Financial Settlement in Divorce or Dissolution: Definitions, Processes, Tips, and FAQs 

Understanding financial settlements in divorce or dissolution is arguably the most important aspect of the separation process. It is not just about legally ending a marriage or civil partnership. It is also about ensuring the fair distribution of assets accumulated during the relationship. 

This guide aims to shed light on the complexities of financial settlements, providing you with the knowledge to navigate these waters more confidently. Whether you are considering a divorce or dissolution, in the midst of one, or seeking advice post-separation, understanding the financial implications is key to securing a fair settlement.

What is a Financial Settlement in Divorce or dissolution?

A financial settlement in divorce refers to the legal agreement between separating spouses which records the division of their assets. This encompasses a wide range of financial considerations such as: 

• Family home  
• Savings  
• Investments 
• Pensions 
• Liabilities 
• Spousal maintenance 
• Child maintenance 

The aim is to reach a fair and equitable arrangement that considers both parties’ current and future financial needs. It is also ensuring that each person can move forward with financial security post-separation. 

Negotiating a financial settlement is a multifaceted process that involves negotiation and, if parties cannot reach an agreement, may involve court interventio

It is crucial to understand that a financial settlement is legally binding once approved by a court, resulting in a financial order that details the division of assets. This ensures that both parties have a single document that records all of the terms, which they must adhere to. 

Achieving a fair financial settlement requires both parties to provide full and frank disclosure of all their financial affairs, along with supporting documentation such as bank statements and property valuations. To ensure transparency, it is absolutely essential to make settlements based on accurate and complete financial information. The information disclosed forms the starting point of negotiations. 

The Family team at Anthony Gold specialise in guiding individuals through this complex process, offering expert advice and guidance to secure outcomes that protect your financial interests and well-being. 

How are assets divided between the parties in divorce or dissolution? 

It is essential that the process of initiating a financial settlement for divorce takes place with the parties providing full and frank financial disclosure of their finances, accompanied by supporting statements and documents. It is only by undertaking this exercise that the parties will understand their full financial position and therefore what is in the matrimonial pot. You can then consider how best to divide this between the parties. Remember accounting for all circumstances of the case and key influencing factors, such as minor children, earning capacity, and needs.

The starting point often involves dividing assets accrued during the marriage equally. If dividing all assets accrued during the marriage equally meets the income and capital needs of both parties and any children, then one could consider this an appropriate outcome. Where an equal division does not meet both parties’ needs and the needs of any children, then an unequal division may be more appropriate instead.  

The process typically involves negotiation and agreement, which can be facilitated through respective solicitors or even family mediation services.  

If the parties cannot reach an agreement, they can choose to commence court proceedings. The court has the discretion to make orders regarding the division of assets. This might include: 

• Selling assets and sharing the realised equity  
• Transferring property ownership 
• Splitting pensions and investments. 

What factors influence the division of assets in a financial settlement?

Section 25 of the Matrimonial Causes Act 1973 requires any Judge who makes a decision in respect of a financial application to consider several key factors. 

 The judge has a duty to consider: 

• All of the circumstances of the case 
• The first consideration is the welfare of minor children of the family who are under the age of 18.

 The judge shall also have particular regard to the following matters when it comes to financial settlement matters in divorce or separation: 

• Financial Resources – The income, earning capacity, property and other financial resources which each of the parties has or are likely to have in the foreseeable future. 
• Financial Needs – The financial needs, obligations and responsibilities which each of the parties has or are likely to have in the future. 
• Standard of Living During the Marriage – The standard of living enjoyed by the family before the breakdown of the marriage. 
• Age – The age of both parties and the duration of the marriage
• Health – Any physical or mental disability of either party to the marriage 
• Contributions to the Marriage – Contributions which each of the parties has made or is likely to make in the foreseeable future, to the welfare of the family. This includes both financial contributions and non-financial contributions, such as childcare and homemaking. 
• Conduct – The conduct of each of the parties, if that conduct is such that it would, in the opinion of the court, be inequitable to disregard it. 

In the case of proceedings for divorce or nullity of marriage, the value to each of the parties to the marriage of any benefit (for example, a pension) which by reason of the dissolution or annulment of the marriage, that party will lose the chance of acquiring. 

Settlements made outside of court proceedings similarly consider these factors.

What role does the standard of living prior to divorce or dissolution play in financial settlements?

Courts often look at the standard of living as a benchmark when assessing financial needs, particularly in terms of housing, income requirements, and the overall welfare of any children involved. 

The goal is not to maintain the exact standard of living but to make financial settlements with an understanding of the lifestyle adjustments the separation necessitates. This approach also helps in making informed decisions about spousal support, child maintenance, and the division of assets. 

The pre-divorce or pre-dissolution standard of living most clearly influences long-term relationships, where many years have established the lifestyle. In these cases, the court attempts to distribute assets in a manner that allows both parties to sustain a reasonably comparable standard of living. 

