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What is a financial settlement?

A financial settlement is where the parties have agreed how their assets and liabilities should be divided. A financial settlement could be achieved through negotiations between the parties, through the help of a solicitor, or via mediation through a family mediator, who can assist parties in reaching a financial settlement.. Once a financial settlement has been agreed, a financial consent order and statement of information is prepared and filed with the court, after the pronouncement of decree nisi or the conditional order in the divorce. A judge will then consider the order, to ensure that it is fair and equitable, having regard to the facts of the case.

How is a financial settlement worked out?

Each case is considered on its own facts. Section 25 of the Matrimonial Causes Act 1975 provides a set of statutory criteria for the court to consider, when a financial remedy application or agreed order has been filed.

The Section 25 criteria are as follows:

  • The income, earning capacity, property and other financial resource which each of the parties to the marriage has, or is likely to have in the foreseeable future. This includes, in the case of earning capacity, any increase in that capacity which it would, in the opinion of the court, be reasonable to expect a party to the marriage to take steps to acquire.
  • The financial needs, obligations and responsibilities which each of the parties of the marriage has or is likely to have in the foreseeable future.
  • The standard of living enjoyed by the family before the breakdown of the marriage.
  • The age of each party to the marriage and the duration of the marriage.
  • Any physical or mental disability of either of the parties to the marriage.
  • The contributions which each of the parties has made or is likely in the foreseeable future to make to the welfare of the family, including any contribution by looking after the home or caring for the family.
  • The conduct of each of the parties, whatever the nature of the conduct or whether it occurred during the marriage or after the separation of the parties or the dissolution or annulment of the marriage, if that conduct is such that it would, in the opinion of the court, be inequitable to disregard it.

As well as the statutory criteria, the court takes into consideration previous case law, which would assist the court in ensuring that a fair and equitable order has been agreed.

The starting point of any marriage is one of equality. The court will take into account the Section 25 factors, and the outcome may not be one of equality. The overriding objective is fairness . The court has to consider the housing needs of the parties and any dependent children. This is likely to lead to a departure from equality, where the financial priorities of the parties are different.

What orders can be made?

The four main categories of orders are relating to:

  • Lump sum payments, which include capital payments.
  • Transfer or sale of property or other assets, which may include business assets.
  • Pension-sharing orders.
  • Income claims, known as maintenance.

What if we do not reach an agreement?

If you are unable to reach an agreement directly between yourselves, there are other options. Provided you meet the criteria for mediation, mediation with a family mediator helps to limit costs and allows you both to negotiate a settlement with an independent third party.

If mediation fails, either of you is able to make an application to the court for a financial remedy order. The other alternative is for you to consider a referral for arbitration.

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