Financial Orders in Matrimonial Law
A common misconception when spouses are divorcing is that it is widely believed the divorce itself and pronouncement of decree absolute/final order in the divorce severs all ties between the parting spouses, including any financial ties. Unfortunately, this is not the case. A final order in a divorce can be made even when there are still complicated financial matters to be resolved. Even if there are no obvious financial entanglements, spouses also need to consider obtaining a Financial Order to prevent any future claims by a previous spouse being made against them in relation to their finances.
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What is a Financial Order?
A Financial Order is a legally binding document issued by the Court which ensures finality and certainty between two divorcing spouses in relation to any financial claim they may have or may wish to bring against the other.
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Why are they needed?
Financial Orders conclude any current financial issues and put an end to any future claims a spouse may make against the others finances. If a Financial Order is not made, a former spouse can claim against assets, pensions, property, savings and investments at any time up until a Financial Order is made. In the absence of a Financial Order only re-marriage can prevent financial claims being made and in these circumstances BOTH ex-spouses would have to re-marry to avoid further claims from being made.
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How to get a Financial Order?
It is advisable to start dealing with matrimonial financial issues as soon as divorce proceedings are commenced as sometimes it can take considerable time for former spouses to agree on what the split should be. The route to obtaining a Financial Order from the Court differs depending on whether the parties agree on how the assets will be divided or not.
the former couple agrees on the split, a Consent Order will be required. In the event where the parties have agreed and signed a Consent Order the terms then have to be approved by the Court in order for them to become legally binding and enforceable. In this situation a judge will consider the terms of agreement reached between the spouses. If the judge is satisfied the agreement is “fair” and meets the needs of any minor children of the family the judge will give the courts approval to the agreement by making it into a court order. Before asking the Court to approve the Consent Order, each spouse is required to provide the court with information about their own financial situation. This includes details of any property owned, savings and investments, debts, pension values and income. Each spouse will also have to confirm their intentions for the future, where they and the children will live and whether there is any intention to cohabit or re-marriage. This information is required to allow the Court to gain a full understanding of the circumstances and thus allow it to consider if the terms of the agreement are fair.
the former spouses are unable to agree on how the finances are to be divided firstly they will be directed to alternative dispute resolution forums such as mediation and arbitration. If these processes still do not assist in achieving and agreement between spouses it will be necessary to start financial remedy proceedings through the court. In financial remedy proceedings each spouse has to fully declare their financial circumstances through a process of disclosure and completing a financial statement. There are various stages to financial remedy proceedings and the process is intended to steer spouses towards an agreement but ultimately if this is not possible, a judge will decide the outcome of the case. The decision of the judge is final in these circumstances.
Enforceability
A Financial Order is legally binding and enforceable. As such, if the terms are not complied with, enforcement action can be taken through the court to ensure the matter is concluded correctly.
Common Scenarios:
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We are on amicable terms, we don’t need a financial order
Even where separating spouses are on amicable terms a financial order should be obtained because without an order financial claims from the marriage remain live. Therefore years down the line from the divorce, an ex-spouse can make claims against financial assets the other ex-spouse has accrued post divorce. The situation becomes more complex as time passes because people enter into new relationships and marriages and go on to have children with new partners. It is not uncommon for ex-spouses to make financial claims years after a divorce has concluded if a financial order has not been made.
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We will just do the divorce, we haven’t got any assets so the financial side of things does not concern us
Although you may not have assets when the divorce takes place, this is unlikely to be the situation long term. The court will always look at the financial circumstances of each ex-spouse at the time the financial matters are brought to the court. Therefore if you acquire assets in the future and do not have a financial order in place, your ex-spouse could attempt to make a claim on those assets at a future point unless a financial order has been made. A common situation arises where a party acquires an inheritance post divorce. The ex-spouse finds out about the inheritance and seeks to make a claim against it.
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I intend to get married again as soon as the divorce is concluded and my ex-spouse will not be able to make any claims against me when I remarry.
This is a common misconception. Re-marriage only terminates the financial claims of the person who has married again. The financial claims of the ex-spouse remain live and will only be terminated if they go on to remarry. In this particular scenario the person who is getting married again would be barred from making any financial claims against their ex-spouse but the ex-spouse could still make financial claims against them if they do not remarry.
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We have written an agreement up between us, this will be enough
A written agreement between parties is not a court order and the terms do not bind a court. A written agreement cannot provide a legal clean break. A written agreement is not enforceable as a court order. Therefore whilst a written agreement is a good start, it does not have the status of a court order and importantly does not dismiss financial claims between spouses. Divorcing spouses should always apply to the court to have the terms of any agreement they have reached between them sanctioned by the court as an order. In these circumstances the court holds its own discretion as to whether to approve the terms of the agreement as fair.
Contact Us Today
At Butcher & Barlow, we have an extensive team of family law solicitors that handle divorce and the challenges divorce can have on a daily basis. When it comes to helping you through a divorce, we truly believe that there is no alternative to having a qualified solicitor that you can meet face-to-face and who fully understands your case, needs, and requirements. If you are beginning the process of a divorce and would like to get in touch with a member of our team, please do not hesitate to call your local branch today and learn how we can help you.
Caroline Cockill-Guy is a Partner at the Firm and has been practising Family Law for over 20 years. She can be reached at ccockill-guy@butcher-barlow.co.uk