Guide: How to Agree a Financial Settlement on Divorce

Guide: How to Agree a Financial Settlement on Divorce

For a financial settlement on divorce to be legally binding, it must be approved by the courts. The courts retain a discretion to make the financial order that it considers to be fair.

Is mutual agreement possible?

It is important to establish at an early stage if it is possible to reach agreement between you. Try starting the process with a detailed list of all assets and income streams, as well as all liabilities, present and future. Remember to include pensions.

When you understand what the available assets are, it is important to take legal advice so that you can understand the options available to you, enabling you to dovetail them with your priorities when structuring your agreement. Try to avoid a situation whereby you reach an agreement on financial matters only to find that it is not possible to implement it. A common example of this is when dealing with the family home: many don’t consider what is to happen to the mortgage, or take into account tax considerations.

Where you agree

In the event that you agree how to split assets and share liabilities, you should obtain a Court Order (known as a Consent Order) reflecting the terms of your agreement in order to make it legally binding. It is important that you understand that an agreement between you is not enough to bring an end to any future financial claims. Only when there is a Court Order reflecting the agreed terms does it become binding on you both.

We would be happy to assist you in drafting a Court Order to reflect the terms of your agreement.

DIAGRAM: Financial Settlement on Divorce

Getting help to agree

Direct discussions may not be an option for you, but there are other options for trying to reach a financial settlement on divorce. There are a number of Alternative Dispute Resolution (ADR) options including mediation, collaboration and solicitor-led negotiations. If agreement is reached through ADR discussions, then it must be put into a court-approved financial order to be binding.

Application where parties agree a financial settlement on divorce

Divorce proceedings must have been started and reached the conditional divorce order (formerly decree nisi) stage (but do not have to be completed) before the court can consider any application for an agreed Financial Order.

See also brief guide on How to Get Divorced (New Procedure) which provides an overview of the whole process.

There is usually no need to attend Court; this is simply a paperwork exercise. A Judge will approve the Consent (Financial) Order if they consider it to be fair.

If the agreement is reached through mediation or a collaborative process, a document will be drawn up to reflect what has been agreed, but that then does need to be put into a court order.

Mediation Information Assessment Meeting

If agreement is not possible, the next step is to issue an application to the court, asking the court to decide the division of assets and income. Before you can start court proceedings for a Financial Order, you must attend a Mediation Assessment Information Meeting (MIAM) (there are a few exceptions to this rule).

Where parties do not agree a financial settlement on divorce

Once an application is made to court requesting a decision on financial provision, the court will set a timetable for you both to comply with, including providing your financial information and completing further documentation.

There are usually a total of three separate court hearings:

  • The First Appointment
  • The Financial Dispute Resolution Appointment, and
  • The Final Hearing, where the Court will decide upon the final division and what is to happen to each asset.

The court will encourage you both to try to reach an agreement.  Even though court proceedings have started, the opportunity to negotiate a settlement between you is not lost.

If the application goes all the way to the Final Hearing, the court will impose a financial order on both parties.

How to Sort out Child Arrangements on Relationship Breakdown

How to Sort out Child Arrangements on Relationship Breakdown

The court takes the view that in most cases the best people to work out the right arrangements for their children, are their parents.  You know your own children and are best placed to know what will work well for them given their ages and interests.

Consider a Parenting Plan

If you can safely discuss the arrangements with the other parent and you reach an agreement, you could think about completing a parenting plan together. Even if you don’t do that, making a record of your agreement is helpful. Some people have this drawn up by solicitors but it is not a legal requirement.

Mediation is encouraged

Some parents use mediation to help them reach an agreement.  The court strongly encourages parents to work on reaching an agreement, unless there are safety concerns.  Before a parent can ask the court to become involved, that parent has to attend a meeting with a mediator to see if mediation could help.  This is called a MIAMs appointment.  The other parent will receive a separate invitation to mediation but if they refuse to participate, then mediation can go no further.

