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What is a divorce financial settlement?


Achieving an amicable and fair divorce is dependent on a number of intricate and often complex factors. The division of marital finances can be the catalyst for acrimony during a divorce, but it is important to note that this too can be done fairly and amicably; there are ways to work through any difficulties with the help of your divorce solicitor.

What is a divorce settlement?

Although there are many things to consider once you decide that a divorce is the right option for you, it is likely that finances will be one of your foremost concerns. Matrimonial finances can be divided by agreement, avoiding lengthy and argumentative court proceedings.

A divorce settlement is a legal agreement between spouses as to the division of assets after a divorce and, in some cases, the subsequent ongoing payment of maintenance. Once agreed and ruled upon by the court, the divorce settlement will form the financial terms of the divorce.

What is Form E and is it compulsory in a divorce?

Prior to a settlement, both you and your spouse have a duty to adhere to what is known as ‘full and frank disclosure’ of your individual and joint finances. This is best achieved by completing a document known as Form E and providing supporting documentary evidence of your income, assets and liabilities.

Once complete, Form E will provide a detailed overview of yours and your spouse’s financial circumstances. The Form E will also include details as to your financial needs and the needs of any children within the marriage.

Although Form E is not a compulsory component of every divorce, it is the standard court form used (even where negotiations are being held outside of court proceedings) which  provides clear financial disclosure, putting parties on an even footing.

What are you entitled to in a divorce settlement?

Although there is no definitive answer here, as all divorce settlement cases are unique to each marriage, the process of dividing matrimonial assets is undertaken by reference to according to two main legal principles: the ‘sharing principle’ and the ‘needs principle’.  The starting point is often considered to be an equal division of matrimonial assets (and liabilities).  This is then tempered by individuals’ needs, taking into account the factors set out in Section 25 of the Matrimonial Causes Act 1973, with particular emphasis on the needs of any children.The determination of “entitlement” is therefore subjective and will turn on the individual facts and circumstances of a case.

What are matrimonial assets?

Matrimonial assets (sometimes referred to as ‘marital assets’) are those which have been accrued throughout the duration of the marriage and often include:

  • Property: the family home or investment properties
  • Businesses: as well as any assets owned by the business
  • Pensions and savings
  • Investments and stocks or bonds
  • Vehicles
  • Cash

What are non-matrimonial assets?

A non-matrimonial asset is considered to be anything which was acquired by either you or your spouse before the marriage began or post-separation. Subject to an assessment of the provenance of the asset in question and the key legal principle of ‘need’, it may be possible to ringfence non-matrimonial assets away from a final settlement.

Those individuals or couples who hold considerable assets prior to entering into a new marriage would be advised to speak to a solicitor about a prenuptial agreement. Once drawn up, a prenuptial agreement could  affect the settlement of those assets should the marriage end in divorce and a financial settlement.

Is inheritance considered to be a non-matrimonial asset?

Inheritance received prior to the commencement of a marriage or post separation may be considered a non-matrimonial asset. However, arguments for keeping non-matrimonial assets outside the divorce settlement is very case specific and subject to the ‘needs principle’.

What happens if your former spouse refuses to pay a divorce settlement?

If the divorce settlement has been approved or ordered by the court, its terms can be enforced through the court.

How long does a financial settlement take – is there a time limit on divorce settlement?

There is no specific time limit for concluding financial settlements. Much depends on the cooperation and attitude of the parties and the complexity of the assets.

What happens if you and your spouse are unable to reach a financial settlement?

If you are unable to reach an agreed financial settlement either directly or through solicitors, you should consider Alternative Dispute Resolution (ADR) options. The most common is mediation, which can yield productive results. Ultimately, if you cannot agree, you may need to make an application to the court as a last resort.

How to calculate your divorce settlement entitlement

Although the value of your assets can be calculated without the help of a professional, we would advise that you speak with a divorce solicitor before doing so in order to ensure that everything has been considered. With many marriages spanning through several years, the complexities of the financial ties can lead to important details and relevant legal factors being missed or simply overlooked. However, prior to meeting with a divorce solicitor, it is a good idea to collect as much information about your assets, liabilities and income to aid the process.

Things to consider include:

  • Property: the value of or equity in any properties owned by you and your spouse
  • Mortgages: any outstanding mortgage debt
  • Other debts: these can include anything from credit cards to finance or loan agreements
  • Savings and investments: any sums of money held in investments or savings accounts
  • Business interests: full details of your interests including your company accounts and shareholdings
  • Valuables: if you own any substantial items which could form a part of financial settlement such as jewellery or vehicles, it is a good idea to get these independently valued
  • Pension resources: usually the production in the first instance of a cash equivalent valuation.
  • Income: evidence of your income from all sources

Video transcription

I’m Daniel Sanders and I’m a Partner and Head of the Family team at Steele Raymond.

In a financial settlement which arises on divorce there are lots of factors to take into account. Many people like yourself will be concerned about what’s going to happen with the children, how things are going to be paid for, what will happen to the house, what other resources are there, and what’s gonna happen to them. And right from the beginning, it’s very important to ensure that we have full information and transparency about the financial resources as they are as controlled and in your possession by you and how things look across the financial landscape with your partner or husband or wife. And so that is an assessment that we undertake.

There is something called Full and Frank Disclosure, which requires full information to be provided usually in a form called Form E. And that is the starting point in assembling the relevant information which then in turn enables me to give you advice on what the options might be and what the outcomes might be as they arise in your case. As part of that duty of Full and Frank Disclosure, we’ll be talking about what your needs are in the future and how financial resources might be applied towards meeting your needs.

Contact us

To speak to one of our solicitors or to arrange an initial divorce consultation, please contact Daniel Sanders or a member of our family team on 01202 983999. Alternatively, you can enquire using the form below. 

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