Financial order: do I need one when divorcing or dissolving a civil partnership?

When navigating the complexities of divorce or dissolving a civil partnership, understanding the importance of a financial order is crucial.

This legal document finalises the financial agreements between parties upon divorce or dissolution, covering everything from property division and savings to pensions and ongoing spousal maintenance. Here we explore why obtaining a financial order can be essential to securing your financial future post-divorce or post-dissolution.

Understanding financial orders in divorce or dissolution

Navigating financial settlements in divorce or dissolution

When spouses divorce or a civil partnership is legally dissolved, it’s a common misconception that all ties, including financial ones, are automatically severed with the final order of divorce, previously called the decree absolute. In reality, the legal end of a relationship does not resolve the financial commitments between former partners. Under the laws of England and Wales, financial obligations to each other remain intact until formally addressed.

The enduring nature of these financial obligations means that without a legally binding settlement, either party could potentially make a financial claim against the other, even many years post-divorce or post-dissolution. This underscores the critical importance of resolving financial matters concurrently with the legal process of divorce or dissolution.

While you and your former spouse or civil partner might have already discussed or even divided assets informally, these arrangements do not hold legal weight without a court-approved financial order. This order is necessary to ensure that any financial agreement is enforceable. Should one party fail to comply with the terms, the other has legal recourse to enforce the agreement.

Moreover, future financial gains such as inheritances could also become subject to claims if a financial order is not in place. To avoid such complications, securing a financial order is advisable. Typically, obtaining this order does not require both parties to appear in court. Instead, the agreement undergoes a review by a court to ascertain its fairness and adequacy in providing for both parties.

The court retains the final say in approving the financial order, ensuring that it justly reflects the circumstances of both individuals involved. Given the complexities involved in meeting the court’s standards, it is highly recommended to draft this order under the guidance of a skilled family solicitor. Professional legal advice not only enhances the likelihood of the agreement meeting judicial scrutiny but also ensures that your rights and future financial security are robustly protected.

Addressing these financial aspects with thorough legal support helps ensure that you leave no loose ends that could lead to future disputes.

What is a financial order in divorce or dissolution?

A financial order is a legally binding document issued by a court that sets out the financial arrangements between separating spouses or civil partners. It details how assets, liabilities, income, and future pensions should be divided. The order is crucial because, without it, financial claims may remain open, meaning either party could make future financial claims against the other.

What are the types of financial orders?

In the realm of financial matters, which run alongside divorce or dissolution,  various financial orders can be issued to manage the division and settlement of marital assets. These are designed to ensure fair financial arrangements are made and can include orders related to lump sums, property adjustments, pensions, and maintenance.

Here’s a detailed look at each type:

1. Consent Order

A Consent Order is a legal agreement that confirms the financial arrangements upon divorce or dissolution and is made by the court at the request of both parties after they have reached an amicable agreement. This order is vital because it prevents either party from making any further financial claims against the other in the future. Consent Orders can cover a variety of financial settlements, including lump sum payments, property adjustments, maintenance payments, and the division of pensions. Obtaining a Consent Order ensures that the agreement is not only formalised but legally binding.

2. Clean Break Order

A Clean Break Order severs all financial ties between the separating parties. This means that neither party can make a financial claim against the other in the future, providing a complete separation of financial affairs. A clean break is particularly useful when both parties wish to become financially independent and is often implemented in situations where no spousal maintenance is required. It’s important to note, however, that a clean break order does not prevent the provision of child support, which remains a separate consideration.

3. Financial Remedy Order

If parties cannot reach an agreement on their financial separation, either party can apply for a Financial Remedy Order. This type of order involves the court extensively reviewing the couple’s finances and making a decision on how assets and income should be distributed. The process can include several court hearings, starting from the First Appointment, progressing to a Financial Dispute Resolution Appointment, and potentially culminating in a Final Hearing if no agreement is reached. The court’s decision is based on various factors, including each party’s needs, the standard of living enjoyed during the marriage or civil partnership, the length of the marriage or civil partnership, and any child welfare considerations.

