How Is a ‘Fair and Reasonable’ Financial Settlement Agreed When Separating?

When you're considering a "fair and reasonable financial settlement" after separating or divorcing, there is no one-size-fits-all solution. Your unique situation, including your assets and liabilities will influence the outcome. Even if no formal Court application has been made, we always consider what the Court will consider fair and reasonable.

Key considerations for your financial settlement

If you have children under 18, whether biological, stepchildren, or adopted, they are the priority. This is not a list of priority, but what the Court considers what is fair in the circumstances:

1. Your income, earning capacity, property, and financial resources now and in the future.
2. Your financial needs, obligations, and resources now and in the future.
3. The standard of living you enjoyed during your marriage.
4. Your age and the length of your marriage.
5. Any physical or mental disabilities you or your partner may have.
6. Contributions each of you made to the family’s welfare.
7. Conduct, if it is inequitable to ignore.
8. The value of any benefits you’ll lose due to the divorce.
9. All other relevant circumstances.

Divorce often requires financial adjustments as assets are divided from a joint collective pot to support two households. You're encouraged to reach a financial settlement together without court involvement unless an agreement cannot be reached.

Reaching your financial settlement

Before negotiating a financial settlement, you’ll need to carry out full and frank disclosure. This applies whether you use solicitors, mediation, or other forms of dispute resolution. Typically, this involves exchanging financial statements with supporting documents. Once you have a clear picture of your financial assets and liabilities, including savings, investments, valuable items such as jewellery, antiques, paintings, properties, pensions, and debts, negotiations can begin.

If you have children, child maintenance is usually payable unless there is a truly shared care arrangement. The Child Maintenance Service (CMS) handles this, and their website offers a calculation tool. If the paying parent earns over £156,000, you may need to apply to the court for a top-up order for additional expenses, such as school fees or for special educational needs or to assist with physical needs of a child. If a Consent Order includes child maintenance, you and the other parent are prevented from applying to the CMS for 12 months after the order is approved by the court.

Confirming your financial settlement

Any financial settlement should be recorded in writing, if a divorce has commenced this will need to be within a Consent Order and if no divorce application has been made, in a separation agreement. This ensures the implementation of the settlement, such as property transfers or monetary payments. A consent order is a court order agreed upon by both parties, sent to the court with a "snapshot" of your financial circumstances and the implications of the settlement, known as a D81 or Statement of Information form.

A judge reviews the consent order to ensure it is fair and reasonable. The court does not simply approve agreements but ensures they are equitable. If the settlement seems skewed, the court can schedule a hearing for you and your spouse to explain your agreement. If the judge approves, the order is sealed and sent to you. Typically, the settlement cannot be reopened. Once the financial settlement is court-approved, you can finalise your divorce by applying for the Final Divorce Order (post-April 2022) or Decree Absolute (pre-April 2022).

Conclusion

Navigating financial settlements during separation or divorce requires understanding various factors and ensuring fairness. By considering these aspects and seeking legal advice, you can achieve a fair and reasonable settlement. Contact our Family Law team for guidance to ensure your interests are protected during this challenging time.