I did my own divorce online, but didn’t realise I needed a final financial order as I thought an agreement with my former spouse would suffice. We were amicable so I ticked the online divorce petition saying I didn’t want to apply for a financial order.
Is it a problem to have no financial order?
The divorce process has become increasingly accessible, allowing people to complete the divorce petition themselves online. The legal ending of the marriage does not end the financial claims arising from the marriage so many people get caught out by question 10.1: ‘Do you want to apply for a financial order?’ If they had said ‘Do you want to preserve your rights or for the court to be able to approve a deal?’ people would more often say ‘yes’ instead of a mistaken ‘no’.
Why should we apply for a financial order if we agree on finances?
When deciding to divorce, many couples may come to an amicable agreement regarding the division of assets. These assets may include the family home, savings and investments, as well as any debts accrued throughout the marriage. Where this agreement is amicably reached, it is easy to assume that no court order is necessary. However, unfortunately, the online process is unhelpful and important legal principles are not emphasised.
Claims over finances cannot be ended by personal agreement between divorcing parties, however amicable. Just as the marriage cannot be legally ended by agreement, neither can financial claims arising from the marriage. Not everybody ‘plays nice’ and the court is there to check that people are not cheated out of their rights. That is why it needs a judge’s approval to terminate them.
Over time, memories fade and sometimes people forget what they agreed and on what basis – a financial remedy order should be clear and unambiguous.
What is a financial remedy order?
A financial order is a document which details how finances will be divided between the parties upon divorce. This might include agreements in relation to the sale or transfer of the marital home, arrangements for ongoing maintenance, the division of pensions, as well as any lump sum payments between the parties.
When a deal is written up in terms that comply with the Court Rules, it can be sent to the family court for approval. A judge needs to know the factual background in order to assess the agreement against the mandatory criteria. Somebody saying a deal is ‘ok’ is not enough for a judge to approve it so there is a Summary of Financial Circumstances form to help the judge and sometimes a covering letter is appropriate to explain.
Once there has been a financial remedy order, neither party will be able to alter their positions and return to make a financial claim in the future. This allows both parties to move forward with their lives, safe in the knowledge that all financial claims from their previous marriage have been settled. Courts rarely allow final orders to be looked at again.
Where such an order is not obtained, and parties end matters with only a verbal agreement, they are allowed to bring claims against each other in the future. Unlike a financial order, any private agreement in relation to finances is not legally binding so cannot be enforced. Even if the deal seems ‘fair’, it will not even be the starting point if somebody applies for an order.
Divorced parties may therefore be forced to ‘look over their shoulder’, in case their ex-spouse has a change of heart, or fortune, which pushes them to seek to alter the agreement and make a financial claim. While family lawyers encourage amicable and open discussions between parties, private agreements are not ‘set in stone’ and so we strongly recommend that agreed arrangements are formally recorded and approved by a judge.
It is therefore vital that this agreement is ratified into a legally binding document in the form of a financial remedy order.
Are there different types of financial order?
There are broadly two types of final order – ones made by a judge in contested proceedings after a decision has been imposed on the parties, and those made by agreement. Most orders are by consent, even if proceedings have been started as most people eventually compromise.
Where the parties are in agreement over the division of finances upon divorce, they should seek to obtain a ‘Consent Order’. A ‘Consent Order’ is so-called because both parties consent to its terms. A Consent Order is likely to include agreements in relation to the family home, the division of investments and savings, as well as the division of any debt.
Family law encourages open, amicable discussion, either directly or through solicitors, so an agreement reached with consent from both parties is the preferred route of the Court.
What if we have no assets?
It is easy to assume that where divorcing parties have limited to no assets, there is no need for a financial order. However, this is a common misconception – a financial order should be obtained on divorce regardless of the couples’ wealth.
Pensions are an asset that a court must know about and could be have significant value years after divorce. Indeed, inheritances are more likely with age and just because wealth was acquired or increased during separation, that does not mean it will be ring-fenced when an application is made, perhaps years later.
Pensions are often ‘hidden wealth’ which does not feel ‘real’ until reaching retirement, yet often eclipses the other more obvious assets. The subject of divorce pension law is complex and needs expert input. Pensions can only be shared by a final court order.
We have dealt with situations where one person became a millionaire after separation and where there was no legally-binding Order in place and also we find that people winning money on the lottery is not particularly unusual.
Where both parties have only limited assets, it is possible to obtain a ‘Clean Break Order’. A Clean Break Order severs financial ties between you and your ex-spouse, allowing you to move forward in the knowledge that no claim can be brought in the future should fortunes change. It should be noted that a Clean Break Order only refers to the spousal rights of the divorcing couple themselves. Should the divorcing parties have children who are minors or still in education, there may be an ongoing obligation to provide financial support to the children.
Parents cannot ‘sign away’ the rights of their children and so all deals are about the marriage, not parenthood.
A simple Clean Break Order is often the best route following a short marriage, within which there has been little to no accumulation of shared assets. A Clean Break Order allows both parties to move forward, living their life financially independent of their ex-spouse.
Do I need an order when we have agreed the division of finances?
As stated above, while the Decree Absolute marks the legal ending of your marriage, it does not end financial claims between the parties. Divorcing couples may reach an amicable private agreement at the time of divorce to divide the finances and move on with their lives. However, this agreement is not legally binding, and claims may arise in the future should the parties have a change of heart, or fortune.
So long as both parties do not remarry, financial claims can exist indefinitely. Therefore, any previous informal ‘agreement’ is liable to fall apart should one party pursue a claim against the other. This may arise for any number of reasons, but is particularly likely to crop up where one party has a significant change in their financial status, for example receiving a large inheritance or launching a successful business.
