Financial Claims

Ancillary Relief (Financial arrangements) Factsheet

One of the fundamental and most difficult elements in any divorce is the settling of the financial arrangements after separation.

 

What are the alternatives to court hearings?

 

It is always preferable to reach agreement between yourselves rather than relying on the court to impose a resolution to any financial issues. The court has a very wide discretion in applying the law and this can therefore lead to uncertainty in a court hearing as well as significant cost and delay.

 

The vast majority of separating couples are able to reach an agreement as to how their finances should be split with the help of their respective solicitors advising on the available options and negotiating on their behalf.

 

Whether seeking to achieve a negotiated settlement or if an application to the court is required, the starting point must always be a full and frank disclosure of each person's financial and personal circumstances, to ensure that everything is known about before the financial position is finalised.

 

What financial arrangements can be made?

 

On a divorce (or Judicial Separation) each party has the right to make various claims against the other. These include:

 

• orders for cash payments
• transfer of property or other assets – where ownership of an asset is transferred to one of the party’s
• maintenance – where one party pays to the other an amount of money each month
• pension sharing (not judicial separation)

 

It is sometimes possible that financial arrangements can be settled through a 'clean break', which means a lump sum payment and/or property transfer and no ongoing maintenance. A clean break effectively draws a line under the marriage and ensures that neither party can make further claims.

 

It is however often the case that there may not be enough assets for a ‘clean break’ and for that or some other reason regular maintenance payments from one person to the other may be needed. These can be open-ended (during joint lives or until the person receiving the payments remarries or enters a new civil partnership) or for a fixed period of time, for example coming to an end when one spouse goes back to work when the children are older. Even where there is a 'clean break', support will still be payable for any dependent children.

 

Unfortunately there is no set formula to determine any sort of percentage settlement and a number of principles are applied. The overriding principle is that of fairness. In order to reach a fair settlement the following factors are taken into account and also applied when trying to reach agreement:

 

• Welfare of any children of the family
• Income, earning capacity, property and resources of each person now and in the foreseeable future
• Financial needs, obligations and responsibilities of each person now and in the foreseeable future
• Standard of living enjoyed by the family before the breakdown of the marriage or partnership
• Age of each person and the duration of the marriage or partnership
• Contribution made by each person to the welfare of the family, including looking after the home and bringing up children
• Conduct of each person, but only if it is so bad it would be unfair to ignore it
• Physical or mental disability
• Any benefit lost because of the divorce or dissolution (in practice this is restricted to loss of pension benefits)

 

The weight given to each of these factors will vary depending on the facts of each case.

 

What may become of the family home?

 

The family home is often one of the most substantial assets and can become the main focus of disputes.

 

Again the court has a wide discretion as to how to deal with the matrimonial home. The court and/or your advisors will need to find a way of trying to finance two households from largely the same income which financed one.

 

Given that the needs of any children are the first consideration, it will be important to make sure that a suitable home is maintained for them.

 

The options:

 

· It may be that the family home can be sold with the proceeds divided between the couple (not necessarily in equal shares) allowing both to re-house adequately to meet their needs.

· Alternatively, the property could be transferred to one person. There are a number of options to facilitate this scenario which include re-mortgaging the home, using funds from elsewhere in the matrimonial pot or from other family members. 

· Sometimes a favoured approach could be to allow one person to stay in the house with the other keeping an interest in the property, receiving their share at a later date. This might be when the youngest child has finished full-time education. This is known as a “Mesher order.”

 

What about my pension?

 

Another valuable asset is often the pension fund. Pensions are considered to be part of the marital assets and must therefore be considered.

 

Essentially pensions can be dealt with in three ways:

 

1. Offsetting. The value of the fund can be offset against other assets which are transferred to the other party. This will depend upon the value of the pension fund and the other assets. As an example you may have an option to keep your pension and in return your ex partner may receive a larger share of the value of the house.
2. Attachment. These orders allow certain payments to be paid out not to the member of the scheme but to a former spouse. In practice few pension attachment orders have been made.
3. Sharing. These are much more popular orders than attachments and allow a court to split pension rights at the time of divorce. This is done by directing a transfer of a proportion of the member spouse’s benefits to the other spouse.

 

Pension sharing will not be appropriate in all cases and, where it is an option, the fund will not always be divided equally.

 

This is a complex area and probably specialist financial as well as legal advice will be needed on how sharing can be achieved in each individual set of circumstances.

 

What happens if you do go to the courts?

 

If an application is made for the court to decide on the division of property or assets, the court will impose a strict timetable and you may be advised to issue an application to ensure that negotiations do not drag on for too long.

 

After the application has been issued you and your partner will be required to:

 

· Complete a Form E which is a document setting out all your financial details (“full and frank disclosure”)

 

· Attach to the Form E copies of all the required documents which include bank and building society statements, pay slips, valuations of any properties, details of any business holdings and cash equivalent transfer values of all pensions.

 

The court will have fixed a first appointment before a District Judge. Prior to that hearing a questionnaire, statement of issues and chronology will have been prepared by each party. At the first appointment the District Judge will identify the issues between you and make orders – for example, dealing with valuation of assets and replies to the various questionnaires.

 

The next hearing will be a Financial Dispute Resolution (FDR) appointment. This is an important stage of the proceedings as it is the time when the District Judge looks at the papers and tries to ascertain whether it is possible to settle the dispute. At this hearing the Judge will give guidance to assist the couple to reach agreement, often indicating what s/he thinks would be a reasonable outcome.

 

If it is not possible to reach an agreement at FDR, there will be a final hearing at a later date heard by a different District Judge.

 

At any time before the final hearing it is possible to reach an agreement and submit a note of that agreement, called a consent order, to the judge for approval

 

The contents of this fact sheet are general principles and do not constitute legal advice. Every case is different and there is no substitute for individual legal advice.

 

Contact us

• 0207 743 6700
• Request a call back
• Email us