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Dividing finances during divorce

Posted on Thursday, 22nd September 2016 by

divorceThe breakdown of a relationship is never an easy time, whether it ends in arguments, sadness or you remain friends. However, when you decide you are ready to end your marriage there are practical issues to be considered.

A marriage is a lifetime contract, so leaving it is not necessarily easy, and one of the main stumbling blocks is deciding who receives  what, from dividing  your money and debts to agreeing on the house, car, and even the family pet.

In this article, we look at the financial side of divorce, and, helping you to decide how best to resolve matters, without the divorce becoming acrimonious.

Please note, although we may refer to ‘marriage’ and ‘divorce’ here, the process for dividing finances when ending a civil partnership is broadly the same and the information on this page should therefore still apply.

However, if you have been cohabiting – no matter how long – without getting married or entering a civil partnership you will not have the same rights to a share of your partner’s finances.

What happens to your property and finances when a relationship ends?

In general, divorcing couples are encouraged to agree, whether this be directly with your spouse, via negotiation through solicitors or meditation, on a fair division of assets, including finances

This is not always easy and parties can take time to reach their own agreement, it is usually better to reach your own agreement, possibly with the help of a professional, rather having an agreement forced on you by the court.

Please note that if you do have a prenuptial agreement in place this may help you to reach an agreement sooner.

If an agreement cannot be reached, either party is able to make an application for the court to make a decision as to how the finances are divided.

How do you achieve division of assets?

First, work out what you have. Your ‘Assets’ will include any property, savings, investments, endowment or life insurance policies, pensions etc. Whether the ‘Assets’ are in joint or sole names they are potentially matrimonial property that can be divided. The term ‘Assets’ may also include any vehicles or other possessions which have a value of more than £500.00.

In most cases you and your spouse will need to agree on the division of the contents of your home, if you cannot agree then solicitors can assist if necessary or the court can make an order

The financial aspect of divorce at its most basic means deciding how much you both need to live on, and making sure you divide the assets in a fair and reasonable manner.

Remember living apart will likely to cost more than living together – you will each separately face rent or mortgage, utility bills and so on – so be realistic about who needs to receive the larger share.

There is a list of factors, which solicitors and the court will use to ensure the agreement is fair for example:

  • Who will be primary carer of the children
  • What your respective housing needs are
  • Your income and income capacity
  • Your financial obligations
  • Your age
  • Your contributions to the marriage
  • Any illness or disability
  • Your standard of living during the marriage

If you agree on a reasonable division of assets, that is usually enough for the courts to approve the agreement.

However, if you cannot agree you can apply to the court to decide.

How do you make the division legally binding?

A consent order is used to make your agreement legally binding – and until you receive a consent order from the court, any agreement you make with your spouse is still informal.

When applying to the court for a consent order, make sure that the terms of your financial agreement are a fair reflection of what you have agreed on.

You may require a solicitor to draft a Consent Order for you. One solicitor will not be able to represent both of you, however, if your spouse has instructed a solicitor to draft a Consent Order, and you do not wish to receive legal advice, you do not have to instruct a solicitor as well.

Is it necessary to make it legally binding?

It is strongly advised but not mandatory to make your financial agreement legally binding via a consent order.

There are certain specific circumstances when you may be required to obtain a consent order, turning your informal arrangement into a legally binding one.

An example of this is if you need to divide a pension fund, as this can only be done using a court order, and not just a private arrangement between both parties in the divorce.

If you do not make your agreement, legally binding then your spouse may be able to make a claim on your finances at a later date, even after the divorce has been finalised. Entering into a Consent/Court Order is the only way to dismiss any future financial claims or to be able to enforce your agreement.

Divorce and finance FAQs

Finance is a huge factor in any divorce and if you have specific concerns about paying for your lifestyle after separation, or assets that might be difficult to divide, it is worth speaking to a solicitor to find out the legal process to come to a decision.

There are a few common questions that are often asked, so here are some of the basics to remember when starting divorce proceedings, to make sure you are taking care of the financial side of things too.

What factors are taken into consideration?

Children are probably the single biggest factor that can influence the division of assets and finances during a divorce, and this is linked with who is the primary carer of the children if they are under 18.

The children will need to be adequately housed; it needs to be considered whether one party can remain in the family home or whether alternative accommodation needs to be obtained.

Whether or not you have children, the court will usually also consider how capable you are of earning an income in the future, as well as any financial obligations you might face.

Your current standard of living and age will be factors for example in matters of income capacity and pensions.

One party’s behaviour does not necessarily determine how the assets are divided.

What assets are taken into consideration?

Everything you own together is an asset, in principle. This includes your house, car, furniture, jewellery, and even your savings, investments and pensions. If you own assets in your sole name, these may also be taken into consideration, either as a resource or as a matrimonial asset, which can be divided.  It may be difficult to decide whether an asset is a matrimonial asset, if so seek advice from a solicitor.

Property is a special consideration, as you will both need somewhere to live after the divorce. If children are involved, housing them will be a priority.

We have no property or savings – why do we need a financial agreement?

Even if you have no assets at the time of the divorce, if you have assets at a later date your ex-spouse may still be able to make a claim for those assets to be divided between you. By entering into a ‘clean break consent order’ now you will be able to dismiss any future claims that your spouse has on your finances, this will ensure that any future assets e.g. an unexpected inheritance or a lottery win are safe from a claim.

Do we have to use a mediator?

Not necessarily. If you are able to agree on dividing the finances, then you do not need to enter into mediation.

The only time it is mandatory to see a mediator is if you are considering making an application to the court. Before you can make an application to the court, you must attend a Mediation Information and Assessment Meeting (‘MIAM’) with a mediator (unless you fit into one of the exemptions). This does not mean that you must enter into full mediation with your spouse, but you must attend the MIAM.

Do we have to go to court?

You will need a court to approve your Consent Order, but that does not mean that you necessarily need to attend court. Most Consent Orders will be approved on the basis of the paperwork submitted and your attendance will not be required.

If you cannot agree on the division of your finances then you may need to make an application to the court for a decision to be made, you will need to attend court in this instance,

How much will it all cost?

Dividing the finances on divorce will require a varying amount of work to be done for every couple and so it can be difficult to predict fees.

If you and your spouse wish to enter into a clean break, consent order, and you are both agreed on this course of action then we charge £500 + vat for preparing a standard agreement. The court fee is £50.00.

If matters are not agreed, we will assess your case and give you an estimate of our likely charges. Each case is different and will require varying time to be spent on the matter – but the more that can be agreed and the more information that you are able to supply the less cost you are likely to incur.

You should make sure you have enough to pay your solicitors’ fees and so on – and if you want to keep costs down as much as possible, try to remain amicable throughout the divorce, as lengthy arguments can lead to mounting legal costs on both sides.

Talk to our legal team

The information provided in all of our blogs reflects only a narrative of some elements to consider on the topic. The blogs do not contain considered legal advice and should not be relied upon as advice. Please see our website terms and conditions for full details of our disclaimer. If you are interested in obtaining advice, please contact one of our lawyers who will be happy and able to advise you on your own particular circumstances.

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