Getting your finances in order for the divorce process

Navigating divorce finances - how do I do it?

The whole process of separation can leave you feeling emotionally drained, burnt out and anxious. There’s so much to consider when going through a divorce and finance is one area of separation that can be difficult and sensitive to navigate.

In this article we will cover the options that are available to you when dividing finances during a divorce. Neil Russell, Family Lawyer and Partner, together with Victoria Spencer, solicitor at Seddons LLP take us through what you need to know.

And before we get started, if you haven’t already, do check out this full guide to the overall divorce process.

WATCH NOW: Neil Russell, family lawyer and partner at Seddons LLP talks through what you need to know about getting your finances in order for the divorce process:

What do I need to know about the separation of finances when applying for a divorce?

When you start the divorce proceedings you and your ex-partner need to come to some agreement on how to separate your finances.

You’ll both need to consider how you are going to divide the following:

• property
• savings
• investments
• pensions

In addition to this you will need to discuss maintenance payments for yourself and any children involved.

If you and your ex-partner can agree on how to divide the money and the property then you will go down the route of applying for a Consent order which is the most straightforward route and least expensive if you can both agree on how to divide your money and property.

You may also need the support of mediation to help both of you through the process and agree on how you divide assets.

If you can’t agree on how to divide finances, what other options are available?

If you are at a point where you cannot agree then you might need to start what is known as ‘financial remedy proceedings’

Should financial remedy proceedings be issued?

An application for financial remedy proceedings should only be made as a last resort and should not be the first port of call, unless absolutely necessary. You may want to consider filing an application for financial remedy proceedings in a range of circumstances such as:

●  If all communication between you and your partner has broken down.

●  Mediation has proven unsuccessful.

●  Your spouse refuses to provide full financial disclosure. 

●  You need interim financial support.

●  There is a risk of assets being dissipated.

What do financial remedy proceedings entail?

There are a number of steps involved in the process which are set out below. Settlement is encouraged, but is likely only to be possible once full financial disclosure has been exchanged.

To be able to file an application for financial remedy proceedings, a divorce petition must have been issued at court. It does not matter if you are the petitioner or respondent in relation to the divorce.

●  Preliminary stage: Mediation Information and Assessment Meeting (MIAM)

The preliminary  stage will be for you to attend a Mediation Information and Assessment Meeting (“MIAM”). In order to issue financial remedy proceedings, the issuing party must attend a MIAM save for in specific circumstances where an exemption applies.

The completed MIAM form must be filed with the court with your application for financial remedy proceedings.

●  Stage one: First Appointment

Upon issuing your application (Form A) the court will list the First Appointment hearing within 12 – 16 weeks of the date of your application. The date the hearing is listed very much depends on the availability of your local family court.

The court will also direct for both parties to prepare Forms E (this is the full financial disclosure - see further below) as well as First Appointment documents (this includes a chronology, statement of issues and a questionnaire, if required) ahead of the First Appointment.

The First Appointment is a ‘Directions Hearing’. It is generally only required if further court directions are needed to help the parties prepare for negotiation. For example, a First Appointment may be required if one party believes pension advice is required or an expert valuation for a property or a company is required where the valuations are not not agreed. A First Appointment may also be required if one party has prepared a questionnaire relating to the other party’s financial disclosure and that party does not agree to answer, all or part of it.

Duty of both parties

There is a duty on the parties to prepare as much as possible for the First Appointment so that where appropriate the First Appointment can be combined with the Financial Dispute Resolution Appointment (FDR) – see further below.

●  Stage two: Financial Dispute Resolution (FDR) appointment - a ‘without prejudice’ hearing

The FDR is a ‘without prejudice’ hearing at which the Judge will read through the papers, including any offers that have been made and will hear from the lawyers. The Judge will then provide an indication as to where they think your case should settle. The indication is given to encourage parties to negotiate further and steer them towards the outcome that this particular Judge might award at trial.

If a settlement can be brokered at the FDR, a Final Order will be agreed at the conclusion of the hearing. 

●  Stage three: Final Hearing

If no settlement can be reached either at the FDR or during the course of solicitor negotiations, then the matter will be listed for a Final Hearing.

To prepare for a Final Hearing, the parties will be expected to prepare what are known as section 25 statements which will set out the arguments that support their case in accordance with the  section 25 factors of the Matrimonial Causes Act– see further below.

At the Final Hearing:

The parties will likely be called to give evidence and cross-examined.

After considering all the evidence, the Judge will provide a  judgement. It may be that judgement is reserved and sent to the parties after the Final Hearing.

What is Form E and why is it important?

Generally, financial matters can only be resolved once the parties have all the details of their respective finances. To enable parties on a divorce to deal with the financial disclosure, they are normally required to complete the court prescribed Financial Statement (Form E). This is generally regarded as the most substantive form within financial remedy proceedings and can often be quite time consuming to prepare.

