Divorce Financial Settlement

The court will consider several factors including:

• Income and financial assets: The income, earning capacity, property and other financial resources which each party has, or is likely to have in the foreseeable future. In the case of earning capacity, it would also be relevant to examine whether it was reasonable to expect one party to take steps to acquire an earning capacity.
• Financial responsibilities: The financial needs, obligations and responsibilities which each of the parties to the marriage has or is likely to have in the foreseeable future.
• Standard of living: The standard of living enjoyed by the family before the breakdown of the marriage.
• Age and length of marriage: The respective ages of the parties and the length of the marriage.
• Health/ Disabilities: Any physical or mental disability of either party to the marriage.
• Contributions: The contributions which 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.
• Behaviour or conduct: The conduct of each of the parties is considered in rare and exceptional cases.
• The value to each of the parties to the marriage of any benefit which, by reason of the dissolution or annulment of the marriage, that party will lose the chance of acquiring (e.g. a right to a spouse's pension)

A spouse will not be penalised for remaining in the home and looking after the children whilst the other spouse goes out to work. The court will treat a spouse's contribution to the family and home life as equal, albeit that one spouse's contribution was an economic and the other a homemaking contribution.

Sometimes it is not practical for the parties to achieve financial independence immediately, and in those cases it may be appropriate for there to be a maintenance order in favour of one spouse. Even a short marriage may create financial dependence, for example, if there are dependent children of the family.

Each party has a duty to provide full and comprehensive disclosure of his or her financial position with documentary evidence in support.

The duty to provide full disclosure is the same, regardless of whether you are negotiating directly with your spouse without having issued court proceedings, within the mediation process or other alternative dispute resolution process, or within court proceedings.

What documents do I need to provide for financial disclosure?

We are unable to advise on financial matters without comprehensive financial information and documentation being provided to us. 

This will usually include:

• Up to date valuations of the home and other assets, such as holiday homes or investment properties
• Up to date mortgage redemption statement showing how much is owed by way of mortgage;
• 12 months of statements  for all bank accounts;
• 2 years of full financial accounts for any business;
• Details of any dividends or profits received from business interests in the last 2 years;
• Details of any life or other insurance policies;
• Share valuations;
• Documentary evidence of other savings and investments;
• Cash equivalent transfer value of all pension schemes;
• Credit card statements;
• Loan agreements;
• Latest P60;
• Last 3 months’ salary slips; and
• A monthly schedule of expenditure.

Many cases will settle after an exchange of both spouses' financial information and negotiations via solicitors. We pride ourselves on providing swift, comprehensive advice to assist our clients in reaching an out of court settlement. We issue court proceedings only when it is in the interests of the client to do so.

Either party to a marriage can issue court proceedings to resolve financial issues following a relationship breakdown provided that:

• Divorce proceedings have been issued and
• You have attended a Mediation Information & Assessment Meeting (MIAM) with a Mediator who has provided a certificate to permit you to commence court proceedings.

Our guide below shows the steps you need to take when issuing financial remedy proceedings.

Step 1 – Issue proceedings at court

The Applicant must issue proceedings at court by filing Form A and paying a court fee of £255.00.

Upon receipt of Form A, the court will assign a timetable for the case. This will allow time for both parties to file documentation by certain dates and a First Directions Appointment (FDA) hearing is fixed to decide preliminary issues.

The court will serve the parties with the court timetable (in Form C) and a copy of Form A.

Step 2 – Financial disclosure

Around 5 weeks before the First Directions Appointment hearing, both parties must file at court and upon each other a Financial Statement in Form E, setting out their respective financial positions with supporting documentation.

Step 3 - Clarifying contested issues

14 days before the First Directions Appointment, both parties must file at court and upon each other a Statement of Issues, Chronology, Questionnaire and Form G which will outline the issues in dispute. The mortgagee and pension provider(s) must also be served with a copy of Form A.

Step 4 – The First Directions Appointment Hearing

At this stage, both parties must attend court with their legal representatives. It is likely that an order for directions will be obtained, which will deal with the timing of the filing of further documentation, expert evidence and any joint valuations.

A hearing date will also be fixed for the Financial Dispute Resolution (FDR) Hearing. Between the First Directions Appointment and the Financial Dispute Resolution hearing, the parties will comply with filing documents in accordance with the order for directions obtained at the First Directions Appointment.

Step 5 – Filing documents before the Financial Dispute Resolution Hearing

At least 2 days (or such other date as may be specified) before the Financial Dispute Resolution hearing, the Applicant must file a bundle at court with all of the up to date documentation. If without prejudice offers have been made, these will also form part of the court bundle.

Both parties are usually expected to file a Schedule of Assets, a Statement of Issues and a costs schedule in Form H, before the Financial Dispute Resolution hearing. In addition, both parties will usually file updated financial disclosure, housing particulars and evidence of the mortgage capacity in advance of the hearing.

Step 6 – Financial Dispute Resolution Hearing

The parties and their legal representatives attend the Financial Dispute Resolution hearing with a view to trying to achieve a settlement. If a settlement is reached at the Financial Dispute Resolution hearing, the Applicant’s representative will draft a consent application for approval.

