Financial Orders | Family Law.

What happens to money, property and debt with divorce, partnership and relationships splits?

When a marriage or civil partnership ends, the parties must decide how to deal with their property, savings, pensions, debts, income and other financial commitments.

Agreeing on matters without contested court proceedings is usually quicker and less expensive. However, each person should understand their legal position and receive sufficient financial information before accepting a settlement.

An informal agreement may not be legally binding. It will not necessarily prevent either person from making financial claims later.

This guide covers financial arrangements following Divorce or dissolution in England and Wales. Different rules apply in Scotland and Northern Ireland.

Financial Arrangements Are Separate from the Divorce

The legal process ending a marriage or civil partnership does not automatically resolve financial claims.

A person may obtain a final divorce order while claims concerning property, pensions, maintenance and capital remain open.

Financial matters should therefore be considered separately and, where appropriate, concluded through a court-approved financial order.

What May Need to Be Divided?

Financial arrangements may involve:

• the family home;
• other land and property;
• savings and investments;
• business interests;
• pensions;
• vehicles and valuable possessions;
• mortgages, loans and credit-card debts;
• spousal maintenance;
• child maintenance;
• life insurance;
• tax liabilities;
• trust interests;
• inheritances; and
• assets held overseas.

The fact that an asset is held in one person's sole name does not necessarily mean that the other person has no claim against it.

Agreeing Matters Between Yourselves

Couples can agree how to divide their finances directly, through solicitors, in mediation or through another form of dispute resolution.

Before reaching an agreement, both parties should normally understand:

• the value of the assets;
• the amount of the debts;
• each person's income and earning capacity;
• the value of pensions;
• housing requirements;
• the needs of any children;
• possible tax consequences; and
• the long-term effect of the proposed settlement.

An agreement reached without proper disclosure or advice may be unfair or unworkable.

Financial Disclosure

Each person should provide full and honest disclosure of their financial position.

This may include:

• bank statements;
• mortgage statements;
• property valuations;
• pension valuations;
• payslips and tax returns;
• business accounts;
• investment statements;
• loan and credit-card balances;
• details of trusts and inheritances;
• evidence of overseas assets; and
• information about significant recent transactions.

In contested proceedings, disclosure is normally provided through Form E.

A court may draw adverse conclusions, make costs orders or set aside an order where assets have been concealed or materially misrepresented.

Consent Orders

Where the parties reach agreement, they can ask the court to approve it as a consent order.

A consent order records the financial settlement and makes it legally binding.

It may deal with:

• sale or transfer of property;
• lump-sum payments;
• pension sharing;
• spousal maintenance;
• debts;
• personal possessions;
• business interests; and
• dismissal of future financial claims.

The court does not approve an agreement automatically. A judge considers whether the proposed arrangements appear fair in light of the parties' financial information.

When Can a Consent Order Be Approved?

In divorce or dissolution proceedings, the court cannot normally approve a consent order before the conditional order has been made.

It is often sensible to resolve finances before applying for the final divorce order because finalisation can affect pension, inheritance and other financial rights.

Documents for a Consent Order

An application will normally include:

• a draft consent order;
• Form D81 setting out financial information;
• the appropriate court application; and
• the court fee.

The draft order should usually be prepared by a family solicitor, particularly where it includes property transfers, pensions, maintenance or a clean break.

Clean-Break Orders

A clean-break order ends specified financial claims between former spouses or civil partners.

It may prevent future claims for:

• lump sums;
• property adjustment;
• spousal maintenance; and
• pension orders.

A clean break does not normally prevent claims for child maintenance.

Where continuing spousal maintenance is ordered, a complete immediate clean break may not be possible, although other claims can still be dismissed.

If You Cannot Agree

Either party may apply to the Family Court for a financial remedy order.

Form A is normally used to begin a contested application arising from Divorce or dissolution.

The court can make orders concerning:

• property transfer or sale;
• lump-sum payments;
• spousal maintenance;
• pension sharing or attachment;
• interim maintenance;
• legal-services payments in qualifying cases; and
• other financial arrangements permitted by law.

The process can be time-consuming and expensive, so the parties are encouraged to explore settlement throughout the proceedings.

Mediation and the MIAM

Before making most contested financial applications, a person must normally attend a Mediation Information and Assessment Meeting, known as a MIAM.

The MIAM explains mediation and other non-court options. It does not require the parties to reach an agreement or necessarily attend mediation together.

Exemptions may apply in circumstances involving:

• domestic abuse;
• urgency;
• risk to a child;
• bankruptcy;
• recent mediation attendance;
• lack of mediator availability; or
• another recognised exemption.

The former Form FM1 should not be used as the general basis for a new application. Current applications contain the relevant MIAM confirmation or exemption provisions.

