Money matters in divorce

Getting divorced doesn't automatically end your financial commitments to each other, so you need to resolve your finances at the same time.

When you legally end your marriage or civil partnership, your money matters with your ex won't automatically be resolved. Many people believe when they get divorced, any ties they had to their ex will have been severed. Unfortunately this is not the case.

Although the marriage will have ended and either person can legally marry someone else, the law in England and Wales stipulates that the couple still have a financial commitment to each other.

Unless you take steps to resolve your financial matters with your ex, one person could make a financial claim against the other, even years after getting divorced.

So, it's very important to resolve your finances at the same time as your divorce or civil partnership dissolution, to avoid potential issues in the future.

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Your financial agreement should be formalised in a court order, only then is the agreement binding, and if one person defaults on any part of the agreement, steps can be taken to enforce the court order.

Also, if in the future, you come into an inheritance your ex could make a claim against those funds at any time, unless you have a divorce financial order from the court in place.

The court always retains the power to approve the financial order or not. The court is not there just to rubber stamp a financial agreement, it has to ensure that it is fair and reasonable, taking into account all the circumstances of your case.

How do I resolve divorce money matters?

You can consider family mediation, or our divorce solicitors can help guide you through the process and negotiate a divorce financial settlement agreement on your behalf.

What factors does the court consider?

The law in England and Wales concerning financial disputes is discretionary and therefore uncertain. Each divorce case is dealt with on its own facts with first consideration always given to the welfare of any minor children.

The court will also consider:

  • the income, earning capacity, property and other financial resources which each person has or is likely to have in the foreseeable future
  • the financial needs, obligations and responsibilities that each person has or is likely to have in the foreseeable future
  • the age of each person and the duration of the relationship, the court generally take into account periods of living together
  • any physical or mental disability of either of the persons
  • the contributions each person has made or is likely to make in the foreseeable future to the welfare of the family
  • the conduct of the parties involved (in exceptional circumstances)
  • the value of any benefit which a person will lose the chance of acquiring by reason of the separation

When applying the above factors the courts first priority is to meet both people's needs. If these needs can be met, the court will consider more complex arguments about how financial and property assets were acquired, and if they should be treated as matrimonial property or not.

Clean break orders and consent orders explained

Divorce financial orders sever the financial commitment between you and your ex, meaning neither person can make a claim in the future. There are two types of financial order in divorce; a clean break order and a consent order.

A clean break order is for couples getting divorced who don't have assets to divide, but want to end their financial committment to each other. The clean break order makes it clear that neither person will make a financial claim against the other in the future. This also extends to wills and the ability to contest a will. Without a clean break order an ex-spouse could challenge a will that's made after the divorce.

A consent order is exactly the same as a clean break order, except it's for couples who have financial assets to divide at the time. The couple can either agree the contents of the consent order or, if they disagree, they can ask the court to decide how the assets should be divided. A consent order will list the couple's assets, including any pensions, and show how these will be divided. It will also include a paragraph that prohibits either person from making a financial claim against the other in the future.

A consent order is made up of three main sections:

  • recitals - agreements that have been reached between the couple
  • undertakings - promises made to the court that the agreements won’t be breached
  • orders - agreements ordered by the court, usually concerning property and financial assets

How long does it take to resolve money matters in divorce?

This depends on a number of factors for example, whether you have been able to reach an agreement in family mediation or whether financial proceedings are contested through the courts.

As a general rule court proceedings can take 12-18 months whereas negotiated settlements can be reached relatively quickly.

Our highly experienced team of divorce solicitors and legal specialists can guide you through each step of the process. We pride ourselves in providing a commercial ‘no nonsense’ approach with the aim of keeping costs proportionate to your case.

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Property money matters in divorce

A key consideration when you get a divorce or dissolve a civil partnership is often what should happen with the family home. You and your ex will need to decide who, if anybody, will continue living in the home, particularly if you have children. The children’s welfare is what is most important, not only for any children under 18 but also children over 18 who may be in full time education or training.

The family home may be a property that is owned by one person alone or by both of you jointly. If you own the property jointly, this could either be as joint tenants or as tenants in common. It is important that you establish which it is and our divorce solicitors can help you with this.

Joint tenants in divorce

Under a joint tenancy it is presumed you own the property equally, but the court can vary these shares depending on the circumstances.

Property held as joint tenants automatically passes to the surviving joint tenant when the other owner dies, regardless of what is stated in your will. You can sever the joint tenancy, which would prevent your share of the property passing to your ex if you died and vice versa.

Tenants in common in divorce

As tenants in common, you each own a specific share of the property, such as 70/30 or 50/50. If you own a property as tenants in common, your share won't automatically pass to the other joint owner if you die. Instead your share can be left to whoever you choose in your will, or it'll be passed on under the rules of intestacy if you don't make a will.

