If a marriage breaks down and ends in divorce, one of the biggest issues that needs to be resolved is the financial settlement between the separating parties. In England and Wales, financial remedies are the court orders that determine what happens to the financial arrangements between the divorcing spouses. They are designed to ensure that each party is provided for, so that one person is not left destitute whilst the other has all the money and assets, and they can be used to provide ongoing support, if necessary. The financial remedy process is complex, and it is essential that anyone going through a divorce understands what options are available to them.
Understanding Financial Remedies
Under UK law, the court has the authority to make a set of orders designed to achieve a fair financial settlement between divorcing spouses. These are called financial remedies, and they are part of the divorce process. Financial remedies can be used to achieve different objectives in different cases. The court can order the sale of certain property, or its division between the parties; it can award spousal maintenance; it can handle pensions; and it can make numerous other orders. The common factor is that the purpose of financial remedies is to put the parties, and any children of the family, in a financial position after the marriage that is as close as possible to what it would have been had the marriage not come to an end.
Indeed, fairness is usually the starting point for most cases, and many people think that fair means 50/50 (which is not always the case). However, in practice, the court will look at a number of factors when determining what financial remedies should be awarded, such as the length of the marriage, the parties’ needs and contributions, and the welfare of the children.
Types of Financial Remedies
The court has the power to make a range of financial orders during divorce proceedings. These are known as financial remedies.
1. Lump Sum Orders
A lump sum order requires one party to pay the other a specified sum of money. That money might be withdrawn from savings or investments, or the lump sum could be taken from the value of the parties’ house by way of sale. Lump sum orders are commonly used to ensure that the party whose income and capital is lower than that of the other is able to move forward with means sufficient to be independent.
2. Property Adjustment Orders
This is the property adjustment order that determines how the couple’s property will be allocated. This can include, for example, transferring ownership of a property to one spouse or the sale of the property and the division of the proceeds between them. The family home is often the most valuable asset of the marriage and this can be the most important decision as to how it is dealt with.
3. Spousal Maintenance
Periodical payments (or spousal maintenance) may also be ordered for a spouse who requires ongoing support following the divorce. This is normally ordered for a spouse who has lower earning capacity than the other party or who has been financially dependent on the other during the marriage. The court determines the appropriate amount and duration of periodical payments based on needs factors, ability to pay, and the length of time support is needed.
4. Pension Sharing Orders
Pensions are often one of the most important assets in a marriage, in particular if one party has worked to support the other party, who has been looking after a family. A pension sharing order means that the pensions can be shared and either part of one party’s pension can be transferred to the other party, or a portion of the future income from the pension can be ordered to be paid to the other party, so that both parties still have provision for retirement after the divorce.
The Process of Seeking Financial Remedies
Financial remedies commence with full and frank financial disclosure. Both parties must disclose the financial position and providing details of income, assets, debts and pensions. The court needs that information so that it can make a decision on the basis of a clear picture of the couple’s finances.
Full disclosure is made and, once this has been done, the parties can then try to negotiate a financial settlement. In many cases, couples manage to reach a settlement through mediation or negotiation and the issue is resolved without the need to go to court. But if they are unable to do so the court will step in and make an order based on the facts of the case.
The court will consider factors such as the welfare of any children; the standard of living during the marriage; the length of the marriage; the contributions the spouses made to the marriage; the earning capacity of each party; and the age, physical and emotional health of each party.
Factors Influencing Financial Remedies
In fixing the financial remedy, the court will consider the needs of each of the parties, especially those of the financially dependent spouse. The court will also consider the needs of any children and, in any financial case where there are children, the paramount need to safeguard the welfare of those children will require the court to make a decision that secures their best interests.
Other factors are the relative income and property of the two parties, the duration of the marriage, the ages of the parties, any physical or emotional disability or illness that reduces the future earning capacity of the supported party, the parties’ earning capacities, the standard of living established during the marriage, and any other factors the court deems relevant. The contribution of each party to the wellbeing of the family, including homemaking and childcare duties, is also taken into account.
Conclusion
Such remedies are aimed at putting the parties into a position where they can each start a new life independently. This may be achieved by the payment of a lump sum, by the sale of a property with the proceeds divided between the parties, by periodic payments (known as spousal maintenance), or by the division of pensions. Full disclosure is crucial, as is seeking legal advice.
