Going through a divorce is a challenging experience, and along with the emotional turmoil, there are also practical matters to deal with. One of the most important aspects of any divorce is sorting out the financial arrangements. A financial order is a key part of this process, but it’s not always easy to understand. If you are in the process of getting a divorce, you may be wondering what a financial order is, why you need one, and what types of financial orders are available. In this article, we will break down everything you need to know about financial orders in divorce in simple, easy-to-understand language.
What is a Financial Order?
A financial order is a legal document issued by the court that outlines how the financial matters between you and your ex-spouse will be settled. It covers the division of assets, financial support, and any other financial issues that arise during the divorce process. A financial order is important because it legally finalises the financial aspects of your divorce, ensuring that both parties are clear on their rights and responsibilities.
When you divorce, the decree absolute marks the end of your marriage. However, this doesn’t mean your financial obligations to each other are automatically ended. That’s why a financial order is necessary. Without one, you and your ex-spouse may still be able to make future financial claims against each other, even years down the line. A financial order ensures that both of you are protected from any future financial claims, giving you the peace of mind that everything is settled.
Why Do You Need a Financial Order?
You might wonder, why do you need a financial order if you and your ex-spouse have already agreed on how to divide your assets? The answer is simple: A verbal or informal agreement is not enough. Even if you both agree on how to divide your property, pension, or maintenance payments, it’s crucial to have this agreement made legally binding through a financial order.
A financial order does several important things:
- Legal Finality: Once approved by the court, a financial order is legally binding, meaning neither you nor your ex-spouse can change the terms later on unless both parties agree. It provides clarity and peace of mind that everything has been legally settled.
- Protection from Future Claims: Without a financial order, either party could potentially make a financial claim against the other in the future. A financial order ensures that your financial relationship with your ex-spouse is severed, so neither of you can ask for more money or assets down the line.
- Clear Division of Assets: The order ensures that assets such as the family home, pensions, savings, and other financial matters are divided fairly and according to what has been agreed or decided by the court.
Types of Financial Orders in Divorce
There are several different types of financial orders, and the one that’s right for you will depend on your circumstances. It’s important to understand the different options available so you can discuss them with your solicitor and determine what best suits your needs. Let’s take a look at the most common types of financial orders in divorce:
Pension Sharing Order
A pension sharing order is used when one spouse is entitled to a share of the other spouse’s pension. This is a common issue in divorce settlements, especially if one party has a significantly higher pension entitlement than the other. A pension sharing order will outline what percentage of the pension should be transferred to the other spouse.
For example, if you have a pension worth £100,000 and your spouse is entitled to 40%, the order would specify that £40,000 worth of pension rights will be transferred to your ex-spouse’s pension fund.
It’s important to seek expert advice about pensions during divorce, as there can be complex factors involved, such as tax implications and the value of different types of pensions.
Property Adjustment Order
A property adjustment order deals with the division of property, which could include the family home, other properties, or any assets such as cars or valuable items. This type of order can specify whether the property will be sold, transferred, or retained by one party.
For example, if you and your ex-spouse agree to sell the family home and divide the proceeds, a property adjustment order would formalise this agreement. Alternatively, if one party will remain in the home, the order could specify how much the other party will receive as their share.
Property adjustment orders are essential for ensuring that assets are divided in a fair and legal manner, providing clarity for both parties.
Maintenance Order
In some divorces, one spouse may be required to make ongoing payments to the other spouse for financial support. This is known as a maintenance order. Maintenance orders are typically used when one spouse has been financially dependent on the other during the marriage and needs continued support after the divorce.
Maintenance payments can be made on a temporary or permanent basis, depending on the circumstances. The court will consider factors such as the length of the marriage, the earning capacity of both parties, and the financial needs of the spouse requesting maintenance.
In some cases, maintenance may be paid for a specific period, such as until the receiving spouse can become financially independent, or it may continue until one of the parties dies, remarries, or enters into a civil partnership.
Lump Sum Order
A lump sum order requires one spouse to pay a one-off lump sum of money to the other spouse. This is often used when there is a large asset (such as the family home or savings) that needs to be divided but does not warrant a property adjustment order. Instead, one party may be ordered to pay a lump sum in cash or in installments to the other.
For example, if the family home is sold and the proceeds are insufficient to divide equally, a lump sum order may be made to ensure both parties receive a fair share.
Clean Break Order
A clean break order is an order that completely severs the financial ties between the divorcing couple. This means that neither party will have any future claims against the other in terms of money, assets, or maintenance. A clean break is often sought when both parties are financially independent and there are no ongoing financial needs.
It’s important to note that a clean break order can only be achieved if both parties agree to it. If one party is entitled to ongoing spousal maintenance, then a clean break will not be possible.
How Are Financial Orders Made?
In most cases, financial orders are made by agreement between the parties. This is known as a financial consent order. Once an agreement is reached, it is submitted to the court for approval. The court will then check that the agreement is fair and reasonable and ensure that it meets the needs of both parties.
If an agreement cannot be reached, the court will make a decision based on the evidence presented. The court will consider various factors, such as the financial needs and resources of both parties, the length of the marriage, and the welfare of any children involved.
Do You Need a Solicitor for a Financial Order?
It is highly recommended that you seek legal advice when applying for a financial order. A solicitor will help ensure that your financial settlement is fair, that your rights are protected, and that the order is legally binding. A solicitor can also help you navigate the court process and represent your interests in court if necessary.
Conclusion
In conclusion, a financial order is an essential part of the divorce process. It provides clarity and finality in financial matters, protecting both parties from future claims and ensuring that assets are divided fairly. Whether you’re negotiating a pension share, maintenance payments, or the sale of the family home, a financial order will formalise and protect your financial arrangements. By seeking expert advice and ensuring your financial order is legally binding, you can move on with your life knowing that your financial matters are settled.
