Money and finance can quickly become a contentious issue in any divorce or separation. We’ll negotiate the best financial settlement for you based on your individual circumstances, ensuring that you can make a fresh start without the threat of future claims against you or your property.
If you and your partner aren’t married then your rights are different. We’ll advise you on your options and help you to arrive at a fair settlement.
Common Questions & Answers
Which financial assets are included in the divorce settlement?
When negotiating a divorce settlement the fiances are divided into three distinct areas.
- Capital Assets – including the house, savings, the contents of the property and cars
- Income – including salary and maintenance payments from a previous relationship
Before a court will make or approve a financial settlement they will want to know what both your overall financial positions are and expect a full financial disclosure.
Everything will be taken into account, but in some circumstances, assets owned before the marriage, acquired afterwards or inherited assets, will be looked at differently and may be ‘ring-fenced’ and not taken into consideration. Your divorce solicitor will be able to advise you how and when your assets can be excluded from the divorce settlement.
What methods are used to divide assets and finances?
During divorce proceedings the finances can be split into three distinct categories. The categories and the methods used to divide them are detailed below. The factors that need to be considered to make a ‘fair’ division of finances is answered by the next question below.
This includes the house, savings, the contents of the property and cars. To divide assets the court can:
- order the sale of any capital asset;
- change the legal ownership:
- adjust their share or eliminate someone’s share;
- it can order the payment of a lump sum, either immediately or delayed;
- it can postpone someone’s interest in an asset.
If there is a significant difference in incomes between the divorcing couple a court may consider spousal maintenance order. These can be for a limited or unlimited time. If they are limited in time, they can be potentially extendible or non-extendible. Quite often, maintenance claims are capitalised, so a larger share of the capital assets is awarded to compensate for any lost maintenance claims. Spousal maintenance claims may be in addition to any obligation to pay child maintenance.
Pensions can be dealt with in three ways.
- A Pension Attachment Order
This divides the pension on retirement, by ordering the pension provider to pay either part of the lump or income or both to the spouse with a lower pension provision. This dies with the pension holder and claims end on remarriage, so this is not popular.
- A Pension Sharing Order
This divides the pension now, so part of the pension is put in the name of the beneficiary and it becomes their pension. This does not end on death or remarriage and so this is more popular.
Instead of making an order against the pension itself, the capital assets are redistributed to allow for lost pension claims. This is not done on a pound for pound basis and there is no set formula for calculating this.
Issues relating to pensions are complex and if the pensions are valuable, they often involve the need to instruct a pension expert, called an Actuary. An Actuary can calculate the percentage of a share that needs to be transferred or the amount of capital necessary to offset pension claims.
The division of finances and the negotiation of a divorce settlement can be complex but your divorce solicitor can guide you through the different options for dividing assets, income and pensions.
What factors are taken into consideration when dividing divorce finances?
When negotiations begin the starting point is 50/50 for capital and pensions. Then consideration needs to be given to Section 25 of the Matrimonial Causes Act 1973 which outlines a number of factors that need to be considered when deciding on divorce finances and how much to move away from the initial 50: 50 split.
The factors include;
- The needs of any minor child of the family. This has to be considered first, but does not necessarily carry any more weight than the other factors;
- Income, earning capacity, property and other resources available to the parties or those which they are likely to have in the reasonably foreseeable future. Basically, the Court has to know what you are both worth;
- The financial needs, obligations and responsibilities that the parties have or are likely to have;
- The standard of living enjoyed during the marriage. The Court is under a duty to try to maintain that standard if possible.
- The age of the parties and duration of the marriage;
- Any mental or physical disabilities;
- The contribution, whether in money or monies worth, each party has made to the marriage. This includes not only financial but also non-financial contributions;
- The conduct of the parties. For the Court to take conduct(bad behavior) into account, it must be extreme and directly related to the financial issues;
- Any benefit lost by virtue of the divorce. This can include pensions and health insurance, for example.
There is also a catchall category, allowing the Court to take into account all the circumstances of the case. It is down to the individual judge to decide how much weight to attach to each of these factors and each case is judged on its own facts. There is no such thing as entitlement.
Your divorce solicitor will be able to advise you how these factors are likely to affect you. Our 30 Minute Fixed Fee Consultation may add some clarity to your potential future financial situation.
What happens if I think my spouse is hiding financial assets?
There is a duty on both parties to make full financial disclosure of their financial position. If you suspect that your spouse is hiding assets we can carry out an investigation which may assist in concluding whether or not such other assets are likely to exist.
If necessary, we can enlist the help of specialist financial investigators, who have the resources and expert knowledge to track assets. If assets are not located, but evidence is found after a settlement has been reached, this may be enough to allow that settlement to be challenged and set aside. This has happened in two recent cases. In one of the cases the deceit was learned of around 10 years after the original settlement was made so we always advise our clients to be honest during their financial disclosure.
