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A Survival Guide to Finances on Divorce

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Submitting a divorce application to the court is the start of the process to bring a marriage to an end. However, it does not deal with financial aspects, which are sometimes left in limbo.

  1. Why are financial aspects important?

It is important that financial matters are also dealt with because both parties will be looking to move forwards separately and will need financial certainty.

  1. What assets need to be considered?

All assets need to be taken in to account. For most families, the main asset is the family home.  One party may be able to buy out the other’s share in the property or the home may need to be sold either now or at an agreed future date and the net sale proceeds divided between them.  There may be other assets such as monies in bank accounts, savings, investments, other properties and pensions, which need to be identified, valued and divided between the parties to reach a fair outcome.

Likewise, liabilities also need to be taken in to account.

  1. How can an agreement be reached?

An agreement can be reached by the parties between themselves direct, through mediation, through solicitors or via the court process. Each of the parties is always advised to seek independent legal advice.

  1. How will the court take into account a gift or an inheritance?

The court will only take into account non-matrimonial assets, such as gifts or an inheritance already received, if they are required to meet the needs of the parties.

  1. What about pensions?

Many people are unaware that they may have a claim in relation to the other spouse’s pension. Pensions are a very valuable asset and there are various ways that they can be taken into account, for example pension sharing, offsetting against other assets or a pension attachment order.

Pensions are complex. Different pension schemes have different attributes, for example some schemes have guaranteed benefits in retirement whilst others do not.

The simple solution is not always the best solution. Many clients chose to offset pensions against the value of the family home in order to continue to live in the family home.  However in retirement, they will have limited pension income and may need to downsize their house to free up capital to live off in retirement.

Recent case law has confirmed that all pension provision may be taken into account, including contributions prior to a marriage and post-separation if they are required to meet the needs of the parties.

In many cases a report by a pension expert on divorce will be required to provide details of available options and the relevant calculations.

  1. What is the next step once an agreement has been reached?

Once an agreement has been reached a solicitor will need to set out the agreement in legal terminology in a consent order. This is sent to the court with Form D81, which provides concise background information to the District Judge to assist with consideration of the order. Once the order is approved by a District Judge, it will be stamped. A binding court order is then in place, which provides certainty.

  1. What happens if finances are not dealt with alongside the divorce?

If the finances remain unresolved for a significant period of time, or only the family home is dealt with upon separation, it will be more time-consuming and more costly to unravel in the future.

Seeking legal advice at an early stage to agree a strategy to resolve financial aspects is advantageous for both parties.

If you think you would benefit from a professionally prepared consent order, please contact our Family team for financial peace of mind.