you divorce?
Financial obligations exist between married couples, which do not end automatically once the divorce process is complete.
Accordingly, it is important to consider resolving finances on divorce.
If the parties can reach an agreement between themselves as to their financial arrangements on divorce, then any agreement reached can be incorporated into a court order known as a consent order.
A statement of information for a consent order will need to be completed to when submitting a consent order to the court.
This document outlines the parties' respective assets and finances before and after the proposed agreement to allow the court to determine whether the agreement reached is fair.
However, if matters regarding finances cannot be agreed upon between the parties, financial remedy proceedings will have to be issued, and the court will intervene and assist the parties in reaching an agreement.
The court can be asked to make a financial order for the parties.
Myerson Solicitors' Family Law Team explore what you may be entitled to if you divorce your spouse.
Financial Disclosure Process
On divorce, both parties are required to exchange full and accurate details of their financial situation, their resources, and their future income and capital needs with the other party.
Parties will outline their financial information in Form E, which will be exchanged between parties, and copies will be provided to the court where they are in financial remedy proceedings.
What Orders can the court make?
The court can make various financial orders on an application for financial relief.
The orders that the court can make include the following:
- A lump sum order.
- A lump sum order by way of instalments.
- Order for immediate or deferred sale of a property or a transfer of a property.
- Order for payment of maintenance for a spouse.
- Order for payment of maintenance, which is secured against property.
- Order for "top-up" maintenance for a child of the family following a maximum Child Maintenance Assessment by the Child Maintenance Service.
- An order for child maintenance if the payer is based overseas or to meet the needs of a child with a disability.
- An order for school fees.
- Order for payment of one party's legal fees.
- Pension sharing or attachment orders.
- An order to freeze assets.
- Orders to vary from previous orders.
- Orders to join the third party to proceedings.
Is my spouse entitled to half of everything in a UK divorce?
The starting point is that the assets built up during the marriage are shared. But this is not a hard and fast rule.
The court's objective is for assets to be divided between spouses fairly based on the parties' circumstances, but this does not necessitate an exact 50/50 division of assets.
The court can take into account a variety of factors as outlined below.
What does the court consider when making a Financial Order?
When making a financial order, the court must consider all the circumstances of the case, the welfare of any minor children and factors set out in section 25 Matrimonial Causes Act 1973.
The court is under a duty to consider whether a 'clean break' is suitable.
A clean break is an order that provides for the parties' financial obligations towards each other to be terminated.
The court may consider a clean break to be more suitable to short marriages, where both parties have a reasonable and equal earning capacity or where the other parties' needs can be satisfied by capital.
The court may consider a clean break to be less suitable to longer marriages, where one party is the primary carer of a child or has poor health, or where one party has a significantly lower earning capacity.
Section 25 factors
The section 25 factors that the court must take into consideration include:
1. The financial resources of the parties.
This includes the parties' earning capacity and current and future income from all sources, including employment, rent, dividends and interest, property, and other financial resources. The court will consider the ability of the parties to increase their earning capacity following separation, such as increasing their working hours or obtaining a higher-paying role.
2. The financial needs of both parties.
This includes each party's essential living needs, such as rent or mortgage payments and associated costs, food, clothing, etc, and obligations to anyone they care for, such as minor children. The court can consider the contribution of any new partners. The court will look beyond each party's basic needs if the marriage has excessive resources.
3. The Standard of Living enjoyed by the family during the marriage.
The court will consider that it is unlikely that the standard of living enjoyed post-separation will be the same as that enjoyed during the marriage. Nonetheless, the court aims for any reduction in that standard to be split equally between both parties.
4. The ages of the parties and the duration of their marriage.
In considering what financial order to make, the court will factor in the parties' ages, which will have a bearing on their earning capacity. The court considers a younger spouse to have a greater earning capacity than an older spouse, and a younger spouse will have a greater number of years to build personal savings. As previously discussed, the duration of the marriage often has a bearing on the court's decision to award a clean break.
5. Health of the parties.
The court is required to consider any physical or mental disability of either party to the marriage due to the impact it may have on their needs and potential earning capacity.
6. The contributions made by either spouse to the family.
The court will consider financial contributions and contributions to family life, such as child care.
7. The conduct of the parties.
This includes any misconduct by either party concerning the divorce proceedings.
8. Any benefit which may be lost.
The court will be mindful of any benefit either party may lose due to the divorce, such as a loss of pension rights or prospective inheritance.
Am I entitled to half of my spouse's pension if we obtain a divorce?
It is important not to overlook pension funds held by each spouse.
You may be tempted to concentrate on your immediate needs, such as housing, but it is vital to consider your retirement income.
The court can divide pension benefits between divorcing spouses to achieve fairness and meet the parties' needs.
Both parties will be expected to provide evidence of the value of their pensions, and as the treatment of pensions in divorce is complex, it is usually necessary to instruct a pension or divorce expert to consider the pensions and carry out calculations.
Parties will often instruct a pension actuary to check the values of the pensions and provide calculations for pension sharing and pension offsetting.
To find out more about how the courts split pensions on divorce, see our article on Is My Spouse Entitled to My Pension on Divorce?