A divorce settlement is the part of the divorce process when assets are divided and any other financial arrangements are decided.
In this guide, we answer frequently asked questions about financial settlements in divorce proceedings.
Even in the most amicable scenarios, where agreement has already been reached between former spouses or civil partners on mutually agreeable terms, it is always best to seek specialist advice when drawing up the terms of an agreement to ensure your interests are protected.
What is a divorce settlement?
When a marriage or civil partnership permanently breaks down, and the division of marital or partnership assets cannot be agreed, the court will need to make an order. This is known as a financial remedy order. A financial remedy order is a court order that a couple can get if they are unable to resolve their marital finances through out-of-court negotiations.
In contrast, a divorce settlement is where agreement has been reached between former spouses or civil partners, without the need for the court’s intervention. If you and your ex can agree on how to split your assets and money, you can avoid going to a contested court hearing, making things more straightforward and less expensive for both of you. However, you will still need a draft consent order drawn up to be put before the court for approval.
When do you need a divorce settlement?
You and your ex can reach a divorce settlement at any time after you separate. However, you will usually need to wait until you have been granted a conditional order, previously a decree nisi, before asking the court to approve a draft consent order. A conditional order is the document in which the court says there is no reason why you cannot get divorced, and will be issued before a final order, previously a decree absolute. Technically, you will still be married following a conditional order, but the final order will bring the marriage to an end.
On 6 April 2022, no-fault divorce legislation came into effect, meaning that separating spouses no longer have to blame each other to get divorced. With these reforms came changes to some of the divorce terminology and procedures, where the decree nisi and decree absolute have now been replaced with a conditional and final order.
If you would like a legally binding arrangement for dividing marital finances, you will need the court to approve your draft consent order before applying for a final order. You can still divide property and money after your divorce is finalised, or your civil partnership has ended, although this may change what you are entitled to get and you may have to pay tax.
How is a divorce settlement calculated?
A divorce settlement is a matter of agreement between the parties, taking into account their respective income and assets, and future financial needs. A fair split is not always 50/50, eg, where one party is responsible for raising children.
If agreement cannot be reached, a judge will decide how matrimonial assets will be split based on things like the length of the marriage, age, earning ability, living expenses, standard of living, and financial needs and responsibilities.
Is a wife entitled to half of everything UK?
A wife is not necessarily entitled to half of everything when deciding on the division of matrimonial assets on divorce. Much will depend on the respective needs, obligations and responsibilities of each party in the context of their financial worth.
What is an ex-wife entitled to after divorce?
What an ex-wife will be entitled to on divorce will depend on various factors, but if she sacrificed her career to care for the home and any children, this can be taken into account, and vice versa.
What is a typical fair divorce settlement?
When you divorce, or dissolve a civil partnership, you and your ex will need to agree how to separate your marital finances. This includes deciding how you are going to divide any property, pensions, savings and investments. On divorce, the overall aim is to divide the assets fairly, although fairness does not necessarily mean an equal division of assets.
It is a common misconception that marital assets will be split 50/50 on divorce, although it can often be a good starting point. There is no one-size-fits-all approach to splitting assets on divorce, as every couple has different circumstances, although a range of factors need to be taken into consideration. These include the length of marriage, the relative needs and responsibilities of each party, your respective earning potential and your standard of living. For example, a spouse responsible for caring for children, or in an economically weaker situation, may be regarded as needing a greater division of the matrimonial pot.
The matrimonial pot will include any marital assets that you have both built up or acquired during the course of the marriage or partnership, such as the marital home or cash in the bank, whereas non-marital assets are usually treated differently. However, non-marital assets are not necessarily excluded from the matrimonial pot on divorce settlement. For example, if an inheritance has been used during the marriage to purchase a house or a car, this asset would now be classed as a marital asset. Equally, assets owned both prior to the marriage and acquired post-separation can also be factored into the equation.
A divorce settlement can therefore include the division of any property, pensions, savings and investments, as well as the division of personal belongings. This might be reflected by a transfer of certain assets and/or lump sum payments, as well as an agreement for spousal and child maintenance, although child maintenance is typically dealt with separately by the Child Maintenance Service. To reach a settlement, you will also need to consider the division of any debts and liabilities, such as loans and credit cards, that you both may have.
How is a divorce settlement approved?
To ask the court for approval of your divorce settlement, you and your ex will need to have a consent order drafted on your behalf by experienced solicitors. It is vital that this is properly drafted, where it is not uncommon for unrepresented parties to proceed under the mistaken belief that they have divided their assets, and that any claims against each other have ended when in fact they remain open. The draft order will then need to be signed.
You will need to complete a statement of information form (Form D81), as well as a notice of application for a financial order (Form A). Even though the court is not being asked to decide how to divide the marital assets, it must have sufficient information before it to be able to assess whether the terms of the draft consent order are fair in all the circumstances. There will usually be no court hearing requiring attendance, where a judge will approve your consent order, making it legally binding, provided they believe that it is fair. If the court disagrees with the agreement reached, you and your ex can be asked to change this.
What if you can’t agree a divorce settlement?
