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02 December 2022

Good Divorce Week: Financial arrangements and the importance of taking legal advice

7 mins

In support of Good Divorce Week 2022, we take a look at how you can protect your financial interests during divorce.

Whilst Good Divorce Week promotes an amicable process that places any children front and centre, it is clear that it’s also very important that separating couples make sensible choices about their finances, and that advice is taken early on to ensure they are able to make informed decisions about their future. 

Does a divorce conclude financial arrangements?

The new no-fault divorce came into effect on 6 April 2022, changing the landscape of divorce law for the first time in almost 50 years. The new process provides couples with a more amicable and straightforward procedure, which no longer requires the attribution of blame. It is now much easier, less costly, and less contentious to complete a divorce application online yourself without legal assistance.

However, statistics are suggesting that the new procedure is encouraging couples to start the process without obtaining legal advice first, which could be detrimental to any financial arrangements that might need to be made.

With the precarious economic situation and increasing costs of living, it is understandably tempting for couples to try and save costs by applying for a divorce online, without input from a solicitor. Whilst we do encourage couples to complete the online application themselves, we must emphasise the importance of seeking early legal advice, preferably before beginning the divorce process.

One reason for this is because a divorce application does not automatically deal with any financial claims you or your spouse may have against one another. In England and Wales, even when there has been a final order for divorce, unless there has been an additional financial order severing your financial ties to one another, you and your ex-spouse still have the ability to make financial claims in the future.

The only way to prevent a situation where financial claims are being pursued later, even after your divorce has concluded, is by having a financial order in addition to your final order in the divorce process.

Do you have to go to court to get a financial order?

You can reach agreement on financial matters in a variety of ways. You could have direct discussions with your spouse, you could reach agreement using an alternative dispute resolution method such as mediation or collaborative law, or obtain an order within court proceedings, although we hope that litigation can be avoided in most cases. Contested court proceedings should only be considered as a last resort or in certain complex, or emergency, situations.

If an agreement is reached, those agreements can be put into a financial order, which is then sent to the court for approval. This is often done without a hearing. These orders are known as consent orders and will usually incorporate the financial agreements you have reached with your spouse. These orders ordinarily set out how you wish to divide and distribute your assets, which might include pensions, property, savings and investments. It can also deal with financial support, often referred to as maintenance. 

Will all financial agreements be approved by a court?

The statute law in relation to financial arrangements has not changed in almost 50 years. Family lawyers continue to rely on s25 of the Matrimonial Causes Act 1973, and no matter how finances are resolved, our advice will always be informed by s25 when advising clients on what might be considered a fair arrangement, to ensure that the court will approve the agreements which have been reached. 

S25 sets out a number of factors to consider when determining what might be a fair settlement. This will always prioritise the needs of any minor children, but also extends to:

  • The income, earning capacity, property, and other financial resources that the couple have, or may have in the future, including any increase in earning capacity that is expected
  • The financial needs, obligations and responsibilities that each of the parties to the marriage has or is likely to have in the foreseeable future
  • The standard of living enjoyed by the family before the breakdown of the marriage
  • The age of each party to the marriage and the duration of the marriage
  • Any physical or mental disability of either of the parties to the marriage
  • The contributions that each of the parties has made or is likely in the foreseeable future to make to the welfare of the family, including any contribution by looking after the home or caring for the family
  • 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, although this is very rarely considered.

Once a consent order has been submitted to court, a judge will be asked to approve the consent order on behalf of both parties without a hearing. If the court is satisfied that the terms of the agreement are fair, the court is likely to approve the consent order. 

If we’ve reached an agreement, why do we need a court to approve it?

When considering what financial arrangements need to be made, it is also important to consider whether a ‘clean break’ is appropriate. A clean break will sever financial ties and prevent any financial claims being pursued in the future. In some situations, it may not be suitable to extinguish financial claims at that particular time, for example, when there are still very young children to provide for. 

You may not think a financial order is necessary because you and your spouse have little or no assets. However, if you acquire assets in the future, and you did not obtain a clean break when you concluded your divorce, there is a possibility that your former spouse could attempt to obtain a share of those assets. Whilst they may or may not be successful, the only way you can be certain that such situations will not arise in the future, is by ensuring the financial claims and ties are extinguished appropriately alongside your divorce. 

A consent order approved by the court will make the agreements you have reached legally binding, and will, if appropriate, order your clean break. 

Therefore, irrespective of how simple or complex your financial situation is, it is always better to act with caution and seek the advice of a family lawyer, preferably prior to commencement of any divorce application. They can advise you on how to ensure all matters are fully considered and concluded before you and your spouse go your separate ways.

How we can help

Our Family and Matrimonial team can help you with your financial arrangements, whether this is providing advice on an agreement that has already been reached, assisting you to transfer your agreements into a court appropriate consent order, or simply providing advice in contemplation of a possible divorce. We also offer mediation, or can assist in the background of any negotiations you may already be having in mediation. We can inform you about alternatives to court litigation, such as arbitration, private financial hearings, or using a collaboratively trained lawyer. 

We believe taking legal advice as early as possible helps to reduce and manage conflict and enable couples to make informed decisions about their finances, and their future.

For help getting started with your ‘good divorce’, the Family and Matrimonial team at Bindmans LLP will be offering complimentary consultations to enquirers seeking guidance on divorce and finances. We hope that you will leave the consultation feeling more confident and informed about the options available to you. Please contact the contact the team to arrange your appointment.

How can we help you?

We are here to help. If you have any questions for us, please get in touch below.