What is a financial order in a divorce?

Divorce is often an emotionally draining experience, but it’s crucial to remember that it’s not just about the end of a relationship. The financial aspect of divorce can be equally complex and overwhelming. At the heart of this financial disentanglement lies the “financial order” – a legally binding agreement that dictates how assets, debts, and income are divided between divorcing spouses.

Understanding and securing a fair financial order is paramount for protecting your financial future, preventing future disputes, and ensuring you receive what you are entitled to. It can determine who keeps the family home, how pensions are divided, whether spousal maintenance is paid, and more. 

At RLK Solicitors, we are an experienced team of family law specialists who understand the intricacies of financial orders and the importance of a fair and equitable settlement. We are dedicated to guiding you through this often-complex process, providing expert advice and representation tailored to your unique circumstances.

What a Financial Order Covers

A financial order is a comprehensive agreement that covers a wide range of financial matters arising from your divorce. It’s designed to provide clarity and security for both parties, outlining how your shared financial life will be divided. Here’s a breakdown of the key areas a financial order typically addresses:

• Division of Property: This includes the family home, any additional properties, investment properties, and other real estate assets. The order will determine who retains ownership, whether a property is to be sold, and how the proceeds are divided.
• Lump-Sum Payments: One party may be required to make a one-off or series of payments to the other as part of the settlement. This can be used to balance the division of assets or address specific financial needs.
• Spousal Maintenance: In some cases, one spouse may be ordered to make regular payments to the other for their financial support. This is often determined by factors such as income disparity, earning capacity, and the length of the marriage.
• Pension Sharing: Pensions are often a significant asset in a marriage. A financial order can specify how pensions are divided, either through sharing or offsetting against other assets.
• Debt Allocation: The order will determine how any outstanding debts, such as mortgages, loans, or credit card debts, are to be divided between the parties.
• Child Maintenance: If you have children, the financial order may include provisions for child maintenance payments. However, child maintenance is often dealt with separately through the Child Maintenance Service or a private agreement.

It’s important to note that not every financial order will cover all these areas. The specific terms of your order will depend on your unique circumstances, the complexity of your finances, and the outcome of negotiations or court proceedings.

Types of Financial Orders

There are two main types of financial orders that can be made in a divorce:

1. Consent Order: This is the most common type of financial order. It’s used when you and your ex-partner are able to reach an agreement on how to divide your assets and finances.  Your solicitors will then draft the agreement into a legal document, which is submitted to the court for approval. Once approved, the consent order becomes legally binding.
2. Financial Remedy Order: If you and your ex-partner are unable to reach an agreement, you can apply to the court for a financial remedy order. This involves financial remedy proceedings, where a judge will make a decision on how your finances should be divided. This process can be more time-consuming and expensive than a consent order, but it provides a solution when negotiations break down.

In both cases, the financial order is legally binding and enforceable by the court. This means that if either party fails to follow the terms of the order, the other party can take legal action to ensure the order is upheld.

How to Get a Financial Order

Obtaining a financial order can be achieved through two primary routes:

1. Agreement through Negotiation

This is the preferred path for most couples, as it allows for greater control and flexibility. The process typically involves:

• Disclosure: Both parties provide full and honest disclosure of their financial information, including assets, income, debts, and liabilities.
• Negotiation: You and your ex-partner (with the assistance of your solicitors) negotiate the terms of the financial settlement. This can involve discussions, mediation, or collaborative law.
• Drafting: Once an agreement is reached, solicitors draft a consent order that reflects the agreed-upon terms.
• Court Approval: The consent order is submitted to the court for approval. The judge will review the order to ensure it’s fair and reasonable before making it legally binding.

RLK Solicitors has extensive experience in guiding clients through this negotiation process, ensuring that your interests are protected and that you achieve a fair and equitable settlement.

2. Court Involvement (Financial Remedy Proceedings)

If you are unable to reach an agreement with your ex-partner, you can apply to the court for a financial remedy order. This involves a more formal legal process, where a judge will make decisions about sharing your finances. The process typically includes:

• Form A: Filing a financial order application (Form A) with the court.
• First Appointment: Attending a preliminary hearing to discuss the issues and set a timetable for the case.
• Financial Dispute Resolution (FDR): A hearing aimed at encouraging settlement through mediation or negotiation.
• Final Hearing: If no agreement is reached, the judge will hear evidence and make a final decision on the financial order.

While court proceedings can be more complex and lengthy, RLK Solicitors can provide expert representation to ensure your voice is heard and your rights are protected. We will work tirelessly to achieve the best possible outcome for you in court.

Why You Need a Financial Order

Securing a financial order is a critical step in the divorce process, and here’s why:

• Legal Protection: A financial order is a legally binding and enforceable document. This means that if either party fails to follow the terms of the order, the other party can take legal action to enforce it. Without a financial order, any agreements you reach with your ex-partner are not legally binding and cannot be enforced by the court.
• Financial Security: A financial order provides financial security and peace of mind by clearly outlining how your assets and finances will be divided. This can help prevent future disputes and ensure that you receive what you are entitled to.
• Closure: Obtaining a financial order allows you to finalise the financial aspect of your divorce, providing closure and allowing you to move forward with your life. It can help to draw a line under the past and prevent lingering financial ties with your ex-partner.
• Protection from Future Claims:  Without a financial order, your ex-partner could potentially make a claim against you in the future, even years after your divorce is finalised. This could be particularly problematic if your financial circumstances change significantly.

A real-world example that highlights the importance of financial orders is the case of Wyatt v Vince. In this case, a woman was awarded a substantial financial settlement from her ex-husband in March of 2015, even though they had divorced many years earlier in October 1992, and he had since become a multi-millionaire. This case demonstrates the importance of having a financial order to protect your financial future and prevent future claims.

When to Apply for a Financial Order

The ideal time to apply for a financial order is during the divorce process itself. This ensures that all aspects of your separation are addressed in a timely and coordinated manner. However, it’s important to note that you cannot apply for a financial order until you have obtained the Decree Nisi (or Conditional Order) in your divorce proceedings. This is the first stage of the divorce process where the court confirms that you have met the legal grounds for divorce.

While it’s possible to apply for a financial order even after your divorce is finalised (Decree Absolute), there are potential consequences for delaying. These can include:

• Loss of Certain Financial Claims: After obtaining the final divorce order (Decree Absolute), certain financial claims may be time-barred or become more difficult to pursue.
• Financial Insecurity: Delaying a financial order leaves you without a legally binding agreement, which can create uncertainty and potential for disputes.
• Tax Implications: The timing of asset transfers can have tax implications, and a financial order can help you manage these effectively.

We recommend addressing financial matters as early as possible in the divorce process. This allows a smoother and more efficient resolution and helps protect your financial interests.

What If you can’t agree?

If you and your ex-partner are unable to reach an agreement on the terms of your financial order, it’s natural to feel stressed and uncertain. However, it’s important to remember you are not alone. Many couples face difficulties reaching a financial settlement during divorce.

In such situations, we can provide expert support and guidance. We will work with you to understand your financial goals and priorities, and we will negotiate on your behalf to achieve the best possible outcome.

If an agreement cannot be reached through negotiation, the matter can be taken to court. The court will then consider various factors, including your income, assets, needs, and contributions to the marriage, to determine a fair and equitable financial settlement.

If you’re considering divorce or need assistance with a financial order, contact RLK Solicitors today for a free initial consultation.