If you are going through a divorce, you will need to divide the assets that you and your spouse own. We take a look at how this is done, why it is vital to make sure you have a financial order and how the division will be dealt with.
Financial Agreements in Divorce
If you are going through a divorce, it is important to address financial issues. Without a final order from the court, your former spouse could potentially make a claim against you long into the future.
A financial order will set out how your assets will be divided. In some cases, one party could be awarded maintenance.
What Matrimonial Assets are Included?
Matrimonial assets are jointly owned assets and those acquired during the marriage. Assets owned by one party prior to the marriage are not generally classed as matrimonial assets, however, if one party has a financial need that cannot otherwise be met, these assets can also be included when a financial order is made.
Hidden Assets in Divorce
Before you deal with financial issues in divorce, both you and your spouse will need to make full disclosure of all of your assets. There are penalties for hiding assets. If someone is found to have hidden assets, then the court can be asked to make a new order at a later date, taking these into account.
What Happens to the Matrimonial Home in Divorce?
There is a range of options when it comes to dealing with the matrimonial home. If one party wants to stay in the home, they may be able to buy out the other party, either by giving them a larger share of other assets such as savings or pension provision or by obtaining a mortgage.
The property could be sold, with the proceeds of the sale shared between you. If you have children, then the court may try to ensure that the person looking after them can stay in the family home. This could be by deferring the sale until the youngest child is 18 or compensating the other party in some other way.
How are Assets Divided?
The starting point for the courts is a 50:50 division of assets between the parties, however, where one party has greater financial needs, this will be taken into account. By way of example, if one party has given up work to raise children, they may need a larger share of the assets to provide financial support.
The court could also order that they receive maintenance, although the emphasis is generally on helping both parties to reach financial independence.
In considering what order to make, the court will take into account several factors, as set out in Section 25 of the Matrimonial Causes Act 1973. These are:
- The resources available to you both as well as your income and earning capacity, both now and in the foreseeable future
- The financial needs, obligations and responsibilities of you both, now and in the future
- The standard of living you enjoyed during the marriage
- Your ages and the length of the marriage
- The contributions each of you have made to your marriage and your family
- Conduct, where it would be unfair to disregard this. In reality, it is not often a factor that will be taken into account
- Any loss of benefits that either of you might sustain because of the marriage
The court will prioritise the needs of any children in reaching its decision. Where one party has lost the opportunity to earn an income or contribute to a pension during the marriage, this will generally be compensated.
What if you Cannot Agree on a Division of Assets?
Your solicitor will be able to negotiate with your spouse’s solicitor to try and agree on an acceptable division of the matrimonial assets. Where this is not possible, the next step is to consider mediation. This is generally a requirement of the court before you can start legal action.
A mediator will discuss with you how they may be able to help you resolve matters. If you agree to mediation, you will have a series of meetings with the mediator to try and find an acceptable solution. You can be together in a room with your spouse and the mediator or alternatively, the mediator can shuttle between the two of you.
For more information, see our page on mediation services.
There are also other methods of dispute resolution available, including collaborative law, which is a roundtable negotiation, and arbitration, where your case will be heard by an arbitrator who will make a binding decision.
Financial Court Orders Available
There is a range of financial orders that the court can make, including:
Lump Sum Order
A lump sum order gives one party a specified sum of money, often to compensate them for the other party keeping certain assets, such as investments, property or a pension. A lump sum can also be ordered instead of maintenance so that a clean break is achieved.
Property Adjustment Order
A property adjustment order can require one party to transfer their share in a property to the other party or for the property to be sold and the proceeds shared. Another option is a deferred sale, where the property will remain in joint names and be sold at a specified point in the future.
Pension Sharing Order
Pensions are considered to be matrimonial assets and as such should be valued and taken into account when considering a split. A pension-sharing order will require a specified percentage of a pension to be put into the other party’s name. This then becomes a separate pension provision that they can draw down when they choose once they reach retirement age.
Consent Order
If you and your spouse can agree on how your finances will be dealt with, your solicitor can put this into writing and put it before the court for approval. If the court is happy with the contents, it will seal the agreement into a legally binding consent order.
Maintenance Order
A spousal maintenance order or periodical payments order can be made if one party is in a financially weaker position than the other. For example, if they are not working because they are caring for children, maintenance could be ordered to give them an income. This is different to child maintenance, which is a separate issue.
The court may order spousal maintenance for a set period, to give the party in question time to re-enter the workforce, to train or to re-establish their career.