If you have your own or a mediated agreement, you can simply work with that.  It can be hard to obtain a court order simply to confirm that agreement as the Children Act 1989 says an order should only be made where that is better for the child than no order.

How to Sort Children Arrangements on Relationship Breakdown

Making a Court Application and the role of CAFCASS

If you have been unable to reach an agreement and have a MIAMs certificate, you can make a court application.  The application should be sent to the Family Court covering the area where the child lives.

The court then sets a date for the first hearing (FHDRA) and also sends a copy of your application to CAFCASS.  Someone from CAFCASS will then speak to you and to the other parent by telephone.  CAFCASS is a body that works within the court system in children cases.  CAFFASS is responsible for drawing up a safeguarding letter which involves checks with the Police and Social Services to make the court aware of any safety concerns.  You will normally be sent a copy of that letter before the first hearing.

At the FHDRA the court wants to find out if matters can be resolved by agreement between the parents.  The court might suggest mediation or attendance at Parenting Information Programme before holding any further hearings.

No agreement

If no agreement is possible at the FHDRA the court will put in place steps so that a judge or magistrate can make a decision about the arrangements for the children.  This might involve a report from CAFCASS or Social Services, statements from both parents or medical evidence.  The court will set a timescale for this to happen and a date for further hearings.

Any order made in relation to children can be changed in the future, by the court or by agreement of both parents.  Generally most orders last until the child has had their 16th birthday, but a parent’s responsibility for a child lasts until 18 years.  This affects permission to leave the UK and changing a child’s name.

This short guide is also available in pdf here.

Guide: How Collaborative Divorce Works

Guide: How Collaborative Divorce Works

Collaborative law is a process where you and your former partner commit to settling matters without going to court. Both of you – along with your lawyers – commit to working together civilly to reach an agreement.

There will be lots of talking! This is a process that minimises correspondence and everything important happens in the room at what are called ‘4-way meetings’. Key features of collaborative law include:

  • all negotiations happen in the room with both clients and lawyers (called a 4-way)
  • there are few or no letters sent between lawyers
  • experts on pensions, financial advice or relationship counselling can be brought into the process and work for the couples, not simply for one of them
  • both the lawyers and the clients sign up to a contract confirming the confidential nature of the process, and stipulating the behaviour that is expected at the meetings and beyond

The agenda is set by you

The agenda is set by you both and offers flexibility to achieve an outcome that might well differ from what a court might order. You will be advised throughout on what a court would consider appropriate, even if your respective advisers differ in their views on the likely outcome. Your lawyer can also give advice outside of the 4-way meetings, but they must be prepared to repeat that advice at the 4-way meetings if required. The approach is one of openness and transparency.

Guide to Collaborative Divorce

Control over timing

Progress is often tailored to the pace of the person moving most slowly, but it can proceed quickly if both parties want and can cope with that. Thus, the 4-way meetings can be held close together and – provided both parties have their financial information available – a conclusion can be reached and made binding within weeks rather than months.

If additional advice or assistance is required from financial advisers, pension actuaries or other experts they can be brought into the process, jointly instructed by both parties, often attending a 4-way meeting so both parties can hear what they advise.

Ultimately your process

Although guided by the lawyers, the onus is on you and your former partner to make the decisions and reach an agreement.

If you agree

If you can reach an agreement, then this needs to be put before a court in order to make it binding. It is important that this be done in order to ensure certainty moving forward for both parties.

If you cannot agree

If the collaborative process breaks down, the two collaborative lawyers will not be able to take any further part in the process and both parties will have to instruct new representation.
The factual information you have gathered in the collaborative law process can be passed to your new lawyers but, although they will be made aware of the discussions as recorded in the minutes of each meeting, those discussions cannot be taken into the court arena.

Why Collaborative Law for Divorcing Couples?

Why Collaborative Law for Divorcing Couples?

