Finances
‘Property’ or ‘assets’ mean everything owned by you and your spouse, including your house, bank accounts, investments, pensions, cars and everything else you own. Even debts are considered as part of your property settlement because they generally constitute a deduction from your property or assets. Sometimes property can be non-matrimonial property.
It's important to think about any joint assets or assets acquired during the marriage. This can include the matrimonial home, and properties or other assets bought together. When married couples or civil partners purchase property, it's common to purchase the property as 'joint tenants'. This means that the ownership of the property is not carved out into distinct parts. It is impossible to transfer, sell, or leave in a will part of the property, without the consent of the other joint tenant. The property is deemed to be owned jointly as part of the matrimonial assets and therefore neither of you can force a sale of the home. However, a court can order a transfer of ‘title’ of property, whether held as joint tenants or tenants in common, when two people are married.
Any assets acquired jointly during the marriage or civil partnership are assumed to be owned jointly. This includes pensions, which can often be appreciably different, if one party has been working full-time and the other has not.
Marital Property
This is property that you and your spouse purchased during the marriage from money that either of you earned during the marriage. It generally does not matter who made the purchase or even whose name the item is in.
Non-Marital Property
This could be property which you inherited, or was a gift specifically intended for you, for example.
Cash Flow or Maintenance
The final general area relates to how you will both pay the bills in each home and whether one party will pay ‘maintenance’ to the other party, relating to the care of children. Generally the courts do not get involved in maintenance payments, this is the remit of CMS (Child Maintenance Service.
The CMS website gives guidelines as to suggested maintenance levels. Parties are free to come up with their own agreement but if one party applies to the CMS, then the levels of maintenance suggested in the CMS Maintenance Calculator can be enforced by CMS.
Separate to child maintenance is spousal maintenance. The courts try to steer couples towards independent financial security at the earliest convenience however spousal maintenance can be ordered in addition to child maintenance where at court feels that one party is dependent on the other party. The court will always seek to minimise the term of spousal maintenance payments to avoid the 'free meal ticket for life' that you might have read about in the press.
Voluntary Arrangements
Most divorcing couples come to their own arrangements regarding the distribution of money, property and other assets, whether via mediation or solicitor negotiation. The government's Money and Advice Service has a divorce and separation calculator which can help with identifying assets and considering how to split them. The charity AdviceNow (www.advicenow.org.uk) also gives some helpful advice. The FJC (Family Justice Council) document, Sorting Out Finances on Divorce is also very helpful in explaining the process that is applied by the courts, to decide a final order or to formalise a consent order.
Mediation can often be helpful because a mediator will try to incorporate the advice received by both parties before supporting them to try to reach an agreement that they can live with. Divorcing couples must generally at least consider mediation (ie. by attending a Mediation Information Assessment Meeting) before taking a dispute to court.
You can agree a 'separation agreement' which sets out the provisional and temporary financial arrangements in advance of the divorce going through.
Consent and Clean Break Orders
If you manage to agree on the financial arrangements following a divorce, you can draft a 'Consent Order'. This will generally include details on how you are going to divide up your assets such as money, property, savings and investments - and it can also include arrangements for spousal and/or child maintenance payments.
The consent order will need to be signed by both former partners. You also both need to fill out a 'notice of an application for a financial order' and a 'statement of information form' which, together with the draft consent order, are sent to a court. A family judge will then decide whether the agreement seems fair to both parties and thus whether to make this order legally binding.
Where there is no ongoing spousal maintenance, a 'clean break' clause may be inserted into a consent order. Sometimes simply known as a 'clean break order', this clause essentially severs all financial ties between former husband and wife. So, for example, if either person later comes into a fortune (eg. as a result of inheritance etc.) the other person cannot claim any of this new money.
Financial Remedy
If you cannot come to an agreement together, you can apply to the court to decide on the post-divorce financial arrangements, in the form of legally binding 'financial order'. This may include things such as a lump sum payment, ongoing maintenance payments and ownership of property. You will need to fill in a Form A application form and send two copies of the form to the court dealing with your case. The process can take 6 - 12 months and will involve going to court.
Before reaching a final hearing, the court will seek to encourage you both to come to an agreement, first. Court is generally the most costly option, especially if you do not manage to settle your disagreements at either of the first two hearings and you have to make the costly preparations for the final hearing. However, fewer than 5% of separating couples do not settle before the final hearing and have a judge impose a settlement on the parties.
What goes into a Financial or Consent Order?
Finances. Both spouses must agree what will become of the matrimonial home, eg whether it will be sold or left to the spouse in custody of the children (where relevant). You might also consider whether the other spouse will begin or continue to make mortgage payments.
Assets. You will need to determine how assets such as shares, insurance policies or a family business will be distributed upon divorce.
Personal property. Personal property includes things such as furniture and fine china. Generally, this involves each party taking ownership of their own goods.
Pensions. Recent case law indicates that pension needs on retirement ought to be treated similarly to housing needs. This means that unless parties are still relatively young, the court would have concerns with one party waiving their right to a pension sharing order, regardless of any offsetting against current assets such as matrimonial property, because that spouse might struggle to make ends meet in retirement.
Spousal Maintenance. It might be appropriate do decide whether one spouse will pay spousal maintenance to the other. It would be important to agree when such payments can be completed, eg upon death, or perhaps for a period of 5 years, to give the former spouse the time to build a new career and earning capacity.
Child maintenance.The Child Maintenance Service generally determines child maintenance.
Pets. Where relevant, you will need to determine who takes ownership of the family pet.
What is a clean break?
A clean break is a clause in a consent order which dismisses rights to make certain types of claims arising out of your marriage or civil partnership.
There are two types:
1) A full clean break - dismisses future maintenance and capital claims; and
2) A capital only clean break - dismisses future capital claims only. This tends to be used where they’ll be ongoing spousal maintenance.
It can mean dismissing future claims either during your lifetimes, after your deaths or both, and can be included in the order for just one of you or both. A clean break is only included once you have agreed how to divide your assets (or have already divided them and simply want to safeguard against future claims). Neither party will have a claim on the other spouse's assets after they die.
Can't I just have a separation agreement instead?
If you have a financial agreement, but do not want to send it to the court to be approved, you can still record the agreement in a separation agreement. However, only a judge can order a “clean break”, which prevents either of you from making future claims against the other.