Why you should sort out your matrimonial finances when obtaining a divorce.

When a couple obtain a divorce it is important to have a Financial Order from the Court - more often than not this Order can be agreed, meaning no Court attendance or formal court application. This is necessary, even if the matrimonial finances are limited, or if there are none at all, or the divorce has been obtained amicably.

Why is this so important?

The final step of a divorce is obtaining the Decree Absolute (if the application was issued under the old law) or Final Divorce Order (if the application was issued under the new ‘no fault’ law). However, the fact of the divorce itself this does not sever the financial ties between former spouses; the Divorce simply ends the marriage and does not close their financial claims post-divorce. These financial claims remain open, until closed by Court Order.

This creates a degree of uncertainty for parties, as it leaves “the door open” to financial claims being made in the future. Claims could be made post-divorce in the event of a “windfall”, which could include an inheritance, or lottery win, or material change in circumstances. Even if an informal agreement is reached and parties’ have the intention of sticking to it, they are still vulnerable to a claim in the future if there is no Court Order which bars these claims being made and therefore constitutes a “Clean Break”.

There are many cases where a party has made a claim for financial provision against the other years after the divorce itself, because generally there is no time limit to making such a claim. The lapse in time may weaken the claim but the financial claim is still valid and falls within the jurisdiction of the Court to consider.

The only certain way to sever financial ties and avoid any future conflict after a divorce is to obtain a Financial Remedy Order, which closes the parties claims against each other. If there is an ongoing liability to support one or other spouse for a defined period of time then the Order should specify this, and dismiss the recipients claims at the end of term – commonly known as a deferred income clean break.

How can you obtain a Financial Order?

You can only make an application for a Financial Order once divorce/dissolution proceedings have begun, and can only file an agreed Financial Order, once a Conditional Order has been made in the divorce proceedings. 

The Courts actively encourage parties to do what they can to reach an agreement about their finances upon separation and divorce. It is however crucial that if there are to be direct discussions between parties, that all financial information is shared, therefore allowing informed decisions to be made. Agreements should not be reached if financial information is not shared or is withheld and is unlikely to be legally binding. If this is not achievable between the parties, they can involve a Solicitor to help reach an agreement. Only if this is unsuccessful, and other options have been exhausted e.g. arbitration, mediation, and private FDRs, may it be necessary to apply to Court.

What happens if we agree a financial settlement?

If an agreement can be reached between the parties, and the correct process has been followed, then the terms of the agreement can be incorporated into an agreed Financial Order.  Once the Order is approved by both parties, it can be filed with the Court, alongside a document which summaries the parties’ final positions, called a Statement of Information.

The Judge will consider both the Consent Order, Statement of Information and Pension Sharing Annex, if pensions are to be shared. The Judge has a duty to ensure any agreement reached is fair and reasonable and that consideration has been given to all of the circumstances and the needs of the parties involved, including any children. The Judge will not automatically approve an agreement which has been reached and, on occasions, may raise queries or request further information. In some cases, they may list a court hearing to hear from the parties and their legal representatives directly.

Once the Judge approves an agreement, this Order will be sealed and becomes legally binding on the parties. The terms of this Order are enforceable through the Court and if either party does not comply to the terms of the agreement, the other party could return the matter to Court to enforce the Order.

What happens if we cannot agree?

If an agreement on finances cannot be reached, then consideration to other options for resolution will be considered before an application to the Court is made. If as a last resort a court application is made, then typically, there are three hearings in financial remedy matters, the First Directions Appointment, the Financial Dispute Resolution, and the Final Hearing. Most cases settle during the proceedings but if an agreement cannot be reached then the matter will progress to a Final Hearing where parties will be required to give evidence under oath and cross-examined (questioned by the other party in the Court) on this. The Judge will then decide on the Final Financial Order.

If you would like some advice about how to put a Financial Order in place, please get in touch with Johnson Astills today and we would be more than happy to discuss your requirements further. Please call us at our office in Leicester on 0116 255 4855 or our office in Loughborough on 01509 610 312 and ask to speak to a member of the Family Team. Alternatively, you may prefer to email us at legal@johnsonastills.com or fill in our enquiry form.