When you go through the divorce process, it is crucial to have a financial order made. This is a legally binding order setting out how your assets and liabilities will be split. If you get a divorce without a financial settlement, you could face a legal claim in the future, even many years later. This claim could be for money you have amassed since your divorce, for example, if you have set up a successful business.
Summary
- The difference between divorce and a financial settlement
- Can you get a divorce without a financial settlement in the UK?
- What happens if there is no financial settlement on divorce?
- What are the risks of not having a financial settlement when you divorce?
- What is a financial order and why is it important?
- What is a clean break order?
- Is a verbal or written agreement enough to agree financial matters on divorce?
- When might people choose to divorce without a financial order?
- What happens if one party applies for a financial settlement later?
The Difference Between Divorce And A Financial Settlement
A divorce is the legal ending of a marriage, and a final order for divorce means that you are no longer married. However, this alone does not end your financial obligations to each other, and if you do not have a financial order made, then your financial obligations continue indefinitely.
A financial settlement is an order that lays out the financial arrangements between you and your former spouse in a way that is legally binding and enforceable. It protects you from future claims from your spouse, if your financial situation changes, for example.
Can You Get A Divorce Without A Financial Settlement In The UK?
It is entirely possible to complete a divorce without formalising financial matters. Some couples choose to do this to speed up the process. However, possibility does not mean that this is an advisable course of action.
The actual divorce process, ending the marriage, is uncomplicated. This part of the proceedings generally takes around six months. However, the process of trying to agree on financial matters often takes longer, so it may be tempting to go ahead with the divorce, leaving yourself open to future claims.
What Happens If There Is No Financial Settlement On Divorce?
Without a financial settlement that has been approved by the court and sealed into a binding financial order, you run the risk of ending up in a legal battle at a later stage.
There is no end date for financial liability for a spouse. If your financial circumstances improve, for example, you come into money or start a successful business, your spouse may decide to make a claim against you.
In the case of Wyatt v Vince (2015), a couple with no assets divorced without putting a financial order in place. They had been living as new age travellers, subsisting hand-to-mouth.
Over the next two decades, Mr Vince built a successful green energy company worth millions. Some twenty years after the divorce, Ms Wyatt made a financial claim under the Matrimonial Causes Act 1973.
The Supreme Court held that there is no limitation period for financial applications following divorce unless a clean break order is in place. She was entitled to financial support from Mr Wyatt, despite the length of time between the divorce and her application, and despite the fact that his fortune had entirely been amassed since the divorce.
What Are The Risks Of Not Having A Financial Settlement When You Divorce?
Without a financial settlement, you could face a claim at any point in the future. This could jeopardise your security and your assets, including those built up since your divorce.
Assets that can be split on divorce include property, savings, investments, and pensions.
If your wealth increases, for example, because of a lottery win, a successful business enterprise, or even because you inherit money, you could lose money to a financial claim.
Should you remarry without a financial order in place from your first marriage, you will generally lose the right to make a financial claim against your first spouse. This means you will lose the right to a share of any former property and other assets. Your former spouse would still be able to make a claim against you, however.
What Is A Financial Order, and Why Does it Matter?
A financial order is a binding legal order made by the court setting out how your assets and liabilities will be split. If you and your former spouse are able to agree on how you want to share everything, your solicitor can put this in a draft order and ask the court to approve it. If the court agrees, it will seal the order so that it is binding.
In the event that you are unable to agree on matters with the other party, you will usually need to at least consider mediation before going to court. This involves a mediator explaining the mediation process to you and how it could assist. Mediation is quicker and more cost-effective than litigation, particularly when the courts have a backlog of cases.
Other types of alternative dispute resolution also exist to help couples try to resolve matters out of court. These include collaborative law, arbitration, and private financial dispute resolution.
Should it not be possible to agree on matters, an application can be made to the court, and a judge will decide on the terms of the financial order.
What Is A Clean Break Order?
A clean break order ends all financial ties between the parties. It will not generally be possible to make any future claims following the making of a clean break order, and the division of assets will be final.
