Divorce & Separation

Financial Claims

Financial Issues on Divorce

During the divorce procedure it is necessary to consider the financial aspects of the marital breakdown so that both parties can move on with their lives independently.

At Ringrose Law, we are able to advise you with regards to the law, legal entitlement and procedure. We can also advise as to whether any immediate action needs to be taken to protect assets or to bolster your position to ensure a more favourable settlement.

Throughout the financial process it is necessary to provide full and frank disclosure of all assets to either enable us to negotiate a settlement or, indeed, to assist the Court in the event that finances remain in dispute.

We can advise as to the documentation required and we are also able to take steps to ensure that all necessary financial disclosure is secured from the other party and that financial disclosure is exchanged to prevent the other party from gaining any unfair advantage.

In the event that a financial agreement cannot be reached, a Family Court will settle any disputes in respect of money and/or property and the Court will make a Financial Order.

Financial Orders can deal with the transfer of property, maintenance payments, lump sum payments and pensions etc. If a Pre-nuptial or Post-nuptial agreement has been put in place then this may assist the Court.

If an Application is made to the Court, we are able to advise and represent you throughout the process and prepare all documentation required by the Court.

For information on the Court procedure please click on the following link: Steps in the Financial Application Procedure

In circumstances where the parties are not ready to proceed with a divorce, finances will need to be dealt with nevertheless, therefore, the exchange of financial disclosure will still be necessary albeit the result may simply be that a Separation Agreement is entered into.

If you need advice on finances we offer free clinics at all of our offices, therefore, please contact us to arrange a free consultation at an office local to you.

Follow this link to view a “Family Justice Council” document on Sorting out Finances on Divorce

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    Further Information

    FAQs

    Whenever lawyers negotiate they are always conscious of what kind of Order a Court might make should finances remain in dispute.

    It is important to secure a Court Order on finances to prevent the other party making future financial claims against the marriage and this is the case regardless of your current financial circumstances.

    Even if you are able to reach an amicable agreement, a Court Order should still be secured setting out the terms of the agreement as the agreement will then be legally binding and enforceable in the event that the other party reneges on the agreement.

    If matters are agreed a Court attendance is seldom required even when seeking an Order from the Court. If a Court Order is not secured the other party is able to make claims against you even years after the divorce is finalised.

    Fairness and the Sharing Principle

    The Court views the marriage as a partnership and as a starting point it looks to divide the matrimonial assets equally.

    However, the Court must then take into consideration a whole host of factors which often leads to a departure from equality.

    In respect of spousal maintenance, other factors come into play and the sharing principle does not apply.

    The contribution of a stay-at-home spouse and parent is deemed to be equal to that of the breadwinning party.

    Property brought into the marriage (e.g. inheritances and gifts) may be considered “non-matrimonial” and may, therefore, be treated differently from assets built up during the marriage.

    However, if those assets are needed to meet the needs of the parties they will be utilised e.g. to re-house a spouse.

    Regardless of the above, the needs of the children will always “trump” the other principles of sharing and contribution.

    The Needs Principle

    This is generally the decisive factor unless the family is exceptionally wealthy.

    Regardless that the starting point is equality, the Court must look at the needs of the parties moving forward. This includes income and housing needs.

    For most families, the matrimonial income, savings and capital will be required to ensure both parties have a home. Of course, the standard of living of most families will deteriorate upon divorce.

    The Compensation Principle

    In reality, the compensation principle becomes part of the assessment of needs. If there is not enough money to meet both parties’ needs, it is a moot point in any event.