4. Lump Sum Order

A Lump Sum Order requires one party to pay a fixed one-off amount to the other. This can be particularly useful in cases where one party wishes to retain a significant asset, like the family home. It can also be used to equalise the division of assets where ongoing payments are not desirable or feasible. Lump sum payments are legally binding and enforceable, ensuring that financial obligations are met in full.

5. Property Adjustment Order

Property Adjustment Orders are pivotal in determining how property assets, such as the matrimonial home, are divided between parties. This order can direct the transfer of property titles from joint names to a sole name or dictate the sale of a property and the distribution of the proceeds. Such orders ensure that property holdings are dealt with in a manner that considers the financial needs and circumstances of both parties, possibly also reflecting contributions made during the marriage or civil partnership.

6. Pension Sharing Order

Pension Sharing Orders are crucial for dealing with pension funds, which are often key long-term assets. This type of order allows for a portion of one party’s pension pot to be transferred to the other party, providing for their retirement needs. Pension sharing can be complex, involving valuation and future projections, but is essential for ensuring that both parties have financial security in later life.

7. Maintenance Orders

Maintenance Orders provide for ongoing financial support from one party to another post-divorce or post-dissolution. This can be in the form of spousal maintenance or child support. Spousal maintenance is typically awarded, for a period of time, where there is a significant disparity in the earning capacity of the parties, with the aim of allowing the lower-earning spouse to maintain a reasonable standard of living. Maintenance orders are particularly significant when considering the welfare of children and may be adjusted over time to reflect changes in circumstances.

Each type of financial order serves different needs and circumstances of separating couples. It’s crucial for parties to seek appropriate legal advice to determine which type of order best suits their specific situation, ensuring fair and equitable financial arrangements that align with both parties’ future interests and legal protections.

The scope of financial orders

Financial orders can cover a variety of areas including:

• Property and real estate: Who will live in the family home, whether it will be sold, and how the proceeds will be divided.
• Savings and investments: How any joint savings, stocks, or investments are split.
• Debts: How any outstanding debts are to be managed or divided.
• Pensions: How pensions are to be shared, which can involve pension sharing orders or pension attachment orders.
• Spousal maintenance: Ongoing payments from one party to another to support their living costs, often until they can support themselves or remarry.
• Child maintenance: Although typically handled separately through the Child Maintenance Service, sometimes it’s included in a financial order.
• Tax: if any of the agreements results in tax consequences then arrangements can be agreed

Do I need a financial order when divorcing or dissolving a civil partnership?

In England and Wales, securing a financial order during a divorce or the dissolution of a civil partnership is crucial. This legal document ensures that any financial agreements made with your former partner are enforceable by law.

A financial order shields both parties from future financial claims. Without this order, there is a risk that your ex-partner could make claims on your finances in the future, which could affect any new assets or wealth accumulated post-divorce.

The financial order clearly specifies the financial responsibilities and entitlements of each party, aiding in the prevention of future disputes and misunderstandings.

Ultimately, obtaining a financial order means achieving certainty and closure in financial matters post-divorce or post-dissolution. It’s important to note that divorce or dissolution proceedings and financial settlements are considered separate legal matters. A financial order is not automatically issued when a divorce or dissolution is granted. This holds true regardless of the size of the marital estate, from minimal assets to significant wealth.

To formalise a financial order, you must submit an application to the court along with a draft consent order that outlines the agreed financial terms. This step is essential to ensure that all financial agreements are legally recognised and upheld.

Why you might need a financial order

Legal closure

Without a financial order, there is no legal finality to the financial aspect of a divorce or dissolution. Former spouses or civil partners can potentially make financial claims against each other many years after the divorce or dissolution has been finalised. A financial order prevents such future claims.