If you do suspect your spouse is hiding financial assets we will be able to advise you on the pros and cons of pursuing investigations and how this may impact on your overall situation.
How the divorce court views dishonesty in financial disclosure is illustrated in our article,‘A court expects a full and honest financial disclosure – dishonesty doesn’t pay!’
In divorce who gets the house?
As the family home is often the most valuable asset, both financially and emotionally, we deal with this financial asset in a separate section Divorce and Property
How do we manage our finances before the divorce settlement is finalised?
It is generally sensible to try to discuss the day to day arrangements if you can and consider such things as:
- What is to happen to joint accounts?
If they are left open, both of you can use and abuse them and the other might end up bearing the overdraft created by the other’s spending. It’s generally in both party’s interest to either close or transfer joint accounts or, if the other party won’t agree, ask the bank to freeze them. You should, however, consider taking advice from your divorce solicitor if you are unable to resolve these issues amicably.
- Does your spouse have a second credit card where you are the primary card-holder?
If so, you might want to cancel their card, otherwise they are spending money which only you are obliged to repay. It would be sensible to discuss this first, but if your spouse if likely to abuse the credit card, you may need to cancel it quickly, but do still consider giving them fair warning.
- Who pays the bills?
If you are both still in the property and you both have an income there is an expectation that you both contribute to the running costs of the property. If one of you has left, normally they would not be expected to pay towards the bills but should really ask for final bills up to the date they leave and pay a portion of those. The same can be true of any mortgage payments but it depends on the circumstances. Unless there are still dependent children of the marriage living at the property, it may be that the person who has vacated would not be expected to pay the mortgage but if the mortgage falls into arrears, they will still be liable for the debt. These are potentially complex issues, and your divorce solicitor can advise on how to deal with them.
- What else should I consider?
If you own a property jointly, you may want to consider severing the joint tenancy and making a will. Most people own the property as joint tenants. This means that there is a ‘Right of Survivorship’ between them which means that if either owner died, the property would automatically pass into the sole name of the survivor. This is irrespective of any will. If you wish to prevent this from happening, you can serve a Notice of Severance on your spouse and this will ensure that your half share will not pass under the Right of Survivorship. However, you will still need to make a will. If you don not your interest in the property will still pass to your spouse as they are your next of kin until your divorce is finalised. Your divorce solicitor can find out how you own the property and advise you if a Notice of Severance is necessary. We can also help you make a will.
- What about my pension?
Although this is probably not the first thing you think of, most people nominate their spouses for any death in service benefits that come from their pension. If you do not want your spouse to benefit from this you can nominate someone else for those benefits. You just need to contact your pension provider to arrange this. Some pensions may not allow this but may allow you to nominate no-one, which means the benefits will pass under your will or the rules of intestacy. This is another important reason why you might want to consider making a will.Whether or not you decide to do this, it would be sensible to ask your pension providers (including any previous pensions) to send you a valuation of your pension (CE or CEV), as this will be needed to negotiate the financial settlement and can take up to 3 months to arrive. This helps avoid any delay and frustration at a later stage.
How does divorce mediation help when negotiating a financial settlement?
Mediation is a process whereby you will meet with an independent professional mediator who will assist you in resolving the financial issues that exist between you. The mediator will meet with both of you and help you identify the issues that you cannot agree on and will work with you together to try and reach an agreement.
The mediator will be neutral and will not take sides and will not be able to advise either of you on the Law. They can provide guidance information and move the negotiations towards a settlement the Court is likely to agree as being fair.
You may want to look at the Resolution website under the heading ‘Alternatives to Court’ and sub-heading ‘Mediation’. You may also want to look at the Mediation Centre’s website at or the Family Mediation Centre Staffs for further information on mediation.
It is now compulsory for the divorcing couple to have at least attempted mediation before making an application to Court for either an order in relation to financial issues or in relation to child issues. The requirement is that they attend a Mediation Initial Assessment Meeting (MIAM). The other party will be invited to attend one as well although not necessarily at the same time. There are exceptions where mediation is not compulsory and the main reason is where there is a a substantiated allegation of violence between the parties.
Mediation should not be seen simply as a box to be ticked before you go to Court, as it can help promote amicable relations and is a more economic means of reaching an agreement that can be more imaginative and agreeable compared to what the court may enforce.
You may even consider mediation as an option before before making formal disclosure through your divorce solicitors. It may help keep legal costs down and may have less impact on both parties from an emotional perspective.
What other options are available to negotiate a divorce settlement?
The financial settlement connected with a divorce does not have to take place in a courtroom. In fact, court should be a last resort because it is the most distressing and expensive route. The easiest and cheapest route is if the divorcing couple can reach an agreement between themselves about the division of property and, where applicable, childcare arrangements. The role of a solicitor is then to simply to create and gain court approval for the Consent Order.