Form E requires the parties to provide detailed information about their finances to include supporting documentary evidence and not limited to the following:

• Any property that you own / have an interest in, including its value and the outstanding mortgage;
• All bank accounts, whether in your sole name or in joint names with any other person, together with bank statements for the 12 month period before Forms E are prepared;
• Any investments to include, but not limited to ISAs, shares, stocks and bonds together with supporting statements;
• Any personal belongings worth more than £500 together with supporting valuations. Generally, this does not include every-day household items and relates, for example, to cars or expensive jewellery;
• Any liabilities to include, but not limited to credit cards or loans.
• Any business interests together with copies of the business accounts for the last two years and an estimate of the value of the business.
• Any pensions together with evidence of their Cash Equivalent Value(s).
• Your income whether you are employed or self-employed. If you are employed you will be expected to provide your most recent P60 and payslips for the three months before Forms E are prepared. If you are self-employed, you will be expected to provide your most recent tax return.
• A schedule of income needs i.e. a summary of your monthly outgoings.

It is important that the parties have full financial disclosure so that they are aware of what the matrimonial pot consists of before making any decisions as to how it should be divided.

How is financial settlement agreed?

In terms of the financial settlement and the distribution of marital assets, the starting point is equality, and the yardstick of equality is to be applied.

However  the court takes into account in determining the distribution of assets on the breakdown of your  marriage, the Guidelines set out in Section 25 of the Matrimonial Causes Act:-

• (1)   It shall be the duty of the court in deciding whether to exercise its powers…to have regard to all the circumstances of the case, first consideration being given to the welfare while a minor of any child of the family who has not attained the age of eighteen.
• (2)   a) the income, earning capacity, property and other financial resources which either party has or is likely to have in the foreseeable future. The same would include, in the case of earning capacity, any increase in that capacity which it would, in the opinion of the Court, be reasonable to expect the parties to the marriage to take such steps to acquire;
• b) the financial needs, obligations and responsibilities that the parties to the marriage have or are likely to have in the foreseeable future;
• c) the standard of living enjoyed by the family before the breakdown of the marriage;
• d) the age of each party to the marriage and the duration of the marriage;
• e) any physical or mental disability of either of the parties to the marriage;
• f) the contributions that each of the parties have made, or are likely in the foreseeable future to make to the welfare of the family, including any contribution by way of looking after the home or caring for the family;
• g) the conduct of each of the parties, if that conduct is such that it would in the opinion of the Court be inequitable to disregard it;
• h) the value to each of the parties of any benefit which, by reason of the dissolution or annulment of the marriage, that party will lose the chance of acquiring.

The court’s first consideration is the welfare of any minor children of the family. Needs can trump all other factors.

As housing is the key factor in any case, the first practical step when considering the financial settlement is to consider the cost of suitable housing for the parties and the children.

Looking at the factors set out above, the financial resources available to the parties include all the assets, whether they are owned in a party’s sole name or jointly. It also includes the parties’ mortgage capacities. In terms of income, it includes the income the court could reasonably expect each party to be able to earn.

The standard of living enjoyed throughout the marriage will be relevant, but the court will take a view that both parties will need to adjust, if necessary, given that they will now be required to run two households. The reality for most families is that there will necessarily be an adjustment in the standard of living.

As for the duration of the marriage, the longer the marriage, the less likely the court will be persuaded that there should be a departure away from equality. It should be noted that seamless cohabitation into a marriage extends the length of the relationship.

Age may be more  relevant for example where there is an age gap between the parties and one or both parties can draw down on their pensions.

In relation to the health of the parties, if one is in ill health and unable to work, that may be an argument to support them receiving a larger share of the financial resources and for there being a departure away from equality in their favour.

With regard to the contributions that each party has made, the court regards looking after the home and bringing up the children as valuable as any financial contributions.

In certain circumstances the court will consider whether any of the financial contributions were pre-marital and / or acquired after the parties separated and may exclude those assets from the matrimonial pot available for division.

In the vast majority of cases, conduct is not a relevant factor for the court to consider. The type of conduct that the court would consider relevant is behaviour that has had a tangible effect on the finances, and it would be inequitable to disregard.

The last factor above relates to any pension either party would lose out on as a consequence of the divorce. The division of the parties’ pensions will be considered as part of the financial settlement.

Pre-nuptial and Post-nuptial settlements may also be of considerable importance.

Conclusion

Divorce can be an incredibly stressful time for both you and your partner, particularly when it comes to finances. Understanding some of the basics of how finances are divided up during divorce can help you to reduce these feelings and help you feel more in control going into the process.

RELATED ARTICLE: How do I get a divorce?

This article is prepared for guidance purposes only and is not intended to be relied upon in substitute of  legal advice.

About the authors:

Neil Russell is a partner at Seddons LLP. He advises on all aspects of relationship breakdown, including divorce, children and finances. His clients come from all walks of life, from stay at home parents to captains of industry, high-profile celebrities and owners of family businesses, and it is a matter of public record that he acted for the Prime Minister, Boris Johnson on his divorce.

Neil has been described in Legal 500 as 'one of the "go to" men in the London matrimonial world'.

Neil is also a Family Law commentator and regularly appears on LBC Radio.

Victoria Spencer is a solicitor at Seddons LLP. She advises on all areas of family law, running her own cases as well as assisting Neil Russell. Victoria has been described in Legal 500 as an ‘excellent associate’.

This article is a paid partnership with Seddons LLP.