Other Ways to Reach an Agreement

Alternatives to contested proceedings include:

• direct negotiation;
• solicitor negotiation;
• family mediation;
• collaborative law;
• private financial dispute resolution;
• family arbitration; and
• early neutral evaluation.

The most suitable process depends on the relationship, complexity, urgency, cost and whether there are concerns about safety or financial disclosure.

How the Court Decides

The court considers all the circumstances of the case, giving first consideration to the welfare of any child of the family under 18.

Relevant factors include:

• each person's income and earning capacity;
• property and other financial resources;
• present and future financial needs;
• housing requirements;
• the standard of living during the relationship;
• the parties' ages;
• the length of the marriage or civil partnership;
• physical or mental disability;
• contributions to the family;
• care of the home and children;
• pension loss;
• benefits lost through Divorce; and
• conduct in exceptional circumstances where it would be inequitable to ignore it.

There is no automatic rule requiring every asset to be divided equally.

Equality may be a starting point in some cases. Still, the outcome depends particularly on needs, resources, children, and the circumstances of the relationship.

Children and Housing Needs

The housing and financial needs of dependent children are important considerations.

Possible arrangements for the family home include:

• sale and division of the proceeds;
• transfer to one person;
• one person remaining in the property for a period;
• postponing sale until a child reaches a specified age or completes education; or
• retaining joint ownership temporarily.

The fact that children live mainly with one parent does not automatically mean that the parent will receive the property outright.

The court must balance the children's needs with the available resources and the housing needs of both adults.

The Family Home

Leaving the family home does not automatically remove a person's ownership or financial claims.

Before leaving, selling, transferring or changing the mortgage, consider:

• legal ownership;
• home rights;
• mortgage liability;
• affordability;
• the effect on children;
• occupation arrangements;
• tax consequences; and
• whether urgent protective orders are required.

A mortgage lender is not bound by an agreement between the couple. A person remains liable for a joint mortgage until the lender formally releases them.

Pensions

Pensions can be among the most valuable assets in a divorce.

The court may make:

• a pension sharing order;
• a pension attachment order; or
• an order offsetting pension value against other assets.

Pension Sharing

A pension sharing order transfers a percentage of one person's pension rights into a separate pension arrangement for the other person.

Pension Attachment

A pension attachment order directs part of future pension benefits to the former spouse or civil partner. Payment normally depends on the pension-holder drawing the pension.

Offsetting

Offsetting allows one person to retain more of the pension while the other receives a larger share of the property or capital.

Pension values are not always directly comparable with cash or property. Specialist pension advice or an actuarial report may be necessary.

Spousal Maintenance

The court may order one former spouse or civil partner to make regular payments to the other.

Spousal maintenance may be ordered:

• for a fixed period;
• until a specified event;
• until further order;
• until the recipient remarries or enters a new civil partnership; or
• until either person dies.

The amount and duration depend on needs, income, earning capacity and the overall settlement.

The court must consider whether financial dependence can reasonably end without causing undue hardship.

Child Maintenance

Child maintenance is separate from spousal maintenance.

Parents can make a private family-based arrangement. The Government's child maintenance calculator may help estimate the amount the Child Maintenance Service is likely to calculate.

Where parents cannot agree, the Child Maintenance Service can normally calculate and manage maintenance.

The former Child Support Agency no longer deals with new cases.

When Can the Court Deal with Child Maintenance?

The court's power to make ordinary child maintenance orders is limited where the Child Maintenance Service has jurisdiction.

The court may still deal with certain matters, including:

• school fees;
• expenses connected with disability;
• some high-income cases;
• stepchildren in qualifying circumstances;
• children living abroad; and
• agreed maintenance contained in a consent order.

A consent order for child maintenance may usually be replaced by a Child Maintenance Service assessment after the relevant statutory period.

Debts

Divorce does not automatically release either person from debts owed to a lender.

A lender may pursue anyone named on:

• a joint mortgage;
• a joint loan;
• a credit agreement;
• an overdraft;
• a guarantee; or
• another legally binding obligation.

A financial order may require one person to pay a debt, but it does not necessarily prevent the lender from pursuing the other person if their name remains on the agreement.

Joint accounts, credit facilities and guarantees should be reviewed promptly following separation.

Business Interests

A business, partnership or shareholding may form part of the financial resources available to the parties.

The court may consider:

• business value;
• income generated;
• ownership structure;
• liquidity;
• tax consequences;
• third-party shareholders;
• the effect of extracting capital; and
• whether the business should remain intact.

Independent valuation and tax advice may be required.

Inherited and Pre-Marital Assets

Assets acquired before the relationship or received by inheritance are not automatically excluded.

The court may consider:

• when and how the asset was acquired;
• whether it was kept separate;
• whether it was used for family purposes;
• the length of the relationship;
• the parties’ needs;
• the needs of children; and
• whether sufficient other assets exist.

