A Comprehensive Guide to Financial Issues Connected to Divorce
When divorcing couples separate, very often there are financial issues which need sorting out between them. This can be achieved by the parties discussing arrangements and divisions between themselves or, very often, legal advice and negotiations are necessary and, ultimately, if an agreement cannot be reached, the issue of court proceedings are inevitable.
If the divorcing couple reach an agreement between themselves, this is undoubtedly cheaper, however, how can either party know whether they are receiving what is fair and reasonable settlement given the circumstances of the case?
That said however, the issuing of court proceedings should effectively be a “last resort” when all other avenues have been exhausted.
Often correspondence and negotiations between solicitors firms is a successful way of concluding the settlement. This process involves the collation and exchange of financial evidence (eg, payslips, statements of savings, investments, property, pensions etc) and proposals are then made. Each client has advice on the assets available (and often liabilities) and negotiations and proposals commence.
Another effective way of reaching a conclusion to the financial proceedings is to attend a process known as Mediation. Mediation involves an impartial third person assisting those involved in family breakdown to communicate better with one another and to help them to reach their own agreed and informed decisions about some or all of the issues relating to or arising from the separation or divorce including children, finance or property.
One advantage of reaching an agreement through mediation is that it is almost always considerably cheaper because it does not involve going to court. Another advantage of reaching agreement through mediation is that such agreements usually last as the parties have the opportunity to discuss the issues in dispute and feel they have a direct “input” in the process.
Usually when the parties reach an agreement in mediation, this would be formally agreed into a document that is known as a Memorandum of Understanding prepared by the mediation service provider (the mediator) and subsequently prepared into a document known as a consent order by the parties’ solicitors and filed at court. The consent order being a document that both parties enter into ‘by consent’ and which is filed at court within the divorce proceedings (any time after the first Decree of Divorce, the Decree Nisi is pronounced. The document formalises the agreement and is legally binding once sealed by the court.
If none of the above processes result in a financial agreement being reached between the parties, then formal court proceedings are extremely likely. The numbered chart later in this article shows the actual court process.
It is mandatory that the parties (or at the very least the applicant) attend mediation before an application can be made to court.
The financial application (formerly known as, and often still referred to as, “ancillary relief”, is the process of sorting out the financial issues connected to a divorcing couple via the court.
Throughout the proceedings, the court considers all the circumstances of the case, gives first consideration to the welfare of any children of the family under the age of 18 and, in particular, the court has regard to the following matters:
- The income, earning capacity, property and other financial resources which each spouse has or is likely to have in the foreseeable future including, in the case of earning capacity, any increase in that capacity which it would be, in the opinion of the court, reasonable to expect a person to take steps to acquire.
- The financial needs, obligations and responsibilities which each spouse has or is likely to have in the foreseeable future.
- The standard of living enjoyed by the family before the breakdown of the marriage.
- The ages of each spouse and the duration of the marriage.
- Any physical or mental disability of each spouse.
- The contributions which each spouse has made or is likely to make in the foreseeable future to the welfare of the family, including any contribution by looking after the home or caring for the family.
- The conduct of each spouse, if that conduct is such that it would in the opinion of the court be inequitable to disregard.
- The value to each spouse of any benefit which one spouse because of the divorce will lose the chance of acquiring (most usually pension provision).
The aim of the court is to achieve fairness. Often a key factor is the reasonable needs of yourself and your spouse.
In most cases, the courts no longer have power to make orders for child maintenance except by agreement; an application to the Child Support Agency (or its successor the Child Maintenance Service) has to be made for child maintenance to be assessed.
Both parties have an absolute duty to each other and to the court to disclose fully their financial position so that a proper financial arrangement can be made.
Financial Relief Process
Either party within divorce proceedings can issue an application for financial relief. The procedure is designed so that the court effectively creates a “time-table” but the parties are encouraged throughout the procedure to reach an agreement without reaching a final contested hearing.
The procedure is as follows:
- Issue of application of Form A
- Filing of further documentation
- First appointment
- Financial dispute resolution (FDR) hearing
- Final hearing
Issue of Form A – the application form to court. The court will order the first court appointment in approximately 6 weeks time from the date of filing the form with the court. At the same time the court will direct that various documentation has to be filed with the court and exchanged with the other party (or their legal representatives) by a certain date (prior to the attendance at the first court appointment). These forms are:
- Form E (financial disclosure form)
- Statement of Issue
- Form G
- Form H
Form E – the financial statement. This is to be completed by both parties. This shows the judge and the parties the full extent of the financial circumstances of both parties. Financial evidence (eg bank statements, wage-slips) have to be attached to this form.
Chronology – a form documenting significant dates within the parties’ relationship, eg date of marriage, birth of children and date of separation.
Statement of Issues – a brief statement provided to the judge setting out the main points at issue between the parties.
Questionnaire – A document requiring answers or evidence that have not been covered in the Form E.
Form G – If all the documentation has been provided by both parties this form is filed with the fourt to confirm that the First Appointment can proceed as a FDR.
Form H – A statement providing an estimate of costs by the parties.
Both parties and their legal representatives attend at court. The judge will give further directions on how the case may proceed. The judge may require further information and order that this be obtained and “re-list” the application for a further appointment.
The judge may order that the parties go, or return, to mediation
If all the financial information and documentation is complete the judge will order a FDR hearing be listed.
If a financial settlement can be reached at this stage the judge will make an order.
Financial Dispute Resolution (FDR) Hearing
Both parties and their legal representatives attend at court. This hearing is an informal hearing. It is designed to allow and help the parties to reach an agreement. Provided all the financial information and documentation is complete the judge may be able to indicate the likely settlement ordered at a final hearing.
No less than 7 days before the FDR hearing, the party making the application to court must file with the court details of all offers to settle, proposals and counter-proposals made within the proceedings.
If an agreement between the parties cannot be reached the judge will order that the matter to proceed to a final hearing. The judge at the final hearing will not be the same judge as at the FDR hearing.
Both parties and their legal representatives attend at court.
The judge will consider all the documentation and evidence and will make an order.
At any stage in the above process, prior to the judge hearing evidence and making a final decision, it is possible to make an agreement between the parties.
All orders become enforceable (unless expressly documented) on pronunciation of Decree Absolute.