Family Law Guide

Guide to finances upon divorce

Guide to divorce financial settlements

When meeting new clients who are facing marital difficulties we will generally discuss three main issues: the children, the divorce and the financial arrangements.  The uncertainty of your future financial security or protection adds a significant additional stress to an already difficult time.  Consideration needs to be given to whether and what level of income and capital provision should be made for the less wealthy spouse and for the benefit of any children of the family.

A number of options are available to parties looking to resolve the financial arrangements with their spouse. If your case is suitable we will discuss the possibility of referring you to mediation, or the option of dealing with your case on a collaborative basis.   Mediators are independent third parties who will attempt to facilitate an agreement between the parties.  The collaborative process, on the other hand, is a process where both parties each have a lawyer, and both have a shared commitment to avoiding litigation. The process primarily entails informed discussions and joint meetings with both solicitors and parties present, for the purposes of settling all issues between them.

While the above options may be appropriate in some cases, in others they will not be, and in the first instance your solicitor will instead seek to come to an agreement on your behalf through negotiations with your spouse’s solicitor. If this is not possible you will most likely be advised to apply to begin financial proceedings at Court.  A financial application to the court can only be made once a divorce petition has been issued.  As part of the court process both parties are required to make a full and frank disclosure of their financial situation.  This is done on a document called Form E.  Both parties must give information about their income, expenses, assets and liabilities within their respective Forms E, which forms the basis of the negotiations between the parties.

In straightforward cases there will usually be up to three hearings.  The first hearing is called a First Directions Appointment (‘FDA’) at which the solicitors will ask the court to give any directions they require to move the case forward.  The Financial Dispute Resolution (‘FDR’) hearing follows the FDA, the purpose of which is to try to encourage the parties to reach an agreement.  Ordinarily, the judge at the FDR will give an indication of what they believe a fair settlement would be.  The vast majority of cases will be settled at, or shortly after, the FDR.

If the parties cannot agree a settlement at the FDR the case will be listed for a final hearing at which the judge will be asked to make a final order.  The parties will be called to give evidence.  The factors that the judge must take into account are listed in Section 25 of the Matrimonial Causes Act 1973, the first consideration being given to the welfare of any child of the family who has not attained the age of eighteen.

Case law provides guidance on how the Section 25 criteria should be applied.  All settlements are subject to the requirement of fairness.  Applying the law to a particular set of facts is an art rather than a science and there are various, often complex, legal arguments which can be argued.  What may be considered fair in one case may not be in another.  Each party has claims for income, capital and pension provision. In summary terms, only the court is able to order that either party makes periodical payments to the other, pays a lump sum or sums to the other, transfers property to the other and it can make various orders in relation to the parties’ respective pension interests.

If you are interested in discussing finances upon divorce please see How Vardags can help with finances upon divorce.