Thanks very much again for all you did to help us reach agreement. It was a difficult process, much tougher than I had expected, but I was extremely glad you were there to give clarity and authority to the process and keep us all on track. You worked incredibly hard for us and rescued the process more than once. Despite the difficulties, looking back I am glad we chose the collaborative approach rather than the traditional court approach which I think would have been even tougher.”

The above is a direct quote from my client who, along with her husband, chose to resolve her financial claims on divorce using the collaborative process.  We think it is a high recommendation of the process which acknowledges that, although it asks a lot of the clients (and the lawyers), it has enabled our client to look back and feel proud that she and her husband made that decision rather than taking the court or normal litigation route.

What is collaborative law and what makes it different from the traditional litigation process?

Any lawyer seeking to explain collaborative law will probably centre on its differences from the traditional litigation process, but for many clients these are matters of nuance:

  • the duties of a lawyer are different, they are working with rather than against the other lawyer;
  • they are not aiming for the best outcome for their client at the expense of the other party but seeking the best outcome for the family overall and for any children as a priority; and
  • they have to be prepared to share their advice to their client with the other spouse and lawyer.

However the pivotal point for most clients is that if the process fails to reach agreement, then both of them have to move to new lawyers to take up their case.  This is the case even if it is the actions of one party that breaks the process.  This can seem harsh and many clients do not want to run the risk of duplicating costs and also losing the emotional investment they have made in their lawyer.

To my mind this is an essential feature of collaborative law, meaning that the lawyer has an investment in the success of the process.  No lawyer likes to fail, and as the process itself is not about winning or losing, the lawyers’ goal becomes to achieve a positive outcome – a binding agreement – for the clients.

There are other practical differences:

  • there are few or no letters sent between lawyers;
  • all negotiations happen in the room with both clients and lawyers (called a 4-way);
  • experts on pensions, financial advice or relationship counselling can be brought into the process and work for the couples, not simply for one of them;
  • both the lawyers and the clients sign up to a contract confirming the confidential nature of the process, and stipulating the behaviour that is expected at the meetings and beyond.

Why is it described as a tough process?

The challenge in collaborative law is in dealing with emotive issues in the same room as your spouse, in a civilised manner.  It can be painful to dismantle a marriage in this way and some people find having to discuss the consequences of a separation that they may not have wanted or even anticipated with their spouse, to be very difficult.  It is also a reality that people can genuinely view things differently, whether that is why they believe the marriage broke down, or what they see as being needed in terms of income, housing, or time with children and that can make finding a solution that is acceptable to both tricky.

The help of a family consultant can be invaluable here but even where that does not happen, the lawyers are dealing with emotions and feelings that mean the process goes beyond the hard facts and figures on a page.  This can be one of the great benefits of the process, as it allows a couple to identify what is important to them, which may be different from what a Judge or the lawyers would have placed as important.

The clients are invited at the beginning of the process to articulate why they have chosen collaborative law and what benefits they hope it will bring.  The lawyers can then refer them back to these statements, if things are becoming rocky, to remind them of the goals set.  All dispute resolution processes are about a level of compromise and, in collaborative law, that may go further than most.  The clients are asked to consider how the outcomes they are discussing affect each of them and their children.  Having lawyers there in the room also means that advice can be given as to the approach a  Judge would take and where parties want to move away from that, what can be achieved and contained in binding orders of the court, and what cannot.

When is collaborative law not suitable?

There has to be trust between the parties that each of them is being honest.  That can be hard where a marriage has broken down because of unfaithfulness but, in many cases, there can still be trust over financial issues.

Collaborative law is not suitable where there is any form of domestic abuse that would prevent one party being able to fully partake in the discussion on a level playing field.

It may not be suitable where one party has fixed ideas as to outcome.  This should be investigated with that spouse’s lawyer as sometimes the exercise of reality checking can adjust someone’s thinking.  However if there is a fixed point of principle then there may be no other option but for a Judge to impose a decision.

So back to the opening question:

Why choose collaborative law?