Protect your assets

Obtaining a financial order ensures that any agreements made are enforceable by law. This legal backing is crucial in cases where one party may not adhere to informal agreements post-divorce or post-dissolution.

Clarity and fairness

A financial order provides clear instructions on how assets and liabilities are to be handled, reducing the potential for post-divorce or post-dissolution conflicts. It ensures that the division of assets is fair and considered, taking into account the current and future needs of both parties.

How to obtain a financial order

Negotiation and mediation

Before applying to a court, it is often beneficial for both parties to attempt to reach an agreement through negotiation or mediation. This can be less adversarial and more cost-effective than court proceedings.

• You might also be interested in: What is family mediation? Everything you need to know

Applying to the court

If you want to ensure the agreement is legally binding, you will need to apply for a consent order if the agreement is mutual butif an agreement cannot be reached, a contested financial order must be applied for. This involves:

1. Financial disclosure: Both parties disclose their financial circumstances fully and transparently.
2. Court consideration: The court will consider the financial needs, obligations, and responsibilities of each party, both now and in the foreseeable future.
3. Issuing the order: Once the court is satisfied that the agreement is fair, or makes a decision in a contested case, it will issue a financial order.

Can I get a financial order after the final order of divorce?

Yes, it is indeed possible to apply for a financial order after the final order has been granted, which legally finalises the divorce or dissolution. However, it is generally advisable to resolve all financial matters and have a financial order approved by the court before reaching this final stage of the divorce or dissolution process.

Applying for a financial order after the final order of divorce or dissolution can be necessary if financial issues were not previously settled or if new financial circumstances arise that require legal intervention. Nonetheless, proceeding in this manner may complicate the situation, as the finalisation of the divorce or dissolution might be perceived as having settled all matters, including financial ones.

While obtaining a financial order after the final order of divorce or dissolution  is permissible, it is crucial to be aware that certain rights, particularly pension claims, might be affected by the timing of the order. Therefore, consulting with a legal professional to understand the full implications and to ensure that your financial interests are adequately protected post-divorce or post-dissolution is highly recommended.

When should I apply for a financial order?

Applying for a financial order during divorce or dissolution proceedings is a critical step that should be initiated at specific stages of the divorce or dissolution process. Ideally, you should begin discussing and arranging financial settlements with your partner as soon as you decide to divorce, dissolve your civil partnership or separate.

Optimal timing for applying for a financial order

Before the Conditional Order

While you can start negotiations about your financial settlement at any time after the petition for divorce or dissolution has been filed, it’s advisable to have a clear idea of the financial division before applying for the conditional order. This can ensure that financial discussions are well underway or even settled by the time the court is ready to legally end the marriage or civil partnership.

After the Conditional Order

It’s highly recommended to apply for a financial order after the conditional order is granted but before the final order of divorce is issued. This timing ensures that all financial matters are legally resolved alongside the legal end of the marriage or civil partnership. Applying during this window allows the financial order to be in place to prevent any future financial claims between you and your ex-spouse or ex-civil partner once the marriage or civil partnership is legally ended.

Before the Final Order

Finalising your financial order before obtaining the final order of divorce or dissolution is crucial. If the final order is issued before your financial matters are settled, it could lead to complications. For instance, pension rights might be affected, and you may lose certain financial protections, such as widow’s benefits under your spouse or civil partner’spension.

Why timely application is important

Applying for a financial order at the appropriate time ensures that both parties have a fair, legally binding agreement about how their assets should be divided. Without such an order, either party could make future financial claims against the other, potentially impacting financial stability long after the divorce or dissolution has been finalised.

How long does it take to get a financial order?

The time it takes to obtain a financial order during a divorce or dissolution can vary significantly depending on several factors, including the complexity of the financial issues, the level of agreement between the parties, and the court’s schedule if litigation is required.