For instance, considerations might include the need for a larger share of assets for one party to secure suitable housing or additional support to facilitate retraining or education to improve earning capacity. 

How can you divide Property during a financial settlement?

Dividing property during a divorce or dissolution can be one of the most complex aspects of financial settlements. It requires careful consideration of both parties’ needs, financial resources and future financial stability.  

The parties can deal with owned property in the following ways:  

• Selling the Property: One of the simplest ways to divide property is to sell the marital home and split the net equity between both parties. This option often comes into consideration when neither party can afford to take over the property independently or desires a clean break.  
• One Party Buys Out the Other: If one party wishes to remain in the marital home, they can buy out the other’s share. This option requires a valuation of the property and an agreement on the buyout amount, factoring in any mortgages or loans against the property.  
• Order for deferred sale (Mesher Order): In cases where children are involved, the court may order a deferred sale of the home, allowing one parent to live there with the children, until the children reach a certain age. After this period, you can sell the property and divide the proceeds.
• Transfer of Other Assets: Instead of selling the home or one party buying out the other, couples may agree to a transfer of other assets of equivalent value, such as savings, investments, or pensions.
• Charge back: You can agree for the legal and beneficial ownership of the property to be transferred to one spouse, while also registering a charge against the title deeds which requires a portion of the proceeds of any future sale to be shared with the other spouse. 

How are pensions treated in financial settlements in divorce?

Pensions represent a significant part of marital assets and can often be one of the most valuable elements to consider during a divorce or dissolution. You must consider the value and benefit of any pension held in any settlement. However, this does not necessarily mean that there will be a pension sharing order. The treatment of pensions can vary greatly depending on the length of the marriage, the types of pensions involved, and the financial needs of both parties. It’s important to understand how to divide pensions to ensure a fair and equitable financial settlement.

There are three main ways to deal with pensions in financial settlements:

1. Pension Sharing: This involves dividing the pension assets, allowing each party to take a share of the pension pot, which can then be transferred into their own pension scheme. Pension sharing offers a clean break between parties as it separates the pension assets immediately. 
2. Pension Offsetting: Here, the value of the pension is offset against other assets. For example, one party might keep their pension, while the other receives a greater share of the equity in the family home or other assets. This method requires careful valuation and negotiation to ensure fairness.
3. Pension Attachment (or Earmarking): This approach orders one party to pay a portion of their pension to the other party once it starts being paid out. However, this approach does not provide a clean break because the financial security of the receiving party depends on the pension holder’s decisions.

What steps should you take to reach a financial settlement in divorce or separation?

Step 1: Financial Disclosure

The first step in reaching a financial settlement is for both parties to provide full and frank disclosure of their financial situations. This comprehensive disclosure includes all assets, liabilities, income, and expenditures. Transparency at this stage is crucial for fair negotiations and outcomes. 

• Form E: In many cases, you will begin by completing a Form E financial statement, providing details of all your financial affairs. 
• Gathering Documents: You will need to collate financial documents in support of the information provided in Form E, including bank statements, pension statements, property valuations, and any other assets or liabilities. 

With our help, you can accurately complete your financial disclosure, ensuring you account for and correctly value all assets.

Step 2: Negotiation 

Once both parties have disclosed their finances, the next step is to consider negotiating a settlement. You can do this directly between the parties, through solicitors, or via alternative dispute resolution methods, such as mediation. 

• Direct Negotiations: Some couples are able to agree on a settlement directly. 

• Negotiations through Solicitors: The parties can opt to negotiate directly through solicitors instructed separately, to resolve issues without commencing court proceedings. 
• Mediation: A mediator can help facilitate discussions and guide couples towards a mutually acceptable agreement. 

Step 3: Agreement

If negotiations are successful, the next step is to draft a consent order, which outlines the terms of the financial settlement. Both parties then approve and sign this document. The signed consent order must then be filed with the court, along with the appropriate court fee and a completed Statement of Information form [Form D81], for approval. 

• Drafting the Consent Order: It’s advisable to have a solicitor draft this document to ensure it accurately reflects the agreement and is structured in a way that the court will approve. 
• Court Approval: The consent order is submitted to the court for approval. Once approved, it becomes legally binding and both parties must adhere to the terms as recorded. 

Step 4: Implementation

After the court approves the consent order, the final step is to implement the terms of the settlement. This may involve transferring property, dividing pensions, or making lump-sum payments. 

• Transferring Assets: Ensure all necessary steps are taken to transfer assets as outlined in the order. 
• Ongoing Payments: Set up any required maintenance payments, ensuring they are made in a timely manner. 

Throughout each of these steps, we can guide and represent you, ensuring we reach your financial settlement efficiently and equitably. From initial financial disclosure to the final implementation of the consent order, our family and relationships team is ready to assist you in securing a stable financial future post-divorce. 

