posted 22nd September 2023
What Is Taken Into Account in a Divorce Financial Settlement?
People usually want a formula. There isn't one.
A divorce financial settlement depends on the particular circumstances — how long the marriage lasted, what each party contributed, the standard of living during it and what each of them needs going forward. Two couples with identical assets can reach quite different settlements.
The starting point in law
The Matrimonial Causes Act 1973 sets out the factors a court must consider. In practice these are what any settlement is measured against:
- The income, earning capacity, property and other financial resources of each party
- The financial needs, obligations and responsibilities of each party
- The standard of living enjoyed during the marriage
- The ages of both parties and the length of the marriage
- Any physical or mental disability of either party
- The contributions each has made, including looking after the home or caring for the family
- The conduct of either party, where it would be inequitable to disregard it
- The value of any benefit either party loses the chance of acquiring
Where there are children, their welfare comes first.
What gets divided
Matrimonial assets typically include property, savings, pensions, investments and anything else acquired during the marriage, along with the debts.
Pensions are frequently the largest asset after the family home, and frequently the most overlooked.
Spousal maintenance
Maintenance may be payable where one party cannot meet their needs from their own resources. It depends on needs, earning capacity, age, health and the length of the marriage.
The courts encourage financial independence, so maintenance is often for a defined period rather than indefinitely.
Contributions, financial and otherwise
Both are weighed. Earnings count, and so does caring for the family or running the home. The parent who stayed at home is not treated as having contributed less.
Future needs matter too, particularly where earning capacities differ significantly.
Pre-nuptial and post-nuptial agreements
These carry significant weight, although they are not automatically binding. A court is likely to uphold one where it was entered into freely, with full disclosure, and where it still meets both parties' needs at the time of the divorce.
Tax
Transfers between separating couples can carry tax consequences, particularly on property. Worth establishing before terms are agreed rather than afterwards.
What fair means in practice
Fair does not mean an automatic equal split, and it does not mean whichever party feels more wronged gets more. The grounds for the divorce are generally irrelevant to the finances.
What it means is an outcome that meets both parties' needs and that a Judge will approve.
Reaching it without going to court
All of this can be agreed between the parties rather than fought over. Mediation establishes what exists, works through what each party needs and arrives at terms both can accept.
The agreement is then submitted as a consent order, which the court deals with administratively. No hearings, no attendance, no Judge deciding on your behalf.
Get in touch for a free initial consultation.