If you and your ex cannot agree how to divide your marital finances, you can ask a court to make a financial remedy order. This is known as the contested route, where the court will ultimately decide how the matrimonial or partnership assets will be split. However, getting the court to decide often takes much longer and is far more expensive than if you and your ex can agree the terms of a draft consent order. This is because the court must fully investigate all matters in detail to be able to make an informed decision. You must also attend a meeting about mediation before applying to ask the court to make an order.
To apply for a financial remedy order, you will need to fill in a notice of application for a financial order (Form A). Before the first appointment, you and your ex will also both need to complete a financial statement (Form E) to show a breakdown of your assets and debts, and an estimate of your future living costs. Additionally, you will need to produce various documents about your finances, including rental or mortgage agreements, proof of your salary or income, pension documents, loan agreements, and details of any personal belongings worth more than £500, for example, any car or house contents.
As with applying to the court to approve a draft consent order, you should apply to the court for a financial remedy order before applying for a final order.
Does the length of marriage affect divorce settlement?
If you cannot agree on a divorce settlement with your ex, the court will need to decide on how the matrimonial pot will be split. The judge will decide on the fairest way to divide the assets, provided there is enough to meet everyone’s needs, prioritising the needs of any children, especially when it comes to their housing arrangements.
In most cases, the overriding factor will be the future needs of each party, rather than past financial contributions, although the court is entitled to take into account the length of your marriage or civil partnership. For example, a spouse who has sacrificed their career progression and future earnings in order to raise any children, may be awarded half the joint assets, a significant slice of their ex’s income until they retire or remarry, as well as half of their ex’s pension entitlement. By comparison, two young people without any children could expect to walk away with whatever they brought into the marriage.
Generally speaking, the longer your marriage or civil partnership, the likelier it is that the judge will divide any assets equally, regardless of who has contributed most of the wealth or, at the very least, equalising both parties financial positions to meet future needs. The court may also take into account how long you and your ex lived together before you married or entered into a civil partnership, including this period in the overall calculation.
However, regardless of the length of the marriage or civil partnership, most judges will try to achieve what is known as a ‘clean break’, so that everything is shared out, and you no longer have any financial commitments or ties to one another in the future.
Can I remarry without a divorce settlement?
Once you get your final order, previously the decree absolute, you are classed as divorced. This means that you are free to re-marry or enter into a civil partnership with someone else.
Technically, you can remarry without a divorce settlement being either agreed or approved, provided you have a final order to say that your marriage has officially been brought to an end. However, if you decide to remarry before a court-approved divorce settlement or financial remedy order is in place, the law will prevent you from applying to the court for all financial orders except pension sharing, unless your claims were started in your divorce application. This means that if you remarry, you may be barred from making a claim.
The easiest way to avoid the remarriage trap is to ensure that all financial and property matters relating to your previous marriage have been finalised before you get wed again. This includes documenting the terms of any divorce settlement with a court-approved consent order. Alternatively, if you intend to remarry whilst divorce proceedings are ongoing, you must issue your financial application without delay to protect your position.
Does having a new partner affect divorce settlement?
The reason for the divorce or dissolution will not normally be taken into account by the court when considering what financial remedy order to make. This means that if one party was unfaithful during the course of the marriage or partnership, or entered into a new relationship on separation, this will not, of itself, result in a reduced divorce settlement. However, entering into a new relationship, where one of you begins living with someone else, can affect the way in which the court assesses financial need.
In divorce proceedings, there is an ongoing obligation on both parties to be open and transparent about their financial disclosure, including cohabitation, until a financial agreement or order has been approved by the court. This means that if one party fails to disclose the fact that they are living with someone new, the order could later be changed.
For example, any additional household income, or sharing of domestic bills with a new partner, could lead to a substantial reduction in the amount of spousal maintenance. Equally, a spouse with less housing costs, where they are sharing these with the person they now live with will result in increased disposable income from which to pay maintenance.
However, it is important to make a distinction between an assessment of additional income from shared housing costs and the ability to claim money from an ex’s new partner. The assets and income of anyone new will not form part of any settlement.
Can my ex make further claims after a divorce settlement?
Even if you and your ex agree how to divide any marital property and money, you will still need to apply for a consent order to make this agreement legally binding. This is to protect both parties from any future financial claims that you may have against each other.
This means that any divorce settlement must be recorded in writing and subsequently approved by the court. Importantly, if your divorce settlement, setting out how any property and money is to be shared at the end of the marriage or civil partnership, is not incorporated into a court-approved order, this will not be enforceable.
To prevent any future claims, you must also ensure that the draft consent order includes a clean break agreement. Without the correct terminology, either one of you may have a viable financial claim against the other in years to come, after your divorce is finalised, including a claim on future earnings or financial windfalls.
The matters contained in this article are intended to be for general information purposes only. This article does not constitute legal advice, nor is it a complete or authoritative statement of the law, and should not be treated as such. Whilst every effort is made to ensure that the information is correct, no warranty, express or implied, is given as to its accuracy and no liability is accepted for any error or omission. Before acting on any of the information contained herein, expert legal advice should be sought.