However, divorcing couples have often gone past the point of effective negotiation and so third party intervention is more than often required. The flow chart below summarises the options available to divorcing couples to effectively negotiate a fair settlement. If you are unable to read the image please download a printable pdf version of the Divorce Options Flow Chart
What are maintenance payments?
There are two possible types of maintenance, being monthly payments by one spouse or parent to the other spouse or parent.
- Spousal Maintenance
The Court can make spousal maintenance orders, which can be for limited or unlimited time. If they are limited in time, they can be potentially extendible or non-extendible. Quite often, maintenance claims are capitalised, so a larger share of the capital assets is awarded to compensate for any lost maintenance claims. This may be in addition to any obligation to pay child maintenance.
- Child maintenance
If you cannot agree a level of child maintenance payments with your spouse the Child Maintenance Service (CMS) will determine how much your spouse should pay by way of maintenance for your children.You can look at the government website at which contains a calculator that will tell you what maintenance would be payable, assuming you can provide some information about your own and your spouse’s income. You can reach an agreement over child maintenance that can form part of the overall financial settlement and there is then no need to involve the CMS but clearly the level of maintenance they would assess will be a factor involved in reaching any settlement. Any agreement for child maintenance can be included within a Court Order. This order will, however, only last for one year after which it will still be enforceable, but can be superseded by a CMS assessment.
Maintenance payments are a very important element of a divorce financial settlement and your divorce solicitor will be able to advise you what you could be entitled to and for how long.
Under what circumstances are maintenance payments made?
For child maintenance, it is payable by one parent (the parent the child does not live with) to the other (the principle carer) on separation. It is only enforceable once a child maintenance assessment is carried out by the Child Maintenance Service but it is often best to reach a voluntary agreement. No maintenance is payable if the care of the children is shared exactly equally between the parents.
For spousal maintenance, there has to be a significant difference in incomes. The Court can make an order for interim maintenance, called Maintenance Pending Suit at relatively short notice. If there is a difference in income and a need for support, it would be best resolving this issue amicably. There is no formula. It is a case of balancing ability to pay with meeting the vulnerable party’s needs. The Courts have recently stated this is only supposed to be a short to medium term obligation and should only last indefinitely in exceptional circumstances. This is a complex area and if you think this will affect you, your divorce solicitor can give you some preliminary advice.
Divorce and business assets. How are these managed in a divorce settlement?
Any business owner facing divorce proceeding may well be concerned that the divorce settlement could impact on the future success of the business and their ability to earn an income. This is a very important topic and so we deal with it in a separate section of this website Divorce and Business
Divorce and family trusts. How are these managed in a divorce settlement?
It depends on the nature and terms of the trust, so it is hard to provide general advice in respect of this. If the trust allows access to capital, it will be more significant. If it only allows income, then it will still be relevant, but only to the extent that it offers support to the beneficiaries. Most trusts are discretionary and so the beneficiaries have no absolute right to the monies within the trust. This creates a difficulty for the Court. To overcome this, they will look at past use of the trust and assume that use will continue. If the trust was set up to avoid a matrimonial settlement, it is still possible for the Court to include the trust assets as assets of the marriage. Discretionary trusts are less common as they are no longer as tax efficient.
When you speak to your divorce solicitor he or she will help you consider whether any trust is a relevant asset and provide you with more detailed advice on your specific circumstances.
Divorce and inheritance. How is this managed in a divorce settlement?
The answer is not straight forward. Broadly speaking, a person who inherits an asset will be allowed to keep it,but only if it has been kept separate from the assets of the marriage and it is not needed to meet the parties’ needs. Therefore if property or cash had been inherited and been kept separate from the marriage and there are enough other assets to meet the parties’ needs, it can be ring-fenced and not included as an asset of the marriage.
If there are insufficient assets to meet the parties’ needs then it can be taken into account. This does not mean that it will be divided 50/50, rather the Court will say that an asset is available to meet the owning party’s needs, so they need less from the assets of the marriage. If the asset is not kept separate, so for example it is transferred into joint names or used to pay off a mortgage, it becomes as asset of the marriage. It is still possible that the person inheriting can argue they have made an additional contribution which may lead them to getting an enhanced settlement. Your divorce solicitor will advise you as to whether this argument is likely to succeed.
What advance preparation can I make regarding property and divorce proceedings?
Basically, get your financial affairs in order and ensure your paperwork is complete and up to date. Any attempts to hide or dispose of assets will be viewed as very serious by the Courts. The Court can, and will, consider historic bank statements, so it is likely any attempt to hide assets will be spotted. This will mean the guilty party may end up with a worse settlement and possibly, an order that they pay some or all of the other party’s costs.
To help you collate the necessary paperwork you can request our Practical Preparation for Divorce Checklist which is a checklist of all the paperwork you will need available to start divorce proceedings and to negotiate a divorce settlement.