No matter if you're a couple who are divorcing after four years or forty years, the divorce process can be emotionally and financially exhausting.
When considering finances, you must remember there are often several matrimonial assets involved. This is because even after you're legally divorced, you may be subject to a financial claim; therefore, it's crucial to know where you stand and what options are available to you.
At What Stage Should You Consider Finances in a Divorce Proceeding?
Well, if you've already gone through a divorce, or know someone who has, then you may have come across the terms Decree Nisi and Decree Absolute.
Decree nisi: The Decree Nisi is a provisional decree of divorce stating that the court is satisfied that a person has met the legal and procedural requirements to obtain a divorce.
Following the pronouncement of decree nisi, the marriage still exists, and the divorce is not yet finalised.
Decree Absolute: The decree absolute is a legal document confirming that your marriage has officially ended.
While there is no set time to consider financial proceedings during the divorce process, we always encourage financial separation as soon as possible after the decree absolute. Why? Because although the final order ends the marriage, it does not end financial obligations amongst parties.
What Options are Available to Protect Your Finances?
To avoid your ex-partner making financial claims against you in the future (which can get messy – especially if you have assets with a new partner), there are several things you can do.
It is often the case that you and your ex-partner have agreed on how you should divide the marital assets. In situations like this, it may be best to draft a Consent Order.
A Consent Order is a legally binding document which records the financial agreements between married parties. This can include provisions for (inter alia) the matrimonial home, and any other properties, investments, savings and pensions.
The consent order is usually drafted and filed with the court after they've granted the Decree Nisi in divorce proceedings. Once a consent order has been approved and sealed by the court, it is usually tricky to alter. Albeit, if parties are in agreeance that the terms are to be changed, then they may request the court to vary the Consent Order.
Consent Orders can be extremely beneficial amongst couples who are open to an agreement; however, a point to note is that if a Consent Order does not include a clean break, then you may still be pursued for a financial claim in the future.
A Clean Break Divorce
A Clean Break is a small investment that can save significant loss. It is used following divorce proceedings and, in essence, means that each person's financial affairs are separated from the others. Therefore, no party can make a financial claim in the future.
The primary benefit of a Clean Break is that it cuts all financial ties at the end of a marriage. So, even if one party comes into a lot of money in the future, the other party cannot claim from these funds.
Take the extreme example of Nigel Page, a man who won £56 million from The National Lottery. Unfortunately, Nigel hadn't obtained a Clean Break on his divorce previous to his big win and was forced to reach an out-of-court settlement with his ex-wife which saw him pay her £2millon.
We see a similar approach in the US legal system in which Richard Zelasko a man from Michigan, won $80 million while going through divorce proceedings. Despite his wife filing for divorce (a while after they separated), Mr Zelasko was required by the court to give his ex-wife half of his winnings.
From situations like these, we see the huge benefit of having a clean break order. However, we are mindful that a Clean Break is not always appropriate as they do not allow for specific provisions – e.g. spousal maintenance.
When in Doubt, Ask the Court
In an ideal world, parties in all cases can resolve financial affairs amongst themselves, without the need for court intervention – albeit, we know this is not always the case.
When disputes arise, family courts do have the power to grant financial remedies. The court can make provisions for all aspects of finances, including matrimonial assets, periodical payment and maintenance payments for spouses and children. To do so, the courts will require full disclosure and will assess – amongst other things – both parties' assets, liabilities and financial capacity.
While the courts deal with all aspects of finances, you must be mindful that obtaining financial settlements can be a complicated and strenuous process.