    1. Form A (the Application for a Financial Order) is filed with the Court together with the Court fee.
    2. The Court issues the Application and sends both parties a Notice of Hearing setting out the time and date of the first Hearing together with confirmation of the dates that various documents will need to be to be filed, and served, prior to the First Hearing.
    3. The Applicant serves the Form A on the mortgagee (if there is one).
    4. Both parties file and exchange Form E’s (a 27 page financial statement) 5 weeks prior to the First Hearing.
    5. Both parties file and serve a Form G, Statement of Issues, Questionnaire and a Chronology 2 weeks before the First Hearing.
    6. Shortly before the First Hearing, both parties file and serve preliminary documents, plus a Form H which sets out costs incurred by the party filing the document.
    7. The First Hearing is called the FDA (First Directions Appointment) and that Hearing is heard by a District Judge sitting in the Family Court. At the end of the FDA, the Judge will make an Order setting out directions such as what questions should be answered, what valuations should be obtained and whether any expert evidence should be filed.
    8. The parties then take steps to prepare for the next Hearing by answering questionnaires and filing expert evidence/valuations. The parties also send out proposals for settlement and file a further Form H before the Hearing.
    9. The Second Hearing is the *FDR (Financial Dispute Resolution Hearing) and at this Hearing the Judge attempts to assist the parties to reach a settlement. Indeed, at the end of the Hearing the Judge will give an indication as to what he/she thinks will be the outcome of the case were the case to progress to a Final Hearing. This is a ‘without prejudice’ Hearing and most cases finish here, or shortly thereafter, and if an agreement is reached at this stage an Order is made in agreed terms. If matters cannot be negotiated to a conclusion at this stage, the Judge at FDR will list the matter for a Final Hearing.
    10. To prepare for the Final Hearing, bundles will be prepared and served, barristers briefed (if necessary), detailed costs estimates (Form H1) will be filed and served and open proposals will also be filed and served.
    11. At the Final Hearing, evidence will be heard and at the conclusion of the Hearing the Judge will make a Final Order and give his/her reasons for why he/she made the Order in those terms.*The FDR is often heard on the same day as the FDA depending on whether both parties are ready to proceed at that stage.

    A Separation Agreement is a written agreement that sets out the financial arrangements that a separated couple have agreed to put in place after separation. It can cover a whole range of issues, for example:

    • Who will pay the mortgage/rent and household bills;
    • Who will live in the family home;
    • What happens if the family home is sold;
    • Who will pay any debts;
    • What will happen to savings, investments and any other assets;
    • What will happen to the contents of the home and personal belongings;
    • Whether maintenance will be paid to support one of you and/or any children;
    • Childcare arrangements to include where the child/ren will live and how often they will see the absent parent.

    If at a later date divorce proceedings are issued, the Separation Agreement will ideally set out the terms of the Final Financial Agreement that will be presented to the Court within those proceedings.

    Pros and cons of a Separation Agreement

    Pros:

    • As you have agreed that you do not intend to live together, your ex-partner cannot issue a divorce petition based on desertion and vice versa;
    • The Agreement also evidences the date of separation for the purposes of a later divorce petition;
    • The Agreement is flexible so you can include any issues even if they do not relate to finances;
    • As the issues are agreed, there is less chance of a dispute later on in respect of finances e.g. upon divorce;
    • It gives both parties clarity and a level of certainty;
    • Although the Court is not bound by the agreement upon considering finances on divorce, agreements properly and fairly negotiated are likely to be upheld.

    Cons:

    • It is not easy to enforce the Agreement;
    • It can only be changed if both parties agree;
    • The Court has the discretion to disregard some or all of its contents upon divorce, therefore, it is not necessarily a final financial solution.

    What is Full and Frank Financial disclosure?

    To help ensure that a Separation Agreement is not challenged, both parties must be fully open about their finances which is why the parties are encouraged to enter into the full and frank exchange of financial disclosure.   That way, when you enter into the Agreement, each of you will already know what the other has by way of savings, investments, property and debts.

    If you are not open and honest about your finances, the Agreement is likely to be varied by the Court upon making a Final Financial Order on divorce.

    Should you take Legal Advice?

