Why a Financial Order Is Important After Divorce.

Obtaining a final divorce order legally ends a marriage, but it does not automatically bring the former couple's financial claims against each other to an end.

Unless the court has approved a financial order dismissing future claims, a former spouse may remain able to apply for financial provision years after the divorce. This can create uncertainty where one person later builds a successful business, acquires property, receives an inheritance or accumulates a substantial pension.

Does Divorce Automatically Separate Your Finances?

No. The divorce process and the financial-remedy process are legally separate.

A final divorce order confirms that the marriage has ended. It does not, by itself, determine what happens to:

• The family home
• Savings and investments
• Business interests
• Pensions
• Debts
• Spousal maintenance
• Future financial claims

Even where both former spouses have divided their assets informally and neither currently intends to make a claim, the arrangement may not provide a legally enforceable clean break.

What Is a Financial Order?

A financial order is an order approved or made by the family court dealing with the financial consequences of divorce.

Depending on the circumstances, it may provide for:

• The sale or transfer of property
• A lump-sum payment
• Spousal maintenance
• Pension sharing or pension attachment
• The transfer of investments or other assets
• The payment of debts
• The dismissal of future financial claims

An order may be agreed between the parties and submitted to the court by consent, or decided by a Judge where agreement cannot be reached.

What Is a Consent Order?

A consent order records a financial agreement reached between divorcing or divorced spouses.

The document is submitted to the family court with financial information about both parties. A Judge will consider whether the proposed terms are fair before approving the order.

Once approved, the agreement becomes legally binding and can generally be enforced if either person fails to comply.

An informal agreement, mediation summary or exchange of emails is not normally an adequate substitute for a court-approved consent order.

What Is a Clean-Break Order?

A clean-break order dismisses specified future financial claims between former spouses.

A full clean break may dismiss claims relating to:

• Income
• Lump sums
• Property
• Pensions
• The other person's estate after death

Once the relevant claims have been finally dismissed, neither former spouse can normally return to court later to seek further financial provision from the other.

A clean break may take effect immediately or after particular obligations have been completed, such as the sale of a property or payment of a lump sum.

Can a Clean Break Be Made Where There Are No Assets?

Yes. A financial order can still be important where neither person has significant property, savings or pensions at the time of divorce.

A court may approve an order providing that neither person receives a payment and that their future claims are dismissed.

This is sometimes described as a clean-break consent order or a nil-order clean break.

Without such an order, claims may potentially remain open even though there was little or nothing to divide when the marriage ended.

Can a Financial Claim Be Made Years After Divorce?

There is no general statutory time limit requiring an application for financial provision to be made within a particular number of years following divorce.

This does not mean that a late claim will automatically succeed. The court will consider the reasons for the delay, the parties' circumstances, their contributions, their needs and the extent to which the other person's financial position changed after separation.

A delay of many years can make a claim more difficult and may significantly reduce any award. However, delay alone does not necessarily remove the court's power to consider the application.

Wyatt v Vince

The importance of obtaining a financial order was highlighted by the Supreme Court case of Wyatt v Vince.

The couple separated during the 1980s and divorced in 1992. At that time, neither had substantial assets. Many years later, the former husband built a successful renewable-energy business and became wealthy.

The former wife later applied for financial provision. The Supreme Court ruled that her application could not simply be struck out because of the passage of time.

The decision did not establish that a former spouse is automatically entitled to wealth created decades after separation. The Supreme Court made clear that the long delay, the short period of marital cohabitation and the fact that the wealth had been generated after the relationship ended were highly relevant.

The case nevertheless demonstrated that, without a financial order dismissing claims, the possibility of an application may remain long after the divorce itself has been completed.

Does a Former Spouse Share All Wealth Acquired After Divorce?

No. The court does not automatically divide everything accumulated after separation or divorce.

When deciding what is fair, the court considers all the circumstances, including:

• The length of the marriage
• The length of time since separation
• The parties' current income and resources
• Their financial needs and obligations
• The standard of living during the marriage
• The ages of the parties
• Any physical or mental disability
• Contributions made to the family
• Responsibility for caring for children
• How and when particular assets were acquired

Wealth created entirely through one person's efforts many years after separation may be treated differently from property accumulated during the marriage.

However, needs can remain important, particularly where one former spouse cared for the children or suffered a lasting financial disadvantage because of the marriage.

Future Inheritances

A clean-break order may protect against future claims if one former spouse later receives an inheritance.

Without a financial order, a later inheritance could potentially form part of the resources considered by the court if a financial application is subsequently made.

An inheritance is not automatically shared. The court will consider factors including when it was received, the parties' needs, whether it has been mixed with family assets and the overall fairness of the case.

Business Success After Divorce

A business created or developed after separation will not automatically be divided with a former spouse.

Nevertheless, if financial claims remain unresolved, the value of the business may form part of the owner's current financial resources when a later application is considered.

The court may distinguish between wealth generated during the marriage and wealth created independently after separation. The outcome will depend on the history of the relationship, the origin of the assets and each party's needs.