Where no order is in place, there is no time limit in relation to one party bringing a financial claim against the other, even following the granting of a Decree Absolute.
Surely a claim can’t be made years after divorce?
No. Even 20 years or so after divorce there is still no legal presumption or black letter law that tells the court to dismiss claims.
Until a financial order is obtained from the Court, the financial claims arising from the marriage continue to be ‘live’. This means that where a financial order is not obtained, both parties have the right to bring a claim against the other, regardless of the time that has passed.
There have been several cases in which the court has shown a willingness to allow financial claims, even where the parties have long-since divorced.
For example, in the case of Vince v Wyatt, a divorcing couple did not obtain a financial order on the grounds that they had only limited assets at the time of their divorce. Following the divorce, Mr Wyatt launched and grew a highly successful business, amassing a fortune far beyond that held in marriage. In 2011, 19 years after the granting of the Decree Absolute, Mrs Wyatt issued an application for a financial order. The case went all the way to the highest court in England and Wales, the Supreme Court and the Supreme Court ruled that, despite the time elapsed since the divorce, Mrs Wyatt was entitled to claim money against her ex-husband. Mr Wyatt was ordered to pay £300,000 to his ex-spouse, despite the nearly two decades that had elapsed since the legal ending of their marriage.
Add in that the wife obtained legal expense funding orders to the tune of £325,000 in addition to the lump sum eventually agreed and Mr Wyatt paid out over half a million pounds in addition to his own legal fees. All when he could have had a clean-break, decades earlier.
Although an extreme case, Wyatt v Vince does demonstrate the dangers of leaving financial claims open following divorce, and the subsequent importance of obtaining a financial order.
No-one can predict the future – it is therefore highly advisable to obtain a clean-break order, even where assets are only limited at the time of divorce. Without such an order, as stated by the Court in this case, there is ‘no time limit for seeking orders for financial provision or property adjustment for the benefit of a spouse following divorce’.
If I re-marry, how does this affect any financial claims?
As shown in Vince v Wyatt, if a financial order is not obtained, financial claims following divorce can continue indefinitely. However, this position is altered where the parties remarry.
If a financial order has not been obtained, parties who plan to remarry are liable to fall into the ‘Remarriage Trap’. Remarrying parties may lose the right to claim assets they were otherwise entitled to. In fact, the remarrying party’s rights may be so diminished that the court has described this as a ‘brutal’ consequence of remarriage.
If you were the petitioner in the divorce (i.e. you applied for the divorce) and within your divorce petition you ticked the correct box, giving notice to the court to deal with your financial claims, then you should not be barred from pursuing any claims against your former spouse should you remarry.
Whilst the right to make a claim is not extinguished by re-marriage IF the correct box was ticked so that there is an ‘application’ before remarriage, the remarriage will represent a change in circumstances and so both ‘needs’ and ‘resources’ will change.
However, if you were the Respondent in the divorce (i.e. your ex-spouse applied for the divorce), and you intend to remarry or enter into a new civil partnership before financial proceedings are concluded, you must issue a financial application (Form A). This financial application must be issued prior to your remarriage or civil partnership, although this will only protect your ability to apply for capital orders, such as lump sums or property adjustments.
To avoid falling into this ‘trap’, you should ensure that you have a legally binding order in place prior to any remarriage.
Can I still apply for a financial order after Decree Absolute?
You can apply for a financial order at any stage after the Decree Nisi has been granted. Most solicitors would strongly advise the financial order be obtained before the Decree Absolute is applied for.
However, while it is advised to obtain a financial order prior to the granting of the Decree Absolute, it is possible to obtain a financial order after the Decree Absolute has been obtained. The process should be started as soon as possible in order to prevent unwanted claims arising from the other party.
What is the process – do I need to go to court?
In short – ‘No’ – most agreements are dealt with on paper and approval rarely needs even a telephone hearing with a judge.
Where the parties have reached an agreement in relation to finances, and this agreement remains the same following the granting of the Decree Absolute, a solicitor will be able to draft this into a legal document together with another which details the assets owned by the parties, and how they will be divided.
Solicitors may ask the parties to provide financial disclosure, evidencing their financial situation to ensure the Consent Order represents a fair division of the parties’ finances. The amount of disclosure required varies on each case, but parties are encouraged to provide honest and open disclosure in order for the process to be as productive as possible. You may be held in contempt of Court if you deliberately mislead or fail to disclose accurate financial information. The parties must sign a ‘Statement of Truth’ which makes any deliberate non-disclosure or misrepresentation a case of perjury as well as risking that the deal can be reopened for fraud.
This draft Consent Order will then be submitted to the Court alongside a ‘Statement of Information’ which broadly outlines the parties’ financial situation. The parties do not need to provide evidence of the information provided on the Statement of Information, but must ensure that the information provided is accurate.
Once submitted to the Court, the Consent Order will then be considered by a judge. A judge will only approve a Consent Order if it reflects a fair division of the parties’ finances. If the judge does not think the Consent Order is fair, is unclear, impractical or otherwise deficient, they can raise questions to be dealt with before reconsidering the agreed arrangements. However, where legal representatives have been instructed in relation to the Consent Order, it is much less likely to be rejected, as the order is likely to be a fair reflection of financial division.
Once approved or ‘sealed’ by a judge, the terms of the Consent Order become legally binding and can be implemented and enforced by the parties. Once the terms of the Consent Order have been implemented, the parties can move forward with their lives, safe in the knowledge that no claims can be brought against them in the future by their ex-spouse. This legally-binding document therefore allows parties to overcome the expensive pitfalls that exist where the agreement is only a private arrangement.
Every case is different
Even though this information is intended to alert you to some of the main legal principles and explain the process, each situation needs looking at carefully and solicitors apply their experience and training to the facts of each case.
That is something that we can do.