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Can we agree how to split our finances without going to court?

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Divorcing couples can, and often do, reach a financial settlement without going to court. In fact, this is encouraged as it can help to minimise the legal fees incurred by both sides. But how do you go about splitting your finances without involving the court? This article aims to set out the various methods and options on offer.

Is a financial agreement possible?

It is important to establish at an early stage whether you can reach an agreement without resorting to court action. If the relationship between you is damaged such that you cannot trust your ex to be fair and open about their finances, or you are emerging from a coercive or controlling marriage, direct negotiation may not be suitable for you. Particularly if your ex has been in full control of the purse strings and you are in the dark about your financial position.

If direct discussions are not an option or you need outside help, there are other methods for trying to reach a financial settlement, such as:

  • Alternative Dispute Resolution (ADR) – this involves hiring a specialist family lawyer to act as a “judge” for the day to hear evidence from both sides and then provide an indication of the likely outcome of the case if it were to proceed to court.
  • Mediation – this is the most common form of dispute resolution during divorce and is a way of sorting out the differences between the parties with the help of a fully trained independent third party.
  • Collaborative law – under this process, each person appoints their own collaboratively trained lawyer who meets together to work things out face-to-face. Both parties have their lawyer by their side throughout the process and an agreement is signed committing the parties to trying to resolve the issues without going to court. There is also a bar on your collaborative lawyer representing you in court if the collaborative process breaks down.
  • Solicitor led negotiations – this process enables your solicitor to have discussions on your behalf, make proposals, negotiate, and try to resolve matters with your personal aims and wishes in mind.
  • One Couple, One Lawyer – this service encourages separating couples to work together to decide on how they will move forward with their lives after their divorce. By appointing a joint solicitor, parties are empowered to reach their own agreement.

How is a divorce settlement arrived at?

There are various ways to negotiate an amicable settlement with your spouse that you are both happy to accept. Whether you do this with the help of your own solicitor, a jointly appointed legal representative, or via some form of mediation or arbitration, all routes to settlement require both parties to provide full and frank disclosure of their financial circumstances.

This is usually achieved by both parties completing a Form E financial statement. And is a comprehensive document covering things such as income, assets over £500 (both jointly and individually owned items), pensions, debts, as well as financial needs and obligations. A valuation of the family home and any other property is also required, alongside evidence such as bank statements, which each party’s solicitor will forensically examine. If any questions arise from this process, these must be asked and answered by the respective parties or their solicitor, and this forms the basis of negotiations to take place.

The negotiation should also take account of the following factors:

  • Children, their financial needs as well as other factors that may affect their future wellbeing
  • The length of the marriage
  • The current earnings of each party
  • The potential earning capacity of each party in the future
  • The assets of each party, including pensions
  • The standard of living the couple has enjoyed during the marriage
  • The financial contribution that each party has made to the marriage
  • Other non-financial contributions that either party has made to the marriage, such as caring for the children and running the home

If you are not using solicitors, you should try to avoid a situation where you’ve reached an agreement, but find that you cannot implement it. A common example of this is when dealing with the family home, for example, because many couples forget to factor in what will happen to the mortgage, or take into account tax issues.

We’ve reached a financial agreement. Now what?

So your negotiations have been fruitful, and you have managed to agree how to split the matrimonial assets and share liabilities. Now what? The next step is to obtain a court order known as a “consent order” reflecting the terms of your agreement. This makes your agreement legally binding. It is important to understand that a simple agreement without the consent order is not sufficient to bring an end to any future financial claims. Only when there is a court order setting out the agreed terms does it become binding on both parties.

Here, it may be sensible to think about instructing solicitors who will be able to draft a watertight consent order setting out the agreed terms. The document will be drafted, agreed, and signed by each party before being submitted to the court. It is important to understand that the judge will not grant the consent order unless they believe it to be fair. They will assess the fairness of the agreement by reviewing it against a document called a “statement of information” which is submitted alongside the consent order. This is a short document that provides an overview of both parties financial position and their future plans, such as an intention to cohabit or get married.

What are the potential repercussions of not getting a consent order?

Although getting a consent order is not compulsory in a divorce, the benefits in protecting both parties cannot be underestimated. If no consent order is in place, either divorced party could, at any point in the future, claim that the financial split differs from what was actually agreed upon.

This can be particularly problematic where one party comes into a large amount of money, for example, through inheritance or winning the lottery. Without a court registered record, there is a very real risk that an ex-spouse could claim a proportion of those funds, or at best, rack up costly legal fees attempting to contest it.

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