Do you want to be able to say to yourself and to your children that you and your spouse were able to sit down and sort out arrangements with which both of you were happy?  Do you want to be able to continue to work with the other parent to bring up your children in a co-operative way, attending future life events for the children and other family members in a positive and non-confrontational atmosphere?

Collaborative law cannot wave a magic wand and create the perfect post-separation relationship but it gives couples the best chance of achieving that.  There is a benefit to knowing that your voice has been heard in the process, that you have discussed the things that were important to each of you and that you have done your best to resolve disputes in a civilised manner, with a view to looking to form a new future for each of you that, whilst being different from what you had previously planned, can still be good.

Arbitration: an option for Children Arrangements

Arbitration: an option for Children Arrangements

Arbitration for financial disputes has been available for some years and, although the number of people taking it up has not been high, it has been strongly supported by Judges. For those who have the available finances, it represents a quicker and more civilised way to obtain an independent and binding judgment than the Court system.

Benefits include Privacy and Control

The proponents of arbitration emphasise the privacy that it brings (particularly for clients in whom the media may be interested); the fact that if desired, the couple can select their arbitrator and the location of the arbitration hearing; and that on the day they can be guaranteed a prompt start without the Judge being occupied with other matters. The location (usually a solicitor’s office or barrister’s chambers) is generally an improvement on court waiting rooms.

Downsides include cost and the need for all parties to agree

The major factors that discourage arbitration are the cost and also that both parties have to agree to use arbitration, whereas any one person can initiate a court application and the other is (however reluctantly) drawn in. In terms of the cost, services of the arbitrator are chargeable to the parties, on top of their own legal fees. However, the cost of many cases that go to arbitration will be comparable to the costs lost in ineffective or reduced Court hearing slots (assuming that the case can proceed at all and that the Court has not over listed).

An additional issue is that (although the courts have been keen to uphold arbitrator’s awards) there is as yet no mechanism within the arbitration process itself to compel the production of information from a recalcitrant party. The arbitration process cannot be used, therefore, if there are concerns about a lack of financial or other information.

The arbitration scheme will cover some children’s matters

As a result of the relative success of arbitration for financial matters, the process has been extended to some (not all) children issues. The scheme covers:

  • the present or future welfare of the child concerned, including upbringing;
  • the present or future living arrangements (including internal relocation disputes);
  • all contact and educational issues; and
  • matters that could be the subject of an application to the court under s8 of the Children Act 1989.

The scheme cannot deal with:

  • child abduction;
  • disputes relating to the authorisation of life-changing or life-threatening medical treatment;
  • any case where a party lacks mental capacity;
  • any case where the child concerned is (or ought to be) a party to the court proceedings.

As in the court system, English law will be applied. For arbitrators exercising their discretion in determining any question relating to the upbringing of the child, the welfare of the child will be the paramount consideration and particular regard will be given to the welfare checklist in section 1(3) of the Children Act 1989, along with the no order principle (s1(5) Children Act 1989).

However, in addition to the cost of the arbitrator, there may well be another expense in connection with children matters. The Judges and magistrates benefit hugely from the services of CAFCASS, who will interview the children and provide the courts with reports and safeguarding checks.  In arbitration, the couple can jointly employ an independent social worker with appropriate expertise.  This appointment has to be agreed by the arbitrator.

An anticipated advantage of the scheme being extended to children matters is the varying timetables that can be applied. Sometimes there is an urgency to the matter, say in connection with deadlines for school admission places. However, in other cases, the children and the family need to take time to adjust to different stages in the process, particularly with very young children.  The arbitrator can be retained and the timetable can be agreed, and adjusted by the parties where necessary.

At Barr Ellison we want to make sure our clients have the opportunity to take the route to resolving their issues that best suits them and their family.  We offer a traditional Court route alongside the collaborative law approach that keeps both parties out of the Court.  The availability of arbitration for children matters is a positive development, giving clients another option which can be tailored to suit their particular requirements and hopefully bring their dispute to a prompt and satisfactory resolution.