Making Sense of Financial Settlements With Your Divorce Solicitor

As your local divorce solicitors in Lancaster and Kendal, the team at Holdens Law know that every divorce settlement is different. Sometimes, the parties can be very amicable, able to communicate and agree to a fair and sensible settlement themselves. Other times, it can be a full-blown battle with arguments over every aspect, and the hatred towards one another clouding every decision.

This is where it pays to have professional advice from an experienced divorce solicitor from Holdens Law.

No Set Rules

There are no set rules in financial settlement, each case will be decided on its own facts and circumstances. Just because someone you know managed to keep hold of the former family home, or managed to keep their pension or other assets, this does not mean that this will apply in your case.

The Court will, more than likely, class the relevant period for assessing the accrual of assets as being from the start of cohabitation, and not from the date of the marriage itself, provided there was no gap between cohabitation and marriage.

Set out below are some general points to consider with your divorce solicitor, simplified for the purposes of this article.

‘What am I entitled to?’

It may help to stop thinking about ‘entitlement’.  Unless there are plenty of assets to go around and the Court can look at sharing the marital assets equally, the Court will be looking for a settlement that meets the needs of the parties ie housing, capital and income needs. It may come as a surprise that even if there are assets that run into millions of pounds, it can still be a ‘needs’ case.

Section 25(1) of the Matrimonial Causes Act 1973 states that all the circumstances will be taken into account, with first consideration being given to any minor children of the family, ie those under 18. This can often cause clients to be concerned about children who are away at university or studying at college, who are in lower paid jobs and not able to afford their own housing, or who have special needs. Your divorce solicitor will ensure that these issues are taken into account when negotiating terms of settlement.

The Court will also have particular regard to all of the factors set down at section 25(2) of the Matrimonial Causes Act 1973.

‘But I brought all the money into the house’

Marriage is, or at least should be, a partnership. Therefore the Court will be looking at contribution to the marriage, and to family life, and not who brought the most money in. A spouse who has not worked and had run the household, whether they have raised a family or not, or who has worked part-time or full-time but on a lower income, will not be treated any differently to the spouse who has the greater income. It is also irrelevant who paid for holidays or the bills.

There are some circumstances where arguments relating to financial contribution will be relevant, especially where we have a short marriage without any significant period of cohabitation beforehand. In these cases, the parties are likely to be put back into the financial position they were in before the marriage, with each party retaining any assets in their sole names, and any jointly accrued assets being divided equally, unless there are reasons for an unequal split.

‘But it’s my house’

It does not matter in whose name the house is legally held; it is the marital home and therefore a marital asset. Often, one party may have made a bigger contribution and has protected that contribution by way of a Declaration of Trust. However, the Court can still override the provisions of this document if the needs of the parties cannot be met if the terms of the Declaration are followed.

The same also applies to the situation where a parent or other relative has provided money to assist in the purchase of the marital home. It is essential that it is made clear, at the time that the monies are paid, whether the contribution is a gift, and if so to whom, or whether it is a loan. If contributions are not protected by an appropriate document at the time they are made, then they can be lost.

If a house was owned by one of the parties before meeting the other, but was then used as the marital home, then although it will form part of the marital pot, it may not be the case that the other spouse will receive an equal share of any net equity.

How are Pensions Treated in Divorce Settlements?

Many people are very protective when it comes to their pensions and do not see why they should share something they have built up from their salary for their own retirement.  There are just as many who do not think they should be asking for a share of any pension because they feel they have had no part in accruing this asset. Pensions are classed as marital assets and need to be taken into account, although they are usually considered separately to the other assets. 

It is also important to note that pensions are not ready cash. If a share of one spouse’s pension is to be ‘paid’ to the other, then this will normally take place by way of pension sharing. This is when a percentage of one spouse’s pension is transferred to a pension fund in the name of the other spouse.

Arguments may arise in relation to pre-cohabitation pension accrual. The Pensions Advisory Group guidance to the Court is that pre-cohabitation accrual should be included in the total marital pension pot. However, we are also reminded that this is guidance and each case needs to be decided on its own circumstances.

Inheritance and Pre-Cohabitation Assets

As a general rule, if inherited or pre-cohabitation assets have been kept away from marital assets, then they will be classed as non-matrimonial and will be ‘ringfenced’ ie they will not form part of the marital pot. However, if the needs of the parties cannot be met without using those assets, then they will be used, in full or in part.

Summary

Negotiating a fair and amicable divorce settlement needs expert input from an experienced divorce solicitor. 

Although there can be arguments relating to the individual assets in respect of contribution, or when or how they were accrued, in the majority of cases, the Court will be concerned with meeting needs. The s25 factors will be considered very carefully before any decision is reached or terms of settlement approved.

To get the best possible outcome, you need the best possible advice. Holdens Law divorce solicitors in Lancaster and Kendal are here to support you every step of the way. To find out more, contact Holdens Law Divorce Solicitors Lancaster on 01524 32484 or Holdens Law Divorce Solicitors Kendal on 01539 720629.

Frequently asked questions on divorce settlements

Do I need a divorce solicitor to negotiate my settlement?

Not always, but financial settlements can be complicated, and expert advice from a divorce solicitor is recommended to ensure a fair and equitable settlement for both parties.

If we make an agreement between ourselves, do we still need a divorce solicitor?

Yes.  Only financial orders approved by the Court are enforceable and prevent claims in the future, so you still need a divorce solicitor to create a properly worded order.

How long does a financial settlement take on average?

Even with the professional help of a divorce solicitor, a financial settlement can still take several months or even a couple of years to complete.

Does a Final Order in the Divorce mean our finances are settled?

No. A Final Order (formerly known as a Decree Absolute) legally ends the marriage but does not end financial ties or prevent financial claims.  Finances are settled when a Financial order is granted by the Court.