Who is responsible for paying the mortgage after divorce?

Everyone named on the mortgage is equally responsible for the payments. If one person doesn't pay, the mortgage provider can ask the other person to cover it.

To avoid mortgage arrears, try and agree on how to cover the mortgage repayments, regardless of who's staying in the home. Our Divorce Solicitors can help you with this.

Divorce options for dealing with a home you rent

If the property is rented in joint names or in your ex-partner’s name only, you may be worried that your ex might try to end the tenancy. Both people don't need to consent to end a joint tenancy.

If your partner moves out and you stay in the property, you should consider having the property transferred into your name. Otherwise your partner could still end the tenancy in the future.

If only your partner’s name is on the tenancy agreement, they can evict you without a Court order as long as they give you reasonable notice. This doesn’t have to be in writing and what is deemed as being 'reasonable' will depend on your circumstances, although normally it wouldn’t be any more that 28 days.

Alternatively, they may allow to you to stay in the property by agreeing to hand over the tenancy, which may be possible.

What if I’m the only person named on the tenancy?

If you’re the only person named on the rental agreement or the lease, you have the right to ask your partner to leave, as long as you give them reasonable notice. What is deemed 'reasonable' will depend on the circumstances but if they have been violent, you may be able to ask them to leave immediately.

If you want to leave the property but are happy for your partner to stay, you may be able to formally hand over the tenancy to them. However, you should get legal advice as to whether this is possible in your case.

Can I protect my right to stay in the matrimonial home?

By applying for an injunction you can protect your right to stay in the matrimonial home and stop your partner from ending the tenancy or giving you notice to quit.

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Dealing with pensions in divorce

Pensions are often one of the biggest financial assets in divorce, apart from the family home. So pensions should always be taken into account when resolving money matters during a divorce or civil partnership dissolution.

Pension options in divorce

Pensions can be dealt with in a number of ways, depending on the circumstances. Currently these are the three main pension options when getting divorced in England or Wales:

Pension sharing – This is where someone receives a percentage of their ex-partners pension. This is either transferred into a separate pension scheme in their own name (an external transfer) or transferred into a separate pot within their ex's existing pension scheme (an internal transfer).

Pension offsetting – This is where the value of a pension if offset against other assets. For example, one person may receive a greater share of the family home or savings to compensate for the lack of pension provision.

Pension attachment (formerly known as earmarking) – This means a percentage of the pension is set aside for the ex-spouse to claim on retirement. Pension attachment benefits are not necessarily watertight though, so this isn't usually the best option.

What pension information do I need?

Make a list of the pensions you currently contribute to, along with any previous pensions you have. Most pension providers provide an annual statement which is a useful starting point.

If a pension is already being paid, can it still be shared?

Yes, but after it has been transferred the pension holder won't be able to take a lump sum from their pension.

State pensions on divorce

The basic State Pension cannot be shared but the Additional State Pension can.

What happens to the family business in divorce?

If you and your spouse or partner are in business together, there are things you will need to consider if you get a divorce, separate or dissolve a civil partnership. This is because if the courts become involved in how your financial assets should be divided up, they will have to take your family business money matters into account.

The court has a very wide discretion in how it deals with arrangements in financial applications when couples break up. When deciding how to divide up a family business the court will consider:

  • how the business was originally set up
  • what contribution each of you has made to it and your current roles
  • whether any other people are involved running the family business
  • the commercial prospects of the business
  • if any assets can be cashed in without affecting day to day business operations
  • what the ultimate intentions for the business were

Valuing the business

Some family businesses have no underlying value and simply provide an income stream. These do not need valuing since they can be shared with a Maintenance Order. However if one spouse owns a family business outright or has a significant shareholding then it is usual for the business to be valued as part of the divorce financial settlement.

Valuing a family business can be difficult and normally you'd need to instruct an expert accountant or valuer with particular expertise. This is a complex area and there are many issues to consider. For example, a consultancy based on the skills or knowledge of one person may be affected if that person leaves the business.

In addition to this there will be business tax issues that need careful consideration and expert legal, accountancy and forensic advice may also be required.

Our specialist team of divorce solicitors are experienced in dealing with complex family business issues for businesses including SMEs, limited companies and partnerships.

About Co-op Legal Services

The family law team at Co-op Legal Services includes specialist family solicitors, divorce solicitors and children law solicitors with Resolution accreditation and accredited experts in child abduction, co-habitation, domestic abuse, property disputes, high net worth money matters and financial advocacy.

Resolution is a national organisation of family lawyers committed to non-confrontational divorce, separation and other family problems.

As part of the Co-op Group, our values of openness, honesty, social responsibility and caring for others are core to the service we provide.