If you are currently going through a divorce or you are planning to divorce your spouse, you may not be aware that any agreement reached between you and your ex-partner regarding the financial matters is not legally binding unless it is approved by the court.
At VM Family Law, our specialist divorce solicitors can help you and your partner reach an amicable financial settlement, ensuring you are protected immediately after the divorce and in the future too.
What is a financial settlement in divorce?
A financial settlement in divorce is a legally binding agreement that outlines how finances, assets, debts and other financial responsibilities will be split post-separation.
The settlement should take into account the following factors:
- The needs of any dependent children
- The income, earning capacity and property of each party
- The financial needs of each party
- The standard of living enjoyed during the marriage
- The age and health of each party and the length of the marriage
- The contributions each party has made to the marriage and in certain circumstances the conduct of each party
- The value of any benefits lost upon divorce, such as pensions
Can you get divorced without a financial settlement?
Yes, in England & Wales it is possible to get divorced without a financial settlement and this is sometimes referred to as a ‘DIY divorce’.
However, it is important to remember the implications that come with not putting a financial settlement in place. After the Final Divorce Order is issued, any financial ties to your ex-spouse are not automatically severed, meaning either party could make a claim against the other in the future unless a financial settlement order is in place.
Equally, if you remarry and a financial order is not in place from your previous marriage, you may lose the right to make any financial claims against your ex-spouse.
Wyatt v Vince
One of the landmark cases which serves as an example of the risks associated with not getting a financial order is the case of Wyatt v Vince. Both parties had very modest assets at the time of the divorce but a financial settlement was not agreed upon.
After the divorce, the husband made £57 million from his green energy company. Since no financial settlement was put in place, the Supreme Court allowed the wife to make an application to pursue a financial remedy order 18 years after the Final Divorce Order was granted. This resulted in the wife receiving £1.9 million.
This case highlights the importance of having a financial order in place at the time of divorce in order to prevent financial claims being made in the future, even years after the divorce has concluded.
What are the risks of divorcing without a financial settlement?
Many couples look towards a DIY divorce thinking it will be the cheapest way to get divorced in England and Wales.
However, the dangers of getting divorced without a financial settlement can cause serious financial repercussions later in life if you don’t understand the process or deal with your finances properly.
The main risks you can expect to see if you divorce without a financial settlement include:
- Risk of financial loss
- No Legally binding decision on financial claims
- Risk of conflict
- A lack of legal guidance
Risk of financial loss
One of the biggest risks of not getting a financial settlement in place is the financial loss that may be associated with it.
Without a thorough understanding of your financial situation, your assets may not be divided correctly or you may end up not considering all the assets as part of any settlement, such as a division of the pension funds.
No Legally binding decisions
If you do not obtain a financial court order, then it is possible that future assets and earnings could be claimed by your ex-spouse if the financial ties were not completely cut during the divorce.
Risk of conflict
Unresolved financial issues can be a common source of conflict during and after a divorce and if financial matters are not properly addressed in the divorce process, disputes can emerge.
This conflict can be hard to address and may lead to expensive legal battles in court particularly if circumstances have significantly changed since the divorce.
Lack of legal guidance
Potentially the biggest risk of going through a divorce without a financial settlement is that you won’t have the advice and professional guidance from a divorce solicitor.
Financial matters in divorce can be complex, especially if they involve issues such as property division, business assets, pensions and spousal maintenance. Reaching a fair financial settlement can be difficult and without the help of a specialist, you may end up overlooking significant aspects which can lead to an unfair division of assets.
Not getting the support or advice you need for a financial settlement can leave you in the dark for a number of scenarios, including:
- If your ex-spouse has not disclosed their assets
- If your ex-spouse breaches your agreements
- The judge rejects your division of finances and assets
It is therefore always advisable to seek expert legal advice at the time of separation and divorce.