Property will be transferred or sold, and the profits split, pensions apportioned where appropriate, and no spousal maintenance ordered.
If there are children of the family, child maintenance is dealt with separately. This means you can have a clean break order, but child maintenance will still be payable.
While a clean break order can be advantageous in that it frees the parties from each other, in some cases, it may not immediately be possible. If one party is in a weaker financial position, for example, because they have given up their career to raise children, the court may order spousal maintenance payments. This is often for a set period to allow the receiving party to train for a job, or finish raising children. The court generally aims to help the parties reach financial independence. In a small number of cases, spousal maintenance may be ongoing, known as a “joint lives order”.
Do We Need A Solicitor For A Clean Break Order?
A solicitor is not essential for a clean break order; however the process can be complicated, and a solicitor will guide you through the required procedure and ensure that you understand your rights and entitlements. This is particularly important if there has been a power imbalance in your relationship.
How to make a Clean Break Order
In order to obtain the court’s approval of a draft order, you will both need to fully disclose all assets and liabilities. This is usually done by completing the lengthy court form known as Form E. You will also need to provide details of your obligations, for example, in caring for children or other relatives.
A draft order should be drawn up and filed with the court, together with the information that the court will need to consider your request. This could include pension sharing paperwork if you will be sharing or transferring part of a pension.
If you are able to agree on matters with your former spouse, the process of using a solicitor to obtain a final order is relatively straightforward, meaning it is faster and more cost-effective than the court process. To ensure that your rights and interests are protected, you are always advised to speak to a solicitor when dealing with financial matters on divorce.
Is A Verbal Or Written Agreement Enough To Agree Financial Matters On Divorce?
Verbal and written agreements between the parties in a divorce are not enough. They are not legally binding, and this would leave you open to financial claims in the future. Even if a court were to take an agreement into account, it would complicate matters and is likely to lead to a protracted court case.
If you are able to agree on how you want to deal with matters, this can form the basis of a consent order. A solicitor will be able to put your agreement in the form of a draft order, which the court can approve and seal, so that you have a legally binding order that you can rely on.
When Might People Choose To Divorce Without A Financial Order?
People may decide to divorce without a financial order if they believe they have an amicable relationship with their ex, or they do not feel they have any assets to split.
However, this is never advisable. Relationships can change, and former partners may choose to make a claim in the future, particularly if they need funds and a former partner is now in a strong financial position.
What Happens If One Party Applies For A Financial Settlement Later?
When deciding what award to make following a financial claim, the court will look at a range of issues, including the parties’ financial situation, the length of the marriage, and what it believes to be fair and reasonable. The needs of any children are always prioritised.
Assets accrued after the divorce could be at risk, although the court may limit an award, depending on the circumstances.
Contact our Experienced Solicitors
If you are facing a divorce, and you have questions about obtaining the right financial settlement, contact our family law solicitors today. You can ring us on 0300 303 2071, email us at info@witansolicitors.co.uk or fill in our contact form. With offices in Birmingham, Northampton, London and Wellingborough, we are well positioned to support you during this difficult time and ensure you get the settlement you are entitled to.
Divorce Financial Settlement Frequently Asked Questions
Can I remarry without a financial settlement?
While it is possible to remarry without a financial settlement from an earlier marriage, this is not generally advisable. It is known as the ‘remarriage trap’, and it means that you will usually lose the right to make any claim for assets from your previous marriage.
Your former spouse would still be able to make claims against you after your remarriage.
How long after divorce can my ex claim?
There is no end date for a financial claim after divorce, meaning you could end up facing legal action even decades later.
Does no-fault divorce change this?
The so-called no-fault divorce laws that came into effect in April 2022 do not change the situation regarding financial settlements. You should still speak to a family law solicitor about having a binding financial order put in place.
What if we have no assets?
The fact that you have no assets does not mean you should divorce without a financial order. If you were to come into money in the future, this would be at risk from a claim. The fact that the money was built up after your divorce does not mean that it is protected. The only way to be sure is to have a binding financial order made at the time of your divorce.
