Getting a divorce can be a time-consuming and emotionally draining experience, with many twists and turns along the way. It involves deciding custody arrangements, spousal support, and child maintenance. One of the most challenging parts is reaching a financial settlement. Therefore, it’s important to understand what you’re entitled to in a divorce settlement. This helps you navigate the divorce without stress and ensures a fair outcome.
In this article, we’ll address:
The legal aspects of divorce settlements, including financial assets, property division, child maintenance, and spousal support.
What you’re entitled to in a divorce settlement
The factors considered in a divorce settlement
The process of reaching a divorce settlement and the challenges involved.
The best practices for reaching a fair settlement.
Legal Framework for Divorce Settlements in the UK
Divorce settlement processes in the UK are governed by a well-established legal framework. At its core is the Matrimonial Causes Act 1973, which serves as a guide for divorce settlements in the UK. This law also ensures that financial settlements in divorce are fair and just by considering factors such as the parties' resources and child-care responsibilities.
No-Fault Divorce and its Impact
Initially, divorce processes in the UK required couples to assign blame for the divorce or wait for long periods before starting the divorce proceedings. This often led to increased tension in the home, which was even more toxic with the children involved. But this all changed when the concept of no-fault divorce was introduced in 2022. This is a significant advancement that has helped to reduce conflict and speed up the divorce process. It focuses more on the children’s welfare and constructive discussions rather than assigning blame. However, this doesn’t change the rules on financial settlements contained in the Matrimonial Causes Act, as the principle of fairness still applies.
What Am I Entitled to in a Divorce Settlement?
There’s no fixed answer to this question because each divorce case is unique. Courts are also allowed to exercise much discretion in this aspect. Despite this, the following are some of the assets you’re naturally entitled to in a divorce settlement:
Division of Marital Assets: There’s no specific rule that dictates the percentage of marital assets you’re entitled to. In many cases, assets are split 50/50, but this is not guaranteed, and it depends on the specific circumstances of the union. The court often aims for a fair division based on the factors outlined in the Matrimonial Causes Act. Marital assets that are typically divided during a divorce include the family home, savings, and investments.
Pensions: Pensions are also considered in divorce settlements because they are financial assets that have accumulated over time. However, distributing a pension between spouses can be complex, and the court usually handles it through two major methods. They either award a portion of one or both pensions to the parties (pension sharing) or offset the pension value against other assets (pension offsetting).
Spousal Maintenance: Spousal maintenance may be awarded to one spouse, particularly if there’s a significant difference in income between the parties. While deciding on spousal maintenance, the court considers the needs of the lower earner and the ability of the higher earner. The ultimate goal is to provide financial support until the receiving spouse becomes financially independent.
Factors That Affect Divorce Settlements
The Matrimonial Causes Act states certain factors that affect divorce settlements. These include:
Length of Marriage: In longer marriages, the court is more likely to split the assets equally between the spouses to recognise their contribution to the marriage over time. On the other hand, shorter marriages may result in a less equal split, with the court considering the spouse’s financial contributions before and after the marriage.
Income and Earning Potential: The court also considers each party’s income and earning potential, both current and future. This includes any expected career advancements that could increase their earning potential. Therefore, the spouse with the lower earning potential will naturally be entitled to a larger share of the assets or spousal maintenance.
Contributions to the Marriage: Both financial and non-financial contributions are considered, especially when deciding on maintenance payments. These contributions cover financial support, such as monthly allowances, and non-financial contributions, such as home and child care.
Children’s Needs: When children are involved, their needs become one of the priorities in a divorce settlement. The court ensures that the children are properly cared for in terms of housing, education, and financial security. The court might even consider making adjustments by providing for child maintenance when dividing assets.
What Is Not Considered in a Divorce Settlement?
Certain factors don’t affect the outcome of a divorce settlement. They include:
Non-Marital Assets: These include assets that were acquired before or after the marriage. They are usually not considered part of the marital pot unless they have been mingled with marital assets. For example, if someone gets an inheritance or monetary gift before marriage but uses it during the marriage to buy a family home, that item would be regarded as a marital asset.
Conduct of Either Party: The courts also don’t consider the parties' conduct when determining financial settlements in a divorce, except if it has a significant financial impact on the marriage. For example, if one spouse spends excessively on an affair, the court might consider that conduct.
Process for Reaching a Divorce Settlement
A divorce settlement involves a three-step process to reach a favourable outcome for both parties. This process involves:
Mediation: The first step is to explore mediation. This involves a neutral third party that helps the parties reach an agreement that benefits both of them. Mediation allows couples to avoid the harshness and lengthy nature of court battles. It’s also less expensive and gives the parties more control over the outcome of the settlement.
Court-Ordered Settlement: If mediation or negotiation fails, the court will have to step in to determine the financial settlement. But keep in mind that this would be a time-consuming and costly process.
