One of the main concerns for people facing divorce or dissolution of a civil partnership is often how they will cope financially and how the assets and debts of the relationship will be dealt with.
Financial Remedies are the procedure to discuss the division of your property when you are undergoing a divorce.
Financial orders, pensions & maintenance
A common concern for people facing divorce or the dissolution of a civil partnership is how they will cope financially. It is clearly important to divide financial assets – for example, property, savings and investments – as well as debts fairly when a couple go their separate ways.
There is a specific legal process which runs alongside divorce or dissolution to make such decisions. Family lawyers refer to this process – essentially, the monetary aspects of divorce – as ‘financial remedies’. The term incorporates the overall financial settlement alongside crucial specifics like pensions and maintenance payments. Most couples undergoing divorce or dissolution begin the financial remedies process by negotiating and attempting to reach an agreement. But sometimes there are major points of dispute and the couple find themselves struggling to agree on much – or anything at all.
Financial orders
If the couple cannot come to an agreement regarding their finances, they will need to ask the family courts to intervene and rule on a fair division of their assets. This is called making a ‘financial order’. Occasionally these are still referred by the now outdated term ‘ancillary relief order’.
You will not be surprised to hear that there are costs associated with going to family court: a court fee of £275 is payable, and any solicitors’ fees will also need to be paid.
Seeking a financial order can take time – but sometimes it is the only option available. It is sensible to try and obtain one before the completion of the divorce in order to fully benefit from the tax benefits of marriage.
Before beginning court proceedings, in most cases you will need to attend a meeting to explore the options presented by official mediation: this is a called a ‘mediation information assessment meeting’ or MIAM. There are some exceptions to the requirement: for example, allegations of domestic violence.
The financial order process has three key stages:
- A first appointment, in which you discuss the specifics with a judge. This normally
- takes place around three months after your initial application.
- A financial dispute resolution appointment, or FDR: a last opportunity to reach a
- negotiated settlement with your estranged spouse.
- The final hearing: when a judge will officially rule on the division of your assets.
The FDR and final hearing (if required) normally take place a few months after the first appointment.
Typically, the Judge at a final hearing will consider such factors as:
- The age of each party.
- Their lifestyle and living expenses.
- Their employment prospects.
- Their caring responsibilities, if any.
- The health and physical independence of each party.
- The financial, housing and other needs of any children.
Whenever possible, the Judge will try to arrange a ‘clean break’, in which neither party has future financial obligations towards the other.
Other legal orders available to the family court concern more specific financial arrangements. For example:
Pension sharing orders
If you gave up work to raise children, you will often be entitled to a share of your soon-to- be-former spouse’s pension. This may be a state pension, a private pension or both.
This entitlement reflects the fact that earning potential is inevitably affected by childcare. Even if the primary caregiver returns to employment, they will often work fewer hours or take on part time roles. A legal order declaring that one party to a divorce or dissolution is entitled to a share of the other’s pensions is called, as you might expect, a ‘pension sharing order’.
Maintenance orders
There are two types of maintenance payment: child maintenance and spousal maintenance. The names are self-explanatory. Spousal maintenance is financial support for a former spouse with limited earning potential. In most cases it will be time-limited, as family courts generally prefer to end the financial relationship between former spouses as soon as they can. But in some circumstances – if the spouse is unlikely to find work, for example – spousal maintenance can be a lifelong affair.
Meanwhile, child maintenance is paid to the parent who is responsible for the day-to- day care of any children so to assist with the children’s living expenses. The payment of child maintenance, also known as child support, is a legal obligation until a child’s 18 th birthday.
A maintenance order issued during divorce proceedings will include the specifics of the maintenance to be paid – how much, to who and for how long. If circumstances change significantly, the paying party may return to court at a later date to argue for changes to their obligations: for example, lowering the amounts due. This is referred to as seeking the ‘variation’ of a maintenance order. For such an application to be successful the paying party will need to demonstrate why they can no longer pay the previously specified amounts.
Consent orders
Negotiating directly with your soon-to-be-former spouse is usually the quickest and cheapest route to a financial agreement. But this approach comes with risks attached. What if your ex stops co-operating at some point in the future – or never really meets their obligations at all? An informal agreement is not enforceable in court. You can avoid such problems by converting your agreement into a legally binding ‘consent order’ so the courts can enforce it if required. The curious name is a reference to the fact that both parties have consented to the agreement.
To convert an informal agreement into a consent order, submit a draft of the order to a divorce centre. As long as the draft contains no obvious problems or unfair elements, it will in most cases be approved by a judge. This can be done at any point after your initial application for divorce and does not have to be finalised before the decree absolute or final order is issued. But if the agreement is only completed after the official end of the divorce itself, different tax liabilities may apply.
A fee of £53 is payable for approval of consent orders. You will need to complete two forms: a statement of information for a notice of application for a financial order. Court fee concessions are available for people on a low income.
It is possible, with some research, to draft the consent order yourself but an expert family solicitor will certainly do a better job and they will also ensure that all relevant issues have been properly addressed in the details of the agreement. In fact, this principle applies to the whole of the financial remedy process: without expert advice, you could settle for less than you are entitled, leave the door open for future claims by your former spouse or create other financial problems for yourself. In that very real sense, not seeking professional legal advice can be a false economy.