Financial Settlements In Divorce

on November 8, 2017 Comments Off on Financial Settlements In Divorce

It is natural for people to focus on what their financial position will be after a divorce and how it will affect them and any children involved. Arguably the most difficult process of getting divorced is trying to reach a financial settlement.  A financial settlement is where the court clearly records the terms of the deal reached between you and your former spouse in a binding financial order.

Financial settlements used to be referred to as “ancillary relief” as it was considered to be ancillary to the divorce.  Although it is in fact a vital part of the process given that the settlement will shape your future.

We are pleased to state that the majority of our financial settlements are negotiated between the parties and solicitors without the need for protracted court hearings with the parties entering into a Consent Order.

Regardless of whether you are the husband or wife, the wealthier party or the dependent party, there are various factors to consider when negotiating a financial settlement such as:


Where there are children involved in a divorce, the Court’s first regard will be for their needs in any financial settlement. The Court will have to consider with whom and where the children will live to determine their housing needs.

Duration of marriage

The length of the marriage is an important factor in negotiating a financial settlement.  Divorce is extremely common today.  A short marriage is generally considered to be one that lasted for less than five years.  Although you should bear in mind that the Court will have regard for the duration of any pre-marital relationship between the parties, particularly when the parties have children.

Financial Positions

The parties will need to disclose their individual current financial positions and set out what they expect their future income and financial needs to be in a sworn statement known as “Form E”. This assists the parties, their solicitors and the Court in considering what an appropriate financial settlement is.

Clean Break

It is now common practice for financial obligations to a former spouse to cease as soon as possible at the end of a marriage, particularly in relation to shorter marriages.  Where possible the Court will look to achieve this on dividing particular assets including pension sharing.

It is not always achievable in matters where ongoing maintenance is required although the Court may look to achieve a clean break at the end of a short term for maintenance payments.

Do you need a Financial Order?

A Financial Order provides peace of mind for all parties that their new financial position will be protected after divorce.  Particularly in matters where a clean break can be achieved, it provides assurance that future financial claims will not be made.

Where a property adjustment order is being sought, that is, where one party acquires the other’s share in a property, it is always advisable to resolve this prior to obtaining the Decree Absolute.  Parties will need to consider that there is a liability for capital gains tax on disposal of an asset including a property.

If a Financial Order is not entered into prior to obtaining the Decree Absolute, there will always be a risk that your former spouse will make a claim in the future for financial support.  Such a claim can be made at any time, regardless of the length of time between divorce and filing a claim for financial support.  People often think this is unlikely.  However, there have been many cases in recent years where former spouses have made such applications because they failed to do so at the time they divorced.  This is particularly common where one party’s financial success grows after a divorce.

It is always recommended that you take legal advice on entering into a financial settlement at the time of divorce.

Please note that if you require specific advice in relation to your tax position, you should seek advice from an independent financial advisor.

Primal LaxmanFinancial Settlements In Divorce