Consent Orders: These are records of any financial settlement agreed upon by the couple through mediation. Once a consent order has been approved by the court, its terms are legally binding on both parties. This prevents the parties from making any additional financial claims in the future.
Challenges in Divorce Settlements
With emotions running high and the issues surrounding the division of assets, divorce settlements come with their trail of challenges. Here are some of the common ones:
Disagreements Over Valuations: One of the greatest challenges you might face in a divorce settlement is disagreements on the value of certain marital assets. These disagreements often arise because of the difficulties in determining the precise value of some assets or the emotional value a party may have placed on an asset.
Hidden Assets: Sometimes, a party may try to hide assets to avoid dividing them with their spouse. This is usually done by transferring the asset to a party or having offshore accounts and hidden investments. Some spouses who are business owners also tend to manipulate their figures to make it look like they earn less than what they’ve disclosed. If you’re on the receiving end of this, you can apply to the court for a full disclosure.
Refusal to Pay Maintenance: Court-ordered maintenance is a common bone of contention between both parties. A spouse could refuse to pay spousal maintenance due to financial difficulties or an outright desire to not support the other spouse. It’s also difficult to enforce payment, especially if the person paying is in a different jurisdiction.
Best Practices for a Fair Settlement
To get a fair and equitable outcome from a divorce settlement, here are some practices to follow:
Full Disclosure of Assets: Transparency is a vital key to a fair settlement. While hiding your assets might seem like a good way to outsmart the other party, it could lead to legal consequences down the line. Additionally, full disclosure allows the settlement process to go smoothly without any delays.
Work with a Financial Advisor: One of the core aspects of a divorce settlement is the division of assets. This aspect often poses a lot of challenges because of the difficulties in determining the value of assets. Consulting a financial advisor can prove helpful in valuing your assets and determining the tax implications involved. Furthermore, financial advisors can help you understand the long-term impact of any settlement, particularly in terms of pensions and investments.
Plan for the Future: A divorce settlement should not only address immediate needs. It should also consider how the settlement will affect each party’s future financial stability. Both parties also need to consider their children’s future needs and have a clear plan for their retirement funds.
Legal and Regulatory Considerations
Every divorce settlement is required to comply with some basic principles in UK family law. One such principle is the principle of fairness. A divorce settlement should always be fair to both parties while considering their financial needs and contributions to the marriage. Furthermore, if children are involved, the law prioritises their welfare.
Although it’s easier to settle out of court, there are certain situations where court involvement might be necessary. These include complex cases or when one party refuses to negotiate, as seen in a contested divorce.
It’s also advisable to consult a family law solicitor to ensure that the settlement process is handled correctly and that all legal rights are protected. A solicitor can also help to draft and review agreements in line with UK family laws.
FAQs
What am I entitled to in a divorce settlement?
There’s no fixed answer for this, as the court usually treats each divorce settlement on a case-by-case basis. Notwithstanding, in a divorce settlement, you’re naturally entitled to a division of marital assets, pensions, and spousal maintenance if needed.
How are assets divided in a UK divorce?
In the UK, assets are usually divided based on the principle of fairness rather than a 50/50 split. In following this principle, the court considers factors such as the length of the marriage, the children’s needs, and the parties’ contribution to the marriage.
Will I receive spousal maintenance?
Whether you’ll receive spousal maintenance depends on whether you require maintenance payments to meet your ongoing financial needs. The court also assesses the ability of the higher earner to pay maintenance by considering their income, financial responsibilities, and lifestyle.
How are pensions split during a divorce?
Pensions are split in two major ways during a divorce. First, a portion of one spouse’s pension is transferred to the other, also known as (pension sharing). Second, the value of the pension is offset against other assets (pension offsetting).
What if my spouse hides assets during the settlement process?
If a spouse hides assets during the financial settlement process, you can apply to the court for a full financial disclosure. If the assets are deliberately concealed, the court can impose penalties, modify the settlement to reflect the current value of the assets, or reopen the case.
Conclusion
Divorce settlements can be quite challenging, but understanding your legal rights will help you reach a fair and equitable financial settlement in your divorce. Presently, the Matrimonial Causes Act serves as a guide for divorce settlements in the UK. It provides for the principle of fairness which the courts must apply when deciding a divorce settlement.
This principle requires them to consider factors such as the length of marriage, income and earning potential, and children’s needs. However, this law doesn’t specify what you’re entitled to in a divorce settlement. Notwithstanding, you’re naturally entitled to a division of the marital assets, pensions, and spousal maintenance, if necessary.
If you need professional help with your divorce settlement, Lawhive is at your service. Our expert divorce solicitors provide advice and support to ensure your divorce settlement is fair and legally sound. Get a free legal assessment today.