Why Do I Need a Financial Court Order?

If you are getting divorced, there are reasons why you need a financial court order, regardless of your current financial circumstances.

In this blog, our divorce solicitors explain why you need a financial order, the types of court orders and how to obtain one.

 For expert family law advice, call our team of specialist divorce lawyers or complete our online enquiry form.

Does a divorce end financial ties between a husband and wife?

Initiating divorce proceedings does not sever the financial ties between spouses. When you secure a final divorce order, the marriage is legally at an end, but former spouses can apply for a financial court order.

There is no time limit to make a financial claim. That’s why you need a financial court order if you don’t want to risk a financial application years after your separation.

The consequences of divorcing without a financial court order

Getting divorced without a financial court order increases the risk of future complicated court proceedings to determine the value of assets at the date of separation and to argue about the impact of delay on the size of the financial award.

If you divorce without a financial court order, your former spouse could claim a share of your assets even if they bring their claim 5,10 or 20 years after the separation.

If your assets could increase in value, it is in your interests to ask the court to make a financial court order when you divorce.

Assets that may substantially increase in value include:

1. Pensions, especially if you continue to make pension contributions.
2. Shares in a family business.
3. Equity in the family home or other property.

These assets can be considered by the court even if they are owned in one spouse’s sole name.

Although the court considers delay when determining what constitutes a fair financial settlement, it also takes into account the individual’s needs.

If there is a small amount of equity in the family home at the date of separation, and you have a pension with a nominal value, that may not be the case in ten years. Alternatively, your former spouse may have had a well-paid job at the date of separation, but five years later, is unable to work due to ill health.

Do separation agreements end financial ties between husband and wife?

Some couples sign a separation agreement when they split up. The agreement may or may not end financial ties – it depends on what was negotiated at the time of separation.

Family lawyers always recommend that a separation agreement is converted into a binding financial consent order. This can be achieved through a consent application. There is no need to attend a court hearing to obtain a consent order.

Does a prenuptial agreement stop financial ties between husband and wife?

If you signed a prenuptial agreement before your marriage, or a postnuptial agreement after your marriage, you may think you don’t need a financial consent order because your family agreement prevents or limits financial claims. You still need a financial consent order, even if you have an existing family agreement in place.

A prenuptial or postnuptial agreement is not legally binding in the UK. It can carry significant weight if safeguards were put in place when it was prepared, and it meets the reasonable needs of your spouse.

Ideally, a spouse will agree to convert the terms of the agreement into a binding financial consent order. If they won’t do that, it is better to ask the court to make a financial court order in the same terms as the prenuptial or postnuptial agreement, rather than wait and face a financial application by your former spouse at a date chosen by them. For example, when the value of your investments or the shares in a family business has quadrupled in value in ten years.

Does death end financial ties between a former husband and wife?

The death of a former spouse does not end potential financial claims unless there is a financial court order that says explicitly that all claims are over. Without this type of order, a surviving former spouse can claim a share of the deceased spouse’s estate. This can be complicated and awkward in situations where the deceased spouse had children or had remarried.

When you separate or divorce, you also need to review the provisions in your Will and take advice from a Will solicitor on how to avoid a claim against your estate.

Does a financial consent order end financial ties between a husband and wife?

Whether a financial consent order ends financial ties and stops future financial claims by an ex-husband or wife depends on its contents.

There are three types of financial consent orders:

1. Clean break – ending financial ties and claims.
2. Deferred clean break – ending financial ties at a specified future date.
3. Non-clean break.

You may question why you should accept a financial consent order that only gives you a deferred clean break or no clean break.

Your divorce solicitors will negotiate the best financial settlement possible for you. In your situation, that may involve you paying or receiving spousal maintenance for life or on a time-limited basis.

Lawyers and courts always strive to achieve a clean break to provide finality and avoid further court proceedings to increase or terminate spousal maintenance or to capitalise spousal maintenance. This may not be possible where there is a significant income disparity between the husband and wife, justifying the payment of spousal maintenance, but with limited equity in the family home, nominal savings, or small pension funds. Where there are substantial family assets, the spouse with the reduced income can accept more of the capital assets (such as the equity in the family home) in consideration for giving up spousal maintenance claims and agreeing to a financial clean break order.

What is a clean break financial order?

A full clean break financial court order prevents all future financial claims.

A clean break means there is no risk that a former spouse will ask a family judge for more because your financial situation has improved unexpectedly or theirs has worsened. The only exception to this rule is if the financial court order was made without providing complete and frank financial disclosure. For example, saying your business was worth 3 million when you had received an offer for 30 million.

In some family situations, it isn’t possible to end financial ties either immediately or in the long term. For example:

1. To provide a home for the children, the family home will remain in joint names until the children have finished school or reached the age of 18. Financial ties will be severed when the family home is sold.
2. If there was a long marriage with substantial income disparity and insufficient capital to buy off the spousal maintenance claim, spousal maintenance may be ordered for the life of the receiving ex-spouse or until their remarriage.

What is a deferred clean break financial order?

A deferred capital clean break ends financial claims when an event occurs, such as the sale of the jointly owned family home.

A deferred income clean break provides an immediate capital clean break, so a spouse cannot request additional funds, such as money from the family home or a larger percentage of a pension. However, the order maintains income ties until, for example, spousal maintenance payments cease. The court order could stipulate that spousal maintenance payments will cease after three years, with the clean break taking effect automatically upon completion of this period, as the court ruled that the spouse receiving spousal maintenance is not entitled to apply for an extension of the maintenance period.

Is a financial consent order worthwhile if it does not contain a clean break?

It may be impossible to obtain a clean break financial consent order due to your personal or financial circumstances.

A financial consent order without an immediate clean break leaves you at risk of further court proceedings. For example, an application to increase spousal maintenance or to capitalise the spousal maintenance payments. However, if you do not have a financial court order, you are at risk of your spouse asking for an order that they get a share of your capital assets. These could include the equity in the property you own, shares in a listed company, your family business, or your pension.

Therefore, whilst a deferred clean break financial consent order or a non-clean break financial consent order is not ideal, it is infinitely better than having no financial order.

How to end financial ties with an ex-husband or wife

To end financial ties with a former spouse, you need a clean break financial court order. If you cannot achieve this, it is still preferable to obtain a financial court order, even if it leaves open the potential for an ex-spouse to make a further court application. Take the example of a restaurant diner. Without a financial court order, the diner can request a three-course meal. With a non-clean break order, the diner may be limited to ordering dessert or after-dinner drinks.

How to obtain a financial court order

Most financial court orders are obtained by agreement. The court approves a draft order submitted by family law solicitors. There is no need to attend a court hearing.

There are several ways you can reach a financial settlement, including:

1. Solicitor negotiations.
2. One lawyer divorce.
3. Family mediation.
4. Family arbitration.

If you cannot reach an agreement, either of you can apply to the court for a financial court order. The court will order financial disclosure, and after a series of court hearings, it will hear evidence and make a financial court order to divide the assets.

Our divorce solicitors can help you obtain a no-fault divorce and reach an agreed financial settlement or convert an agreement reached in family mediation into a binding court order.

If you can’t reach an agreement, our financial lawyers can represent you in a financial application to help you achieve a financial court order that meets your needs.

For expert family law advice, call our team of specialist divorce lawyers or complete our online enquiry form.