Sharing financial assets after separation and divorce
There are a number of big decisions that need to be made when you are separating from a partner or spouse; if you are married, you will need to work out what your financial assets after separation are, and make sure that they are equally and fairly divided.
How to calculate the ‘financial asset pot’
Some assets that will need to be taken into account when calculating the financial asset pot, while others can be left out.
It doesn’t matter whose name the family home is legally registered in, it must be added to the list of family assets on separation. Even if the property is legally owned by only one of the parties it will still need to be taken into account.
After the family home, any other financial assets which have been acquired or maintained during the parties’ marriage need to be added to this list. These include things such as bank accounts, and any shares or investments. Pensions may also be taken into account but often have to be considered separately from other assets as decisions about where they go, and how much should be included will have to be made.
Once you have a list of all the family assets on separation, you can then start dividing them. Usually there is an equal division, but a court may decide on a different ratio depending on factors such as;
- The length of the marriage,
- Any health issues between the parties,
- The parties’ age,
- Any income/likely income,
- The parties’ individual needs and ability to meet those needs,
- Any contributions they’ve made,
- Age of the children,
- A difference in income and pensions,
and any other relevant circumstances.
Division of marital assets can be a delicate balancing act, and even if one or more of the factors above applies, it doesn’t mean that there will be an automatic change to the ratio division. The final decision will depend on which financial assets are available or likely to be available.
Any assets that were owned before the marriage or which one of the parties has acquired after the end of the marriage won’t be taken into account as family assets on separation, although they may be considered to be relevant to meeting one parties needs in the future. These will still have to be disclosed.
Of course, it’s always best if both parties can come to an agreement without intervention from the courts, but for that to happen, there must be transparency from all parties about what assets they actually have. In order to have a clear idea of what the assets are, full financial disclosure (taking into account their circumstances, evidence of income, capital, property and pensions) is vital, as is an idea of their forecast future needs ( potential cost of purchasing or renting an alternative property, mortgage capacity etc).
Problems coming to a financial agreement
If you are involved in discussions about splitting the family finances and you can’t come to a financial agreement between you, you can make an application to a court within existing divorce proceedings. This is called an application for financial remedy order. Before you can issue this type of application, there will have to be evidence that you’ve attempted to resolve things yourselves. You will usually need to show that you have considered family mediation and the mediator will need to sign your application, stating that you have received certain information about that service.
A financial remedy order
Once court proceedings have been issued for a financial remedy order there is a set timetable of events. There is also ample opportunity for you to resolve any issues without a court hearing, in fact this is encouraged.
What happens in an application for a financial remedy order?
- Both parties will have to complete and exchange financial statements -these are sometimes called ‘Form E’.
- If any more information is needed, a questionnaire will be prepared, one copy sent to the other party and one filed with the court. The questionnaire doesn’t have to be completed before the first hearing but it’s usually helpful to provide some or all of the information requested to allow negotiations to take place.
- The court will list the matter for a first hearing date about three months after the application is filed to allow for disclosure to take place. The idea is that this hearing should be more of a negotiation style hearing, where the court can and will aid negotiations.
- If further information and or documentation is required then the first hearing will be a First Directions Appointment (or FDA) where the judge will give case management directions – this usually means parties will be expected to answer questions, provide valuations and mortgage capacity evidence. The directions might also remind parties to file a financial statement.
- There will then have to be a further, final hearing, called a Financial Dispute Resolution (FDR) or (negotiation hearing).
What happens to the financial remedy order proceedings if we reach an agreement?
Once the terms have been agreed by both parties, you will sign a ‘proposed order by consent’ which has to be filed with the court. A judge will then consider the order and if the judge is happy with the terms, they simply approve the order and the court send out a sealed version to both parties.
If the court doesn’t think a financial agreement is fair
A judge sometimes doesn’t approve an order if it seems weighted in one party’s favour; for example, if all or the majority of the assets were being transferred to or kept by one party. In these circumstances, it’s advisable to get professional legal advice from a family lawyer,
If you can’t reach an agreement
If the parties do not reach any agreements then there will need to be a final hearing, At this type of hearing, a judge will decide what orders should be made in relation to the family assets, parties’ income and any liabilities.
Is it necessary to issue an application?
You can avoid court proceedings if you decide to negotiate financial issues voluntarily. Although the proceeding won’t be as strictly timetabled, the process is very similar. There will still need to be full financial disclosure, with any outstanding information gathered and then negotiations can take place. An order by consent is then prepared and filed with the court, agreed and a court order made.
This type of negotiation can be done by family mediation, with legal advice in the background if necessary. It can be carried out via solicitors on a voluntary basis or directly between the parties.
Our experienced family lawyers can help you with preparing documents for a financial remedy order, gathering and considering documents and or negotiating a financial settlement out of court. We can also assist you with representation in any financial proceedings. For more information, contact us.