Clean Break Order
A clean break order deals with the division of all matrimonial assets and ends the possibility of either party making a financial claim against the other in the future.
It should be noted that a clean break is not possible with regard to financial obligations in respect of children.
What Does the Court Consider When Splitting Assets in Divorce?
Using the criteria in Section 25 of the Matrimonial Causes Act 1973, above, the court will aim to divide the matrimonial assets fairly and ensure that both parties’ needs are provided for. It will prioritise the needs of any children.
Court Hearings
If a financial settlement cannot be agreed upon, then it will be necessary for the court to deal with matters. You can expect to have more than one hearing, starting with a directions appointment at which the court will set out a timetable and require issues such as valuations and disclosure to be dealt with.
A financial dispute resolution hearing is an opportunity for you and your spouse to try and reach an agreement on what is to happen, with the assistance of the court. The judge will give some guidance as to what they believe the final outcome might be. Cases often settle at this hearing. If an agreement cannot be reached, further directions will be given prior to the final hearing.
At the final hearing, both parties can be questioned and the judge will consider all the evidence before them before making their judgment.
Contact our Family Law Solicitors
At Witan Solicitors, we understand that dealing with the financial aspects of a divorce can be stressful. You are likely to be concerned about the future and will want to ensure that you have the certainty and security that you need.
Our family law team has extensive experience in dealing with financial issues in divorce, including in complex and contentious cases. We have a proven track record of success in securing strong financial orders for our clients.
We always aim to resolve matters without recourse to the courts where possible and we work proactively to finalise issues promptly and without any avoidable delays. We can discuss your options with you and what outcome you would like, for example, if there are assets that you particularly want to keep if possible, such as your pension or the matrimonial home. Email us at info@witansolicitors.co.uk or fill in our contact form and we will discuss your situation with you.
FAQ
How do I come to a financial agreement when divorcing or separating?
Ideally, you and your partner will be able to agree on how your assets should be divided. This could be by way of negotiation or following alternative dispute resolution. Your solicitor will then be able to put the details into a draft consent order to be sealed by the court.
It is crucial to have your agreement put into an order of the court. Without this, your former spouse could make a financial claim against you many years into the future as divorce does not end your financial responsibilities to each other.
In the UK, are assets split 50:50 in divorce?
The court will use this as a starting point, but will also take into account the needs of each party and what it considers to be a fair split. Your solicitor will be able to discuss your situation with you and give you some idea of what you might realistically expect to receive.
When should we decide how to split our assets
Financial matters should be dealt with at the same time as your divorce. You may wish to delay finalising your divorce until you have a financial agreement.
If we have agreed how to divide our finances, what happens next?
You will need to complete a lengthy form formally disclosing all of your assets to your spouse and advise your solicitor of the details of your agreement. Your solicitor will draft a consent order to be sealed by the court.
We cannot agree on how to divide our assets – do we need to go to court?
It is often possible to resolve matters without the need to go to court, even if you cannot initially agree on how to share your assets. An agreement can be made at any time before the final hearing.
If it remains impossible to reach an agreement, then the court will need to decide matters.
As a business owner, are my shares treated as marital assets?
Shares in a business will generally be treated as matrimonial assets. You may be able to offset the value of these against another asset, such as the family home or a pension so that you can keep the shares.
The business and your holding will need to be valued. If asked to rule on the matter, the court will take a range of factors into account and no two situations are the same. A family business that has been owned for generations will not be treated in the same way as a business started by a spouse during the marriage.
While the court does have the power to order the sale of a business, it will not usually do this and will usually try to find an alternative solution.
For more information, see business assets and divorce.
In the UK, who typically keeps the house in a divorce or separation?
If there are children involved, then it is often the case that the person with the day-to-day care of them will be able to live in the property. The court may require that this be sold at a future date or that the person who leaves is given a larger share of other assets to compensate them.
Where a property is sizable, the court can order that it is sold so that each party will have money to use to buy a smaller home.
What is the law on divorce and finances?
The law aims to provide for both parties fairly and according to their needs. Children will always be prioritised.
Is it recommended to have a family solicitor or lawyer to handle the financial aspects of my separation or divorce?
Even if you are able to agree on the division of assets without the need for a solicitor, you are strongly advised to engage an expert family lawyer to ensure that the agreement is put into a binding consent order.
If you are not able to agree, a solicitor will ensure that your rights and interests are protected and that the best possible outcome is secured on your behalf.
