Emotions often run high in divorce cases. Regrets and recriminations, arguments and accusations come with the territory when a couple decides to separate. Throw in the delicate matter of child custody and you often end up with a combustible mix.
Recent changes to divorce law have helped. The old system under which one party or another would in effect have to prove fault in the other in order for a legal separation to be granted only encouraged the airing of dirty linen, often before a court.
Since the introduction of ‘no fault’ divorces in April 2022, however, all it takes now is for one-half of a couple to declare they no longer wish to be married or involved in a civil partnership, formally apply to the courts to say as much, wait the designated 20 weeks and then the divorce papers can be signed without contest. It’s a much more civilised approach that avoids the venting of private grievances for legal ends.
However, while it has become much easier to obtain a divorce, the legal act of separation is not the be all and end all when it comes to a couple going their separate ways. We’ve already mentioned child custody, should the pair have children. Another issue that cannot be overlooked is untangling two people’s finances.
How financial settlements in divorce work
The aim of a financial settlement in divorce is to ensure a fair and equitable division of assets and liabilities between separating spouses. Note that ‘fair and equitable’ does not necessarily mean equal. When negotiating a settlement, factors such as income disparity and child custody arrangements will be considered, often leading to assets being shared in a proportion other than 50/50, and/or one party continuing to contribute financially to the other, at least for a specified period of time.
During divorce proceedings, both parties are required to provide full and accurate disclosure of all income, assets, debts, and any other financial information deemed relevant. There is sometimes a temptation from one partner or the other to provide misleading information in an attempt to keep certain assets from the other party. But this is strongly advised against as it can have negative legal consequences.
Once disclosure is made, the objective is to divide so-called marital assets. Marital assets are any property, investments, savings, pensions, businesses, and personal belongings acquired during the marriage. It doesn’t matter whose name things like property, bank accounts or investments are in – legally, if they were acquired during the course of marriage or a civil partnership, or even during a period of co-habiting beforehand, they count as belonging to both partners.
Not all financial settlements in divorce cases need to be determined by the courts. In fact, if the separating couple cannot come to an agreement between themselves, they are encouraged to go through a mediation service. Only once it becomes clear that the parties cannot come to terms themselves will the courts step in to make a judgment.
In cases where one half of the couple financially supports the other, or earns considerably more than their spouse, the courts may make an order for spousal maintenance to be paid. This is a regular payment owed by the ‘better off’ party to the other once divorce is finalised. The test for spousal maintenance is whether one party is unable to support themselves financially following divorce, and whether that is because of decisions taken by the couple while married (such as one spouse not working so they can look after children, for example).
Spousal maintenance awards are often made in lieu of child custody rulings and the child maintenance settlements that go with them. They may be made subject to certain conditions (such as the recipient finding employment or remarrying), or be granted for a fixed length of time.
As well as dividing assets and deciding on any applicable maintenance payments, another side to post-divorce financial arrangements is sorting out any debts or liabilities accrued as a couple. This includes things like mortgages, loans, credit card debts, finance repayments and more. As with assets, responsibility for debts is shared between both parties, weighted towards whoever has the higher income or is in the better financial position.
Financial settlements in divorce can significantly impact the future stability and well-being of both parties involved. It is crucial to approach this process with careful consideration, openness, and the support of legal professionals to achieve a fair and sustainable outcome.
