As with many questions in family law, there is no one, simple answer to the question: what am I entitled to in a divorce settlement? Every case is different because the circumstances of each couple is different.
The starting point for dividing assets will normally be a 50/50 split. However, it is important to understand that this is very much a starting point. From there, a variety of things are considered. It is worth bearing in mind that the final settlement amount will need to reflect the length of your marriage, your ability to generate income, as well as your needs now and in the future.
For most couples, there will be several assets to be think about, and how each will be treated will depend on the circumstances. There are options like pension sharing, equity transfer, splitting the proceeds of sale. It is essential to consider all options carefully before making a decision.
Given how complicated a separating couple’s finances can be, it is really important to get expert legal advice at an early stage. Being clear about what you may be entitled to right from the outset can help to ensure you get a fair settlement and minimise the risk of conflict (which often arises where people have unrealistic expectations about what they want to achieve).
If you would like personal advice on reaching a divorce financial settlement, please contact us to arrange a free 30-minute consultation with an expert local family lawyer. You can do so by calling 0800 321 3832 or completing our quick online form.
For more general information on divorce settlements, including what factors may be involved when calculating a settlement, how homes and businesses are treated, and the benefits of working with an experienced divorce lawyer, please read on.
What is a divorce settlement?
‘Divorce settlement’ and ‘divorce financial settlement’ are terms that are sometimes used ambiguously. In general terms, they refer to how financial assets (such as the family home, pensions and savings) are divided in divorce. These matters can be decided amicably between the separating couple and confirmed in a consent order, without the need for any court proceedings. If agreement cannot be reached, either through negotiation, mediation or arbitration, court proceedings may be required. In this case a judge will make the decision on the division of assets and this will be confirmed in a court order.
The court process of dividing assets is sometimes referred to as ‘financial remedy’ proceedings. What to consider before agreeing a divorce settlement
All aspects of your finances will need to be considered before a fair financial settlement can be reached. The first of these is capital assets and debts, which includes properties, shares and savings as well as any debt that you have individually or as a couple.
Secondly, pension valuations must be considered. Pensions are all too often ignored or glossed over but, in many cases, can be the second most valuable asset, after the family home. Income for both parties will also need to be factored in, as will any business interests.
If you are making an application to the court for their judgement on a divorce settlement, you will be asked to complete a Form E financial disclosure document. In fact, this is often the best method of gathering all the information needed to reach a fair settlement and work out what you are entitled to.
What is a fair divorce settlement?
Before agreeing to a divorce settlement, it is essential to get to the real value of all of the assets of both parties. In the past, there has been a huge tendency to underestimate the value of a pension and maybe forget the value of a house must be offset against any outstanding mortgage commitment.
Getting to the true value can be tricky, but unless you do, it’s unlikely you will achieve a fair divorce settlement.
It is important to remember that you are not always comparing like with like – money that is tied up in a property isn’t the same as cash in the bank. Cash isn’t the same as an investment (which might rise or fall in value). And pensions, whilst they can often be a very valuable asset, aren’t readily available and accessing them may come with strings attached.
The thing to remember is that you should not focus too much on each asset individually, you need to look at the overall picture – the sum total of the marital assets. When splitting the assets between the parties the division needs to be fair. This can be quite a difficult concept to get your head around if you do not have the benefit of someone who has experience in looking at how particular assets may be offset against each other.
It may be in a lot of cases that equalising the pension after a long marriage is right, but that does not necessarily mean that you should equalise what happens to the property as well. It is important to think about the overall picture – not just each individual component.
If you are in this position, you will need to obtain valuations for your assets – but do speak to a specialist family lawyer first as the devil is in the detail, especially when it comes to pension valuations and the type of valuation you will need.
How is a divorce settlement calculated?
The starting point must be an understanding of your priorities – of course you can’t always have what you want but an understanding of your financial needs is an important consideration for your lawyer.
Someone in their 50s and 60s might have retirement needs on their mind whilst for a young mother, housing needs are going to be the absolute priority. This will determine how the assets are split. The young mother will be more likely to take her share, whatever that may be, as equity in the house rather than as a pension share.
Should the division of assets come before the court, there are various factors they will consider. These should also, therefore, be considered when agreeing a divorce financial settlement voluntarily. Some of the most pertinent issues to look at are:
- What assets there are
- Whether these are matrimonial or non-matrimonial assets (see below)
- Each person’s current and realistic future earning capacity
- Each person’s needs
- The needs of any children
- The age of the separating couple
- The length of the marriage
- The contributions each person made during the marriage (both financial and non-financial e.g., child care)
- The standard of living enjoyed by the couple during the marriage
How are money and assets split in a divorce?
