Emily Cannell, partner and head of family at Mincoffs Solicitors, advises divorcing couples to think about their finances sooner rather than later.
A relationship breakdown can be a distressing time and therefore it is no surprise that the practical, financial implications of a divorce or dissolution of a civil partnership may not be at the forefront of separating couples’ minds.
Because of this, many separate without knowing what steps that they need to take to cut financial ties with their ex-spouse.
According to the latest family court statistics published by the Ministry of Justice, there were 28,865 divorce applications made under the new ‘no fault’ divorce process in the first quarter of the year.
While there were also 27,465 final orders and decree absolutes granted, only 11,432 financial remedy applications – which resolve finances on separation – were made during the same time.
This relatively low number may be because people are not aware of the potential implications if the finances are left unresolved.
The relationship between divorce and finances
It is a common misconception that divorce or dissolution not only ends the legal relationship between separated couples, but also severs any financial ties between them.
A marriage or civil partnership is legally dissolved when the court grants a final order – or decree absolute if the application was made under the old, fault-based divorce law. Finances on separation must be considered as a separate issue from the divorce proceedings.
Even if parties are legally divorced, if the finances have been left unresolved then financial claims against each other remain open. As there is generally no time limit to making a claim for financial provision from an ex-spouse, claims can be made years after a divorce has concluded.
For those who felt that matters had been settled and finalised at the time, this can come as a shock.
How do I formalise a financial agreement?
The only way to formally sever future financial ties from an ex-spouse on a legally binding basis is to obtain a consent order from the court, which records the terms of an agreement that has been reached.
Once a consent order has been drafted, the order must be filed with the court, along with a document which summarises both parties’ financial positions. A judge will review the consent order and will approve it if they are satisfied that the agreement is within the boundaries of a fair and reasonable settlement. The order is then ‘sealed’ so that it becomes a legally binding document.
Until then, it remains open to either party to make a financial claim against the other in the future, even if their divorce has been concluded for some time.
It is therefore advised that a consent order be drawn up for all divorcing couples, regardless of whether there are limited matrimonial assets at the time of separation, or if the divorce is amicable and an agreement has been reached informally.
When should I start thinking about the finances?
There is no set rule about when separating couples should start considering how they want to deal with their finances, however we would advise that it is considered sooner rather than later.
An application for a consent order can only be made once the conditional order (or decree nisi, under the old law) stage of divorce proceedings has been reached.
Under the ‘no fault’ process, once a divorce application has been made there is a 20 week ‘reflection’ period for spouses to consider their decision. If the parties still wish to proceed, the court can then grant their conditional order or decree nisi. It is only at this point that an application for a consent order can be made.
Separating couples must therefore remember that a divorce only legally ends the marriage and, while the two are linked, finalising the finances is an entirely different matter.
For confidential, trusted advice about settling finances during a divorce, contact Emily Cannell on ecannell@mincoffs.co.uk, or visit www.mincoffs.co.uk/services/family-law