Dispute Resolution

Understanding that court proceedings can be emotionally and financially draining, Anthony Gold prioritizes negotiation and mediation as paths to resolving disputes amicably. 

• Mediation: Mediators are trained in conflict management. They are impartial and will not take sides, but they will help you to find a voice in the negotiations. A mediator will meet with you and your partner separately at first to assess whether the circumstances are suitable for mediation. Mediators will identify the issues that you cannot agree upon and try to help you reach an agreement. Our mediation services facilitate open communication, helping both parties reach mutual agreements on financial matters without the need for court intervention.
• Collaborative Law: The Collaborative Law process is a way of dealing with family disputes concerning finances, children or divorce issues. Each person appoints their own lawyer. However instead of conducting negotiations by letter or over the phone, you and your respective lawyers all meet together in person to work things out in a series of meetings. Anthony Gold’s collaborative practice offers a structured approach to negotiation, where solicitors work collaboratively to find solutions that benefit both parties. 

For those considering mediation or collaborative law, Anthony Gold offers mediation and collaborative practice services to support constructive and cooperative negotiations. 

When and how to start financial remedy proceedings?

Before anyone is permitted to make an application to the family court to determine an issue relating to their finances, they must first attend a family Mediation, Information and Assessment Meeting (MIAM). In the video below, expert mediator, Caroline Bowden answers some of the most common questions related to mediation:

In certain cases, circumstances may make attending a MIAM inappropriate, and exemptions to this requirement have been provided for. The exemptions include: 

• Domestic violence 
• Urgency 
• Previous MIAM attendance or previous MIAM exemption 

You should consider applying for a financial order when: 

• Negotiations Fail: If you and your ex-partner cannot reach an agreement on financial matters through negotiation or mediation. 
• For Legal Clarity: Even if you have reached an agreement informally or through mediation or negotiation, applying for a financial order formalises the agreement and ensures that it is enforceable in court. 
• Clean Break: To prevent your ex-partner from making future financial claims against you, securing a clean break order as part of the financial order can provide long-term security and peace of mind. 

The application process for a financial settlement after divorce involves several key steps: 

• Completing the Application: The application for a financial order is made using Form A, which you can obtain from the court or submit via the online portal. This form signals to the court your intention to seek a financial order. 
• Paying the Fee: There is a fee associated with applying for a financial order, which you must pay upon submitting your application. If you’re unable to afford the fee, you might be eligible for a fee exemption or reduction. 
• Financial Disclosure: Both parties are required to provide full and frank financial disclosure through the completion of Form E, accompanied by supporting documents. This step is crucial for the court to understand your financial circumstances and make a fair judgment. 
• First Directions Appointment (FDA): This is the first court hearing, where the judge assesses the case and decides what further information is needed before a final decision can be made. The objective is for the court to define the issues and save costs.  
• Financial Dispute Resolution (FDR) Appointment: A court hearing where the judge encourages both parties to negotiate and reach an agreement with the help of their solicitors. If the parties cannot reach an agreement, the Judge will indicate how they would decide the matters if presiding over the final hearing.
• Final Hearing: If no agreement is reached during the FDR, the case moves to a final hearing, where a judge will make a binding decision on how assets should be divided. The FDR judge cannot preside over the final hearing. 

How Can Anthony Gold Help with Your Financial Settlement?

Throughout this process, it is vital to have the guidance of experienced legal professionals. Anthony Gold’s family law services can provide you with the expertise needed to navigate the application for a financial order. 

At Anthony Gold, the team of highly skilled family law solicitors brings a wealth of experience and knowledge to the table. Whether you are dealing with complex asset portfolios, international property, or business valuations, we provide expert legal advice to navigate these complexities effectively. 

FAQs on Financial Settlements in marriage or civil partnership breakdown:

How long does it take to reach a financial settlement?

The timeline varies, depending on agreement complexity and cooperation levels. Anthony Gold streamlines the process with expert negotiation and mediation support. 

Can I apply for a financial order without a solicitor?

While possible, professional guidance significantly enhances your chances of achieving a fair settlement. 

What happens if we can’t reach an agreement on a financial settlement?

Anthony Gold can assist you with commencing court proceedings where appropriate. We will assist you with navigating through them, advocating for your interests throughout the court process. 

How are assets valued during a divorce?

The parties can instruct an appropriate expert to provide a valuation of the asset at its current market value. 

Is spousal maintenance always awarded in a divorce?

Not automatically; it depends on each party’s needs, resources and all of the circumstances of the case. 

Can you change a financial settlement after a divorce?

Modifications are possible under certain circumstances, with legal advice being crucial. 

How can I protect my financial interests during divorce?

Early engagement with Anthony Gold ensures tailored advice and support, safeguarding your financial future.