As stated above, exactly how money and assets will be divided in divorce will depend on the situation. A key factor is whether assets are ‘matrimonial’ or ‘non-matrimonial’.
Matrimonial assets are those which either spouse acquired during the course of the marriage. These will almost always be included in the division of finances. Non-matrimonial assets are those acquired before the marriage and might not be shared in the same way. Understanding what is and is not a matrimonial asset is not always straightforward, so it is crucial to get expert advice on this matter.
Below, we cover how some of the key assets people most often worry about might be dealt with in divorce:
Who gets the house in a divorce?
The family home is often the largest asset a separating couple has. There are several ways to deal with property in a divorce settlement:
- Sell and divide the equity
- One party buys the other party out
- Remain as joint owners but with one party living in the house (often used where there are children who need a stable home) and agreement that the house will be sold, and proceeds split at a date in the future.
As we have indicated elsewhere, the house should not be considered in isolation and whatever option is chosen needs to be looked at in the context of other assets and the needs of both parties.
How are pensions divided in divorce?
After the family home, pensions are often the most valuable assets a separating couple will have. Where one person has more pension wealth than the other, this will need to be accounted for in any settlement.
The options for dealing with pensions in divorce are:
- Pension offsetting – the person with a smaller or no pension takes a bigger share of other assets to offset their former spouse’s pension wealth.
- Pension sharing – the pension pot is split with a lump sum being placed into a new, separate pension for the benefit of the person with a smaller or no pension.
- Pension attachment – a percentage of the income or future income from one party’s pension is paid to the other party once retirement begins on an ongoing basis. This option is rarely used as it means the divorcing couple will stay tied together financially.
Learn more about pensions in divorce settlements.
How are business assets divided in a divorce?
A common question is whether business assets are included in divorce settlements. If they are considered to be matrimonial assets, they will be, as will any income generated by the business.
An independent valuation of the business will be required to ensure its worth is properly reflected in the settlement.
Some options that might be used to divide business assets include:
- Offsetting the value with other assets – i.e. giving the non-business owning spouse a bigger share of other assets such as the house.
- Giving the other spouse a share of the business – this gives them an interest in the business, which may not always be desirable.
- Selling the business and splitting the proceeds – this option is rarely used but might be worth thinking about if the business owner had been thinking about exiting the business prior to the divorce.
Learn more about limited companies and divorce settlements.
What to ask for in a divorce settlement
Many couples are concerned about who will get to stay in the house, who will keep the family car and how household furnishings will be divided. There are no hard and fast rules on this matter. In an ideal world you should try and agree between yourselves how household possessions are divided, although this can be tricky and may require some perseverance.
Failing to reach an agreement could mean taking your case to court, which is costly and ultimately eats into the pot of assets you are arguing about. It is normally better to make concessions than go to court, where you could potentially lose more and have a judge give a ruling which might be less favourable to you.
Of course, what we have not mentioned so far are the needs of any children. Their needs and rights take priority, and their care needs to be considered when reaching a divorce settlement.
How much will I get in a divorce settlement?
Moneyhelper.org.uk offers a divorce settlement calculator, but it makes a lot of assumptions, and we would urge extreme caution if using a tool like this. In short, don’t get your hopes up or, conversely, get disheartened, if you get a figure tumble out of the bottom after entering your details.
The only way to find out what you might get in a divorce settlement is to speak to an experienced family lawyer and ask them for advice on your circumstances. They will give you an honest view on a likely settlement, factors to be considered and the approach you might take to reach your own fair settlement.
Can you agree a financial settlement without a solicitor?
Theoretically, you can reach a divorce settlement yourself without expert support. However, doing so would be very risky. As the above information has hopefully made clear, the division of finances in divorce can be very complicated, with many different factors to consider.
Understanding what you are entitled to in divorce is rarely straightforward, so it pays to have expert advice. Working with an experienced divorce lawyer means you can be confident you know your rights and it can also help to ensure the process remains amicable by giving you a professional perspective. If you do end up needing to rely on court proceedings, expert support is critical to make sure you present your case in the strongest manner possible.
An experienced family lawyer will be able to advise you on using a consent order to make the terms of a voluntary settlement legally binding and a clean break order to prevent future financial claims from your former spouse.
Talk to Woolley & Co Solicitors about a divorce settlement
At Woolley & Co Solicitors, our expert divorce lawyers can offer specialist legal advice to guide you through a quick and stress-free divorce process. We can advise you on everything you need to consider and all of the issues you need to resolve, including the division of finances.
To take advantage of your free 30-minute consultation with an expert local family law solicitor, call 0800 321 3832 or complete our quick online form.
Kate Butler
Family lawyer Northampton