General timeline

1. Negotiation and agreement: If both parties can agree on their financial settlement quickly through negotiation or mediation, this can speed up the process considerably. Once an agreement is reached, solicitors can draft a consent order, which is then submitted to the court for approval. The time needed for this part of the process can range from a few weeks to several months.
2. Court processing: Once the consent order is submitted to the court, it typically takes about 6-8 weeks for the court to review and approve the order, provided there are no issues or objections raised.
3. Contested proceedings: If the financial settlement is contested and requires court intervention, the process can take much longer. Contested financial remedy proceedings can take several months to over a year. This includes time for financial disclosure, negotiations, interim hearings, and possibly a final hearing.

Factors affecting duration

• Complexity of assets: High-value or complex assets, such as international property or complicated business holdings, can lengthen the process due to detailed valuations and negotiations.
• Disagreements: The more the parties disagree on the division of assets, spousal maintenance, or other financial matters, the longer it will take to resolve these issues, especially if it reaches a final hearing.
• Court efficiency: Delays in the court system, availability of judges, and the specific practices of the local court can also impact the timeline.

Legal representation

Given the complexities and significant implications of financial orders, having experienced legal representation is advisable. A solicitor can guide you through the process, from drafting the initial agreement to representing your interests in court.

• Discover how Moore Barlow can help you with your divorce legal needs

What does the court take into account when it makes a decision?

When making a decision regarding financial orders in a divorce or dissolution, courts in England and Wales consider a variety of factors to ensure that the outcome is fair and reasonable for all parties involved. The primary considerations include:

1. Welfare of any children

The welfare and needs of any children of the family are given the highest priority. The court considers their current and future needs, including education, housing, and general welfare.

2. Financial needs, obligations, and responsibilities

The court assesses the financial needs, obligations, and responsibilities of each spouse or civil partner both currently and in the foreseeable future. This includes their ability to earn, their financial needs, and their responsibilities towards children or other dependents.

3. Income, earning capacity, and financial resources

Each party’s income, earning capacity, and other financial resources are closely examined. This includes not only current income but also potential future earning capacity and resources such as savings and investments.

4. Age of each party and the duration of the marriage

The age of each party and the length of the marriage or civil partnership are significant factors. Generally, the longer the marriage or civil partnership, the more likely that financial assets are considered joint assets.

5. Contributions to the marriage

Contributions made by each party to the marriage or civil partnership, including looking after the home or caring for the family, may be taken into account. Financial contributions may also be considered, as well as non-financial contributions.

6. Standard of living

The standard of living enjoyed by the family prior to the breakdown of the marriage or civil partnership is considered. The court tries to ensure that neither party will experience a drastic change in their standard of living post-divorce or post-dissolution, although this is not always possible.

7. Physical and mental health

The physical and mental health of each party can affect their ability to support themselves, which is another factor the court considers.

8. Loss of benefits

The court considers the loss of any potential benefits one party might incur due to the divorce or dissolution. This includes things like pensions and insurance benefits.

9. Conduct

In some cases, the conduct of the parties may be relevant to the financial settlement if it is deemed inequitable to disregard it. However, this is generally only considered in extreme cases.

These factors ensure that the decision made by the court is equitable, considering both parties’ circumstances and future prospects. The goal is to provide a degree of financial security and fairness to both individuals as they begin their new lives post-divorce or post-dissolution.

Final thoughts

Deciding whether you need a financial order when divorcing or dissolving a civil partnership depends largely on your individual circumstances. However, for most people, securing a financial order is a critical step in ensuring that their financial rights are protected and that there is a clear legal framework governing their post-divorce or post-dissolution financial relationship.

As divorce or dissolution not only marks the end of a legal relationship but also the beginning of a new phase of financial independence, having a financial order in place provides peace of mind and stability for both parties moving forward. If you are considering divorce or dissolution, consult with a legal professional to understand how a financial order can protect your interests and secure your financial future.

• Discover how Moore Barlow can help you with your divorce legal needs