Where resources are limited, needs may require inherited or pre-marital property to be taken into account.

Tax

Transfers or sales following separation can have consequences for:

• capital gains tax;
• stamp duty land tax;
• income tax;
• inheritance tax;
• business taxation; and
• pension taxation.

The timing of transfers can materially affect tax treatment. Tax advice should be obtained before implementing a settlement involving property, investments or businesses.

The Court Process

A typical contested financial remedy case includes:

Application

One party files Form A and pays the court fee. The court then sets a timetable.

Financial Disclosure

Both parties complete Form E and exchange supporting documents.

First Appointment

The court identifies the issues, considers questions and valuations and gives directions for further evidence.

Financial Dispute Resolution Hearing

A judge indicates the likely outcome and encourages settlement. The judge will not normally conduct the final hearing if the case does not settle.

Final Hearing

If no agreement is reached, a different judge hears evidence and imposes a binding decision.

Cases may settle at any stage.

Interim Financial Support

A person who needs immediate support may consider an application for maintenance pending suit or another interim order.

In some cases, the court can also order one party to contribute towards the other's legal costs where they cannot reasonably obtain funding elsewhere.

Urgent advice should be obtained where there is no money for basic living costs, housing or legal representation.

Do Not Dispose of Assets

Neither party should conceal, transfer or dispose of assets to defeat the other's financial claims.

The court may:

• set aside transactions;
• restrain a proposed disposal;
• draw adverse conclusions;
• make costs orders; or
• adjust the final settlement.

Urgent legal action may be available where there is evidence that property or money is about to be removed.

Finalising the Divorce

Obtaining the final divorce order before finances are resolved may affect:

• pension rights;
• inheritance rights;
• death-in-service benefits;
• widow's orwidower'ss benefits; and
• the practical implementation of a settlement.

Legal advice should be obtained before applying for the final order where financial matters remain outstanding.

Unmarried Couples

Unmarried couples do not have the same financial claims as married couples or civil partners.

There is no general legal status of common-law husband or common-law wife in England and Wales.

Following separation, claims may depend on:

• legal ownership of property;
• declarations of trust;
• financial contributions;
• beneficial ownership principles;
• proprietary estoppel;
• cohabitation agreements;
• Schedule 1 of the Children Act 1989; and
• child maintenance law.

An unmarried partner cannot normally claim spousal maintenance or pension sharing merely because the relationship was long-term.

Cohabitation Agreements

A cohabitation agreement can record:

• ownership of property;
• mortgage and household contributions;
• responsibility for debts;
• ownership of possessions;
• financial arrangements during the relationship;
• what should happen on separation; and
• arrangements for selling or transferring property.

Each person should normally receive independent legal advice, provide financial disclosure and enter into the agreement freely.

Pre-Nuptial and Post-Nuptial Agreements

A pre-nuptial agreement is made before marriage. A post-nuptial agreement is made afterwards.

These agreements are not automatically binding as ordinary commercial contracts, but the court may give them substantial weight.

Important factors include whether:

• both parties entered freely;
• each understood the implications;
• full financial disclosure was provided;
• independent legal advice was obtained;
• the agreement was made in sufficient time;
• the terms remain fair; and
• the reasonable needs of each party and any children are met.

The court can depart from an agreement where it would be unfair to hold the parties to it.

Protecting Yourself Following Separation

Practical steps may include:

• obtaining legal advice;
• gathering financial records;
• checking joint accounts and credit facilities;
• reviewing mortgage liability;
• obtaining pension information;
• checking insurance and nominations;
• making or updating a will;
• protecting home rights where appropriate;
• recording the separation date; and
• avoiding major financial decisions without advice.

Do not remove money dishonestly, conceal assets or dispose of jointly owned property without authority.

How a Family Solicitor Can Help

A family solicitor may assist with:

• financial disclosure;
• negotiating a settlement;
• consent orders;
• clean-break orders;
• property transfers and sales;
• pension sharing;
• spousal maintenance;
• child maintenance advice;
• business and overseas assets;
• tax and valuation evidence;
• mediation support;
• Form A applications;
• Form E disclosure;
• interim applications;
• court representation;
• enforcement or variation of orders;
• cohabitation claims; and
• pre-nuptial and post-nuptial agreements.

Finding a Divorce Financial Settlement Solicitor

Reaching agreement can reduce costs, delays, and conflict. Still, a settlement should be based on proper disclosure and a clear understanding of its long-term effects.

Even where the parties agree, a court-approved consent order is normally required to make the settlement binding and bring financial claims to an end.

Use the search facility at the top of this page to find a family solicitor experienced in divorce financial settlements, pensions, property and maintenance.

This guide provides general information about financial arrangements on Divorce and separation in England and Wales. It does not constitute legal, financial or tax advice and should not replace advice about an individual case.