    You are strongly advised to take legal advice upon entering into a Separation Agreement as you are entering into a contract.  You can then ensure that you have received advice on the agreement before committing yourself to the contract.  If you have taken legal advice, and both parties have engaged in the exchange of financial disclosure, your agreement is much more likely to be upheld by the Court upon divorce.

    It is particularly important to take legal advice from a solicitor if your break-up is acrimonious or if one of you is in a stronger financial position than the other.  Furthermore, if you ex-partner is bullying/intimidating you into agreeing terms, it is imperative that you seek legal assistance.

    If you and your ex-partner have already reached an agreement you should each seek independent legal advice with regards to the terms before arranging for the agreement to be properly drawn up as a legal document. Of course, you cannot both instruct the same solicitor.

    When can you use a Separation Agreement?

    You can use a separation agreement if you are separation from your ex-partner but you are not ready to divorce.  You can also use a Separation Agreement if you are unable to divorce or dissolve your civil partnership because you have not been married for more than one year.

    Is a Separation Agreement Legally Enforceable?

    Separation Agreements are binding contracts as between the parties.  Therefore, if the parties have both been open and honest about their finances and have both taken independent legal advice in respect of the proposed agreement it would be difficult to argue in Court that the parties should not be bound by it albeit a Court would not allow a clause that ousted the jurisdiction of the CMS or the court in respect of child maintenance.

    Prenuptial Agreements have been fully binding in the rest of Europe for years, however, in England and Wales they have historically been of little value.

    However, the case of K -v- K [2003] led to English law catching up a little and in January 2008 the case of Crossley confirmed the vital importance of Prenuptial Agreements in family asset preservation.

    The Crossley case further confirmed that the Court may now require a party who wishes to challenge an agreement to show good cause why it should not be followed upon making a final Financial Order within divorce proceedings.

    Thus, the balance has started to tip in favour of following a financial agreement, drafted as a Prenuptial Agreement, provided the agreement has been properly drafted and the parties have sought legal advice.

    A Prenuptial Agreement allows couples a degree of self-regulation over their own financial affairs and this can be of enormous benefit in preventing expensive, unpleasant, protracted disputes, as the parties will already have agreed on the distribution of their assets prior to marriage and, indeed, separation.

    However, the agreement must ensure fairness if the parties expect a Court to enforce their private financial arrangements.

    English courts have been careful to impose a variety of different safeguards in the interests of fairness, therefore Prenuptial Agreements must be carefully managed throughout the drafting process to ensure that every legal requirement and safeguard is met.

    Using a DIY contract without specialist legal knowledge of every potential pitfall will put all your assets and future earnings at risk in the event of a divorce.

    The landmark Court decision in K -v- K [2003] was useful in setting out some of the criteria that English Courts now look at when reviewing Prenuptial Agreements, for example:

    • Did the party with most to lose understand the agreement?
    • Did he/she have independent legal advice?
    • Was he/she under pressure to sign?
    • Was there full financial disclosure?
    • Would an injustice be done if the agreement were upheld?

    A Prenuptial Agreement is particularly useful for protecting assets acquired prior to the marriage as well as expected future inheritances from a named source.

    The government has already considered the possibility of Prenuptial Agreements becoming fully binding in England and Wales, therefore, it would appear that the state is starting to accept the inevitability of Prenuptial Agreements, indeed, becoming fully binding on the English Courts.

    In the meantime, although only persuasive, the Courts are, clearly, taking Prenuptial Agreements much more seriously than they have in the past.

    Emma McGrath Ringrose Law portrait
    Emma McGrathHead of Family Law & Partner
    01205 311511
    Anita Garside Ringrose Law portrait
    Anita GarsideAssociate Solicitor, Family Solicitor
    01529 301300
    Pam Gaches Ringrose Law portrait
    Pam GachesChartered Legal Executive & Associate, Family Law
    01476 857670
    Emma Darley Ringrose Law portrait
    Emma DarleyTrainee Legal Executive, Family Law
    01636 594472
    View all the team

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