If a settlement is not reached, all without prejudice correspondence will be removed from the court file and the matter will be listed for a Final Hearing. The District Judge who listened to evidence at the Financial Dispute Resolution hearing will not be able to sit as a District Judge at the Final Hearing.

Step 7 – Before the Final Hearing

14 days before the date set for the Final Hearing, the Applicant must file copies of all open proposals at court and file a court bundle with a cost estimate.

Both parties will need to file lengthy statements setting out their position. In addition, both parties will usually file updated financial disclosure, housing particulars and evidence of the mortgage capacity in advance of the hearing.

Step 8 – The Final Hearing

Both parties must attend the Final hearing with their legal representatives. After listening to evidence from both parties, the District Judge will give his final judgement.

The court has wide-ranging powers to order:

• An immediate or delayed sale of a property;
• A transfer of property;
• Payment of a lump sum;
• Maintenance pending suit to assist a spouse in funding expenses pending a financial settlement;
• A legal services order to assist a spouse in funding legal fees;
• Interim and continued spousal maintenance payments;
• Child maintenance payments in limited circumstances; 
• Pension Sharing or Attachment Orders; and
• An order for payment of school fees

The court will adopt a different approach to "matrimonial" assets and "non-matrimonial" assets. Matrimonial assets mean assets built up by the parties during the marriage, such as the family home. Matrimonial assets are generally divided equally.

"Non-matrimonial" assets are assets built up prior to or following the breakdown of the marriage, or assets acquired through an independent source. These could include:

• inherited wealth;
• personal wealth generated prior to or after the breakdown of the marriage;
• personal injury compensation;
• interest in a trust;
• a gift given to one of the parties by a third party;

Generally, these assets are not shared between the parties, save to meet needs. The court has a wide discretion to assess needs and each case is dealt with accordingly to its own specific facts.

Assets inherited by one party to the marriage are generally regarded as “non-matrimonial” property and are usually excluded and not available to be shared between the parties.

Where the needs of the parties can be met by using matrimonial assets, non-matrimonial wealth may be disregarded.

However, if the needs of the parties cannot be met from matrimonial assets, then the court has a wide discretion to take into account the availability of non-matrimonial assets, such as inherited property.

A business may need to be valued by a joint forensic expert as part of the financial negotiations on divorce. An expert may be requested to value:

• the shares in the business
• whether there is any liquidity within the business to support a lump sum payment
• the tax consequences of a sale/transfer of the business
• the sustainable level of income that can be derived from the business going forward.

The court has a range of options in dealing with business assets on divorce. It can order:

• an immediate or deferred order for sale of the business
• a transfer of the business from one spouse to the other with or without the payment of a lump sum.
• an order that one spouse retains the company in return for paying spousal maintenance to the other
• An order that one spouse retains the business in return for allocating a greater portion of the other assets to the non-business owner

At Myerson, we advise business owners or their spouses on how best to achieve the right commercial solution in an attempt to preserve the business and safeguard its income stream. 

We have significant experience in working for:

• owner-managed businesses
• directors and shareholders in public and private limited companies
• owners of commercial and residential property portfolios
• family Investment Companies

We work closely with our private client, commercial property and corporate teams to make sure our clients receive a bespoke commercial service to protect their interests.

Myerson is ranked in the Legal 500 Directory as a Top Tier law firm in relation to its advice on agricultural estate issues. Our Family Team regularly advise clients on the complexities involved in farming divorces including:

• Advising on matrimonial and non-matrimonial wealth issues
• Trust issues
• Third-party ownership of land and estates
• Farming subsidies, Stewardship Agreements and the Basic Payment Scheme
• Valuation of plant and machinery
• Valuation of agricultural land and farming businesses
• Diversification

Dealing with a farm on divorce can be complicated, often due to the fact that it may have been in the same family for generations.

On divorce, the courts are able to transfer or sell land, distribute business assets or transfer shares between the couple involved.

You can read our complete guide to farming divorces here.

Pension assets are capable of being shared on divorce.

If the pension assets are of high value or there are a combination of different types of pension schemes, it is advisable to seek advice from a pension actuary to advise on:

• The value of the benefits under a pension scheme and how best these can be shared
• How best to equalise capital and income
• Whether it is best to have a pension sharing order, a pension attachment order (now rare), or to offset the pension by allowing one party to retain more pension upon the basis that the other party is awarded more of the non -pension assets.

We have created a very useful guide on pensions on divorce you can read here.

Assets or income derived from a Trust are regarded as “non-matrimonial” property and therefore not available to be shared on divorce. However, if the matrimonial assets are not sufficient to meet the reasonable needs of both parties, then the Family Court has a wide discretion to analyse the assets and income from the Trust and regard it as a financial resource of the beneficiary

The court has wide-ranging powers to:

• Join Trustees as parties to court proceedings or request them to provide documents and information
• Order the attendance of the Trustee at a court hearing to give evidence
• Order the disclosure of  the Trust Deed, Any letter of Wishes, Financial Accounts of the Trust and Trust bank statements or order valuations of assets owned by the Trust
• Order to set aside the Trust
• Order that the spouse (who does not have any interest in the Trust) has a greater share of the non-Trust assets, upon the assumption that the other spouse has access to trust assets/income