4 December 2023
Navigating Divorce: Understanding The Financial Implications
Divorce is an emotionally challenging experience, and it is often accompanied by complex legal and financial issues. When a marriage breaks down, the division of finances is a crucial aspect of the divorce process. This blog post will provide an overview of what happens to your finances during a divorce.
If divorcing parties cannot agree between themselves how their capital and incomes are to be divided, experienced family law solicitors can help them to negotiate an agreement. Solicitors will advise the parties as to the most cost effective and stress-free method of concluding the marriage. Alternatively, divorcing parties can attend independent family mediation to try and resolve their financial differences. Should agreement still not be possible, either party can make an application for a financial remedy to the divorce court as a last resort. However, before solicitors, mediators or the courts can assist, the parties will need to mutually exchange full particulars of their capital and incomes to the other. This process is called the exchange of financial disclosure.
If agreement cannot be reached directly, via solicitors or via mediation, either party can ask the court to issue financial remedy proceedings. Once issued, the court will set a timetable for the exchange of financial disclosure. Both parties will then be legally obliged to obtain and exchange up-to-date valuation evidence of any capital asset that they own and exchange documentary proof of their incomes, debts, and expenses. The court can direct that further documentation and information be produced if it feels that a party has failed to provide adequate disclosure.
Division of Matrimonial Assets
Matrimonial assets include everything acquired by either party during the marriage, such as the family home, savings, investments, pensions, and personal property. In most cases, these assets will be classed as matrimonial assets which are subject to division between the parties. However, in determining what it considers to be a fair and appropriate division of capital and income, the court will consider the individual facts of a case. In exercising its discretion, the court must consider a list of statutory factors, including the length of the marriage, the standard of living enjoyed during the marriage, any health or welfare considerations, each party’s financial contributions and the needs of the parties and any dependent children. Top priority will be given to the housing needs of any minor children. Wherever possible, the court will try and arrange what is called a clean financial break between the parties, where neither party will have a legal obligation to support the other after the divorce is complete, save payment of child support where appropriate.
One of the most significant consequences of the marriage breakdown will be deciding what is to happen to the family home post-divorce. This will often be the most valuable family asset, and there are several options. These include selling the property and splitting the proceeds, transferring ownership into one spouse’s sole name, or delaying the sale until certain specific conditions are met, such as the children attaining a certain age, or the spouse in occupation starting to cohabit with a third party or remarrying.
In certain cases, the court may order one spouse to pay spousal maintenance to the other. This is typically based on the recipient’s financial needs and the paying spouse’s ability to provide support. Spousal maintenance can be temporary or permanent, depending on the circumstances. However, in most cases, the court will try and arrange a clean break.
Child Maintenance or Support
Child maintenance is another critical consideration post-divorce, primarily focusing on the needs of any dependent children. However, the divorce court has limited jurisdiction to deal with such issues as part of the financial remedy proceedings. If divorcing parties cannot reach agreement over child support issues, they would ordinarily be encouraged to apply to the government’s Child Maintenance Service (CMS).
The division of pension assets upon divorce is a very complex legal topic. After a long marriage, one or both parties might have acquired valuable pension funds. The court might order that a pension report be prepared by an independent pension’s expert to assist it in determining how pensions should be divided so as to achieve a fair outcome. The court can make a range of orders, including pension sharing, pension attachment and can order that the value of pensions be offset against the value of other assets.
Orders by Consent and Financial Remedy Orders
If at any point during the divorce process the parties reach a financial agreement, their solicitors can prepare a document called a Consent Order, which will formally record the agreement. This Consent Order will be sent to the court for the approval of a judge. If the parties cannot reach agreement and proceedings are issued, the court application might progress to a contested final hearing, when a judge can determine the dispute once and for all. In that event, the court will hear from both sides as to what they consider an appropriate outcome to be before the judge decides what it thinks is the correct outcome. Either way, the order produced will be a legally binding document which will contain comprehensive terms regarding the division of matrimonial assets, whether there is to be spouse maintenance or a clean break, whether one party should pay the other’s legal costs, and so on.
Divorce can be a challenging and emotionally charged process, but understanding the financial consequences of the marriage breakdown is crucial for both parties. For anybody who has concluded that their marriage is finally over we strongly recommend that you seek advice from an experienced family lawyer, as they can provide guidance and expertise in navigating the complex financial aspects of divorce. Each divorce case is unique, and the appropriate outcome will depend upon your specific circumstances. This blog is only intended to provide a basic overview of the process.
At LDJ Solicitors, our experienced and sympathetic family law team can give you clear and comprehensive advice to assist you in the event of a breakdown of a marriage or relationship. As members of the Resolution and Children Panel, our family law team have many years of experience working in this area. We have an excellent reputation for giving sound and realistic advice, and we will provide you with constant support to help ease any anxiety during this difficult time.