Lottery Wins and Other Windfalls

A lottery win or other unexpected windfall received after divorce does not automatically belong partly to a former spouse.

However, where claims remain legally open, the windfall may be considered as part of the recipient's resources if the former spouse later applies for financial provision.

A properly drafted clean-break order can prevent future claims against income or capital covered by the dismissal provisions.

Pensions

Pensions can be among the most valuable assets in a divorce and should not be ignored simply because they cannot yet be accessed.

The court can make:

• A pension-sharing order
• A pension-attachment order
• An order offsetting pension value against other assets

A pension-sharing order must be made or approved by the court. A private agreement between the parties cannot require a pension provider to divide pension rights.

It is often sensible to resolve pension matters before applying for the final divorce order because finalising the divorce can affect certain pension and death benefits.

Spousal Maintenance

A clean break may not be immediately possible where one person requires continuing financial support.

The court can order spousal maintenance for a specified period or, less commonly, without a fixed end date. The order may sometimes be varied if circumstances change.

Where possible and fair, the court must consider whether financial obligations can be brought to an end without causing undue hardship.

A deferred clean break may be used where maintenance is paid temporarily before future income claims are dismissed.

Child Maintenance Is Different

A clean-break order between former spouses does not generally prevent appropriate child-maintenance arrangements.

Child maintenance is primarily governed by a separate statutory system and exists for the benefit of the child.

Parents cannot normally use a clean-break clause to remove a child's right to proper financial support.

Can an Informal Agreement Protect Both Parties?

An informal agreement can record what the parties intend, but it may not finally dismiss their statutory financial claims.

Problems may arise where:

• One person changes their mind
• An asset was not disclosed
• A property transfer was never completed
• A pension arrangement cannot be implemented
• Maintenance payments stop
• One person later applies to the court

To make an agreed financial settlement legally binding, the parties normally need a properly drafted consent order approved by the court.

Financial Disclosure

Both parties must provide full and honest financial disclosure before the court approves or decides a financial settlement.

Disclosure may include:

• Income and benefits
• Bank accounts
• Property
• Pensions
• Businesses and company interests
• Investments
• Debts
• Trust interests
• Assets held in the UK or abroad

A financial order obtained through serious non-disclosure, fraud or mistake may later be challenged or set aside.

When Should a Consent Order Be Approved?

A court cannot normally approve a financial consent order before the conditional divorce order has been granted.

It is often sensible to have the financial order approved before applying for the final divorce order, particularly where pensions, inheritance rights, insurance or occupation of the family home are involved.

There may be circumstances in which the divorce should be finalised sooner, but legal advice should be obtained about the financial consequences.

What Happens if One Former Spouse Remarries?

Remarriage can restrict the financial applications available to the person who has remarried.

In particular, a person who remarries before applying for certain financial orders may lose the right to make those applications against their former spouse. This is sometimes called the remarriage trap.

The precise effect depends on what was claimed in the divorce application and whether a financial application had already been made. Advice should be obtained before remarriage if financial matters remain unresolved.

Can an Existing Financial Order Be Changed?

Some financial orders can be varied, while others are intended to be final.

Spousal maintenance may often be varied or discharged if there is a significant change in circumstances. A lump-sum or property-adjustment order is generally much harder to reopen once it has taken effect.

A clean-break dismissal is intended to be final and will not normally be reversed merely because one person later regrets the agreement or the other becomes wealthier.

An order may nevertheless be challenged in exceptional circumstances involving fraud, serious non-disclosure, mistake or another recognised legal ground.

Can Former Spouses Prepare Their Own Order?

The parties can agree the division of their finances themselves, through mediation or with legal assistance.

However, the wording of a financial order is important. An incorrectly drafted order may fail to dismiss particular claims, create tax problems or prove difficult to enforce.

The court will also require financial information before deciding whether the proposed agreement is fair.

Even where the agreement is straightforward, both parties should consider obtaining independent legal advice before signing the documents.

Why a Financial Order Matters

A financial order provides certainty about what each person will receive, what obligations remain and whether either person can make further claims.

It can protect both former spouses by:

• Agreeing legally binding
• Ensuring property and pension arrangements are implemented
• Providing enforceable maintenance terms
• Clarifying responsibility for debts
• Dismissing appropriate future claims
• Reducing the risk of litigation many years later

Even where there are few assets, a clean-break order may provide important protection if either person's financial position later changes.

Obtaining Legal Advice

Anyone divorcing or already divorced without a financial order should obtain advice about whether financial claims remain open.

A family law solicitor can advise about consent orders, clean breaks, pensions, maintenance, property, businesses and the effect of remarriage.

Advice is particularly important before applying for the final divorce order, remarrying, transferring property or relying on an informal agreement.

Important Information

Solicitors.com is not a firm of solicitors. This article is provided for general information only and does not constitute legal or financial advice. Divorce and financial-remedy law may change, and its application will depend on the individual circumstances. You should seek advice from a suitably qualified family law solicitor before taking or refraining from action.