What Is a Financial Settlement on Divorce?

When a marriage ends, the divorce itself and the division of finances are separate legal matters.

A financial settlement determines how financial arrangements between former spouses will be resolved. It may deal with:

• The family home and other property

• Savings and investments

• Pensions

• Business interests

• Income and earning capacity

• Debts and liabilities

• Spousal maintenance

• Other assets held individually or jointly

There is no fixed formula for dividing finances on divorce in England and Wales. The appropriate outcome will depend on the circumstances of the marriage, the resources available and the present and future needs of each person and any children.

How can a financial settlement be reached?

Some separating couples are able to agree on the division of their finances directly. Others require professional assistance to understand their financial position and negotiate appropriate terms.

Financial settlements may be reached through:

• Direct agreement

• Solicitor-led negotiation

• Mediation

• Arbitration

• Other forms of non-court dispute resolution

• Court proceedings where an agreement cannot be reached

Court proceedings are generally treated as a last resort. Reaching an agreement through negotiation or another non-court process can give both parties greater involvement in the outcome and may reduce delay, cost and conflict.

Does an agreement need court approval?

An agreement reached between former spouses is not automatically legally binding.

The agreed terms will usually need to be recorded in a financial consent order and approved by the court. This can provide certainty about how assets will be divided and whether any future financial claims will remain open.

The next part of this series considers the factors the court takes into account when deciding whether a proposed financial settlement is fair.

Are you trying to resolve financial arrangements following the breakdown of your marriage? Elizabeth Stocker is a consultant solicitor specialising in financial issues arising from divorce. She can explain your options and help you work towards a fair and properly documented settlement. Book an appointment with Elizabeth or complete the enquiry form.