Divorce is not just the end of a relationship: it’s also the beginning of a complex financial disentanglement. While the emotional toll is significant, the financial aspects of divorce can also be challenging. This blog explores the key components of financial settlements in divorce, helping you understand what’s considered, how assets are divided, and what steps you can take to reach a fair and cost-effective resolution.
What are Financial Settlements in Divorce Proceedings?
A financial settlement refers to the division of assets, income, and responsibilities between separating partners. It runs alongside the divorce process but is legally distinct. The goal is to ensure both parties can move forward with financial clarity and security, and that there needs and those of any dependent children are met.
Settlements can be reached through negotiation, mediation, or court proceedings. Regardless of the route, it’s crucial that any agreement is formalised in a legally binding court order.
Key Assets to Consider
Property
The family home is often the most valuable matrimonial asset and central, therefore, to settlement discussions. There will be consideration as to whether it should be sold or retained by one party. Investment properties are also considered, and their treatment depends on how they were acquired and used during the marriage.
Savings and Investments,Pensions
Both joint and individual savings, ISAs, stocks, and other investments must be disclosed. The extent to which these are shared will likely depend on how other assets are shared..
Pensions
These can have a substantial value, particularly where parties are older. It is often necessary to obtain advice from an expert as to how they should be dealt with on divorce to ensure fairness and because they can be complex to consider.
Matrimonial vs Non-Matrimonial Assets
Understanding the difference is vital. Matrimonial assets are those acquired during the marriage and are generally shared on divorce. Non-matrimonial assets such as inheritances, gifts, or property owned before the marriage may be excluded, unless they’ve been mixed with joint finances or unless it is necessary to meet the needs of the parties and any children.
Maintenance Payments
Child Maintenance
If parents cannot reach agreement in relation to child maintenance then the Child Maintenance Service (CMS) will calculate the amount to be paid usinga formula based on the paying parent’s income and the amount of time children spend with each parent. Payments under the CMS continue until the child finishes full-time education or turns 18, whichever is later but the court can order payments for longer. .
Spousal Maintenance
Spousal maintenance may be awarded if one partner cannot meet their financial needs post-divorce. It’s not automatic and depends on factors like income disparity, duration of marriage, and future earning capacity. Courts aim for a “clean break” where possible, but maintenance may be ordered for a fixed period or for the parties joint lives.
Other Important Considerations for Financial Settlements in Divorce
Personal Property
Items such as cars, furniture, jewellery, and artworks can be considered part of the asset pool and are usually retained by the person who uses them. Joint property will normally be shared by agreement, taking into account other elements of the settlement.
Pets
Pets are legally considered property, but their emotional significance is increasingly recognised. Courts typically look at legal ownership, caregiving responsibilities, and the welfare of any children attached to the pet. While shared pet custody isn’t legally enforceable, informal agreements can be made.
How Courts Decide
If an agreement can’t be reached, the court will decide based on several factors outlined in Section 25 of the Matrimonial Causes Act 1973. These include:
- Income and earning capacity
- Financial needs and responsibilities
- Standard of living during the marriage
- Age and health
- Contributions to the family (financial and caregiving)
The court’s objective is to achievea fair division that meets both parties’ needs and those of any children.
Reaching a Settlement Without Court
Most couples prefer to avoid court due to cost and time. Alternatives include:
- Mediation: A trained mediator acts as a neutral third party to help facilitate an agreement.This allows a separated to couple to discuss important matters in a non-adversarial setting, finding the best solutions and compromises. Mediation is a great way to resolve disagreements amicably, keep control in the hands of the separating couple, and can allow for a healthier ongoing relationship for separated couples and co-parents.
- Arbitration: A private arbitrator gives a decision outside of court, similarly to a judge, they will weigh up evidence and hear testimonies before making a binding decision. This system allows for quicker and usually more cost-effective resolutions to disagreements, allowing separating couples to decide who the arbitrator will be, what matters need to be resolved and have it all arranged at times convenient to both parties. Private arbitration is also completely confidential, making it ideal for scenarios involving the separation of a business or for individuals in the public eye.
- Solicitors: Negotiations can take place between solicitors, usually in correspondence to reach a solution.
Final Thoughts
Resolving financial matters on divorce can seem daunting, but with the right advice and approach, they can be resolved fairly and efficiently. Whether you’re dealing with pensions, property, or pet custody, understanding your rights and responsibilities is key.
If you’re considering divorce or are in the process, speak to a qualified family lawyer to ensure your financial future is protected.
Get In Touch
Vicki McLynn is a Partner in the Family Department. She specialises in divorce law, financial proceedings, international divorces and high net worth cases.
If you’d like to speak to Vicki or one of our other experienced family lawyers please don’t hesitate to get in touch by calling 03330 